Pay for Success
Pay for Success financing has the potential to bring new resources to early childhood systems and to make those systems more effective by helping government, service providers, and funders focus on outcomes for children. ICS is committed to building an environment in which early childhood PFS projects can develop.
With Pay for Success financing (also called Social Impact Bonds, or SIBs), philanthropic funders and/or private “impact investors” provide the initial capital to scale up successful interventions. Most often these interventions are “evidence-based,” a designation based on rigorous evaluations and several years of solid outcomes data. Services selected for PFS financing are generally delivered by nonprofits, under a management structure headed by an intermediary organization.
An outcomes payor — typically the government – contracts for specific outcomes, and an independent evaluator determines whether the outcomes are achieved, usually by comparing them to those of a control or comparison group. The intermediary organization uses the government’s promise of payment to raise private capital to fund those programs expected to achieve the contracted outcomes with the least risk to the investors.
If the outcomes are achieved, government funds are used to repay the investors’ principal plus an agreed-upon return. These interventions often save government money by reducing the likelihood of crime, child abuse, or other expensive problems; thus, they both prevent problems and promote health and well-being. Government can draw on those savings to pay for the outcomes achieved.
Pay for Success Portfolio
ICS believes that PFS financing holds enormous promise for improving children’s lives. We have explored PFS in a number of ways, ranging from studies to resource documents to in-person convenings. Learn about our previous and current work:
ICS was privileged to be a recipient of funding from the federal Social Innovation Fund (SIF) which allowed us to complete 10 feasibility studies in different communities across the U.S. to explore using PFS funding to expand early childhood funding. Highlights from these feasibility studies are available on our website:
ICS is also conducting a PFS feasibility study in partnership with Legacy Early College, a public charter school in Greenville, SC – the only charter school funded for PFS feasibility analysis for preschool by the U.S. Department of Education in December 2016 and, ICS believes, the only charter school to undertake a PFS feasibility study in the U.S. to date. The feasibility study is exploring how PFS could expand Legacy’s school model to include high quality pre-K for three- and four-year-olds, incorporating the AppleTree Every Child Ready model. This study will be completed December of 2018.
ICS is leading the transaction structuring work for a PFS project in Spartanburg, South Carolina, in partnership with the City of Spartanburg, Mary Black Foundation, and others. The project is designed to provide a continuum of services, including home visiting and other parent supports, to young children and families in Spartanburg. This project sits within the broader envisioned Hello Family continuum of services in Spartanburg that will offer greater access to high-quality early learning, including an expanded Pre-K continuous quality improvement system and a model early learning center, to form a comprehensive age 0-5 support structure for City families. This work is made possible by an approximately $200,000 grant from the Nonprofit Finance Fund, supported by the Social Innovation Fund.
This project is slated to be the first PFS project in a U.S. community of this size, the first to include multiple early childhood interventions, and the first to prioritize serving all children in a community.
ICS has released several papers on PFS from varying angles as well as publish our research in other outlets. We recommend visiting our Pay for Success publications page and our blog archives to learn more!
As part of our SIF-support technical assistance, ICS has developed a suite of tools and templates to guide communities through assessing PFS feasibility. We are proud to make these resources publicly available here.
ICS has hosted our Pay for Success conference focused on early childhood opportunities in several locations across the United States. For resources from these events, please see the 2018 Charlotte event page and the 2016 Denver event page. And make sure you are on our mailing list to receive a registration link for future events.