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Date: April 29, 2024 Mon
Time: 11:25 pm
Time: 11:25 pm
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1 results foundAuthor: McKay, Kyle A. Title: Evaluating Social Impact Bonds as a New Reentry Financing Mechanism: A Case Study on Reentry Programming in Maryland Summary: Social impact bonds (SIBs) represent a relatively new concept for financing and contracting for the delivery of social service programs. They are designed with the intention of shifting the financial risk of performance-based payments from providers onto investors. This allows governments to, in theory, increase the portion of funding linked to the achievement of an outcome without damaging the funding of service providers. Although actual bonds are not typically issued, the government contracts with investors, a program manager, and nonprofit service providers for a SIB program. If an independent evaluator finds that the SIB program produced outcomes equal to or greater than the targeted levels, then the government reimburses the investors for their capital, along with a return on investment. In the event that the program does not produce the targeted outcomes, then the investors receive no compensation from the government and lose their capital investment. The Department of Legislative Services (DLS) has conducted a review of the feasibility, potential benefits, and risks associated with financing reentry programs using SIBs. Reentry programs are of particular interest to the Department of Public Safety and Correctional Services (DPSCS) based on its mission. Reentry programs are also generally considered a strong candidate for SIBs due to the potential for large cost savings to the government through the successful reduction of re-imprisonment. Based on the benefits commonly associated with SIBs, DLS evaluated the potential of SIBs to generate cost savings, help finance social programs, shift outcome risk, increase innovation in reentry programming, and build more rigorous evidence for policy decisions. Even when using a set of highly optimistic assumptions, it is clear that pilot reentry programs cannot self-finance their operations. Because pilot programs cannot create a large enough reduction in demand to close a facility, the cost dynamics are driven by much smaller marginal cost savings. As a result, a program that produces a 10% reduction in recidivism for 250 prisoners per year over five years will only result in minimal avoided imprisonment costs. Before including the cost of direct services, the fixed costs of designing the contract, compensating a third-party intermediary, and conducting an independent evaluation, at $700,000 collectively, would alone exceed the fiscal benefits. Including service costs of $2,500 per participant, the program would result in a net fiscal impact of -$3.9 million. Doubling the size or assumed effectiveness of the program would not result in a positive net fiscal impact. These results indicate that the additional costs of a SIB program cannot be justified by offsetting savings. Other potential benefits do not justify the cost or complexity of a SIB program either. Given the difficulty of linking the evaluation of a social program to a highly complex contract centered on an outcome payment, the government may actually increase its operational risks in undertaking a SIB. The government would also need to budget upfront for the contingent liabilities of outcome payments. As a result, a SIB program would increase both budgetary pressure and operational risks. Reentry programs can have great social value independent of their fiscal impact. The decision to finance them should be made independent of whether or not they can be self-financed through cost savings and a SIB mechanism. Because they are especially valuable and effective when integrated and combined with larger scale policies aimed at reducing recidivism and increasing public safety, DLS recommends that DPSCS continue to directly finance reentry programs while pursuing other organizational and policy changes likely to have greater impacts while posing less risk than a SIB financed program. Details: Annapolis, MD: Maryland Department of Legislative Services, Office of Policy Analysis, 2013. 24p. Source: Internet Resource: Accessed February 17, 2017 at: http://mgaleg.maryland.gov/Pubs/BudgetFiscal/2013-Evaluating-Social-Impact-Bonds.pdf Year: 2013 Country: United States URL: http://mgaleg.maryland.gov/Pubs/BudgetFiscal/2013-Evaluating-Social-Impact-Bonds.pdf Shelf Number: 146668 Keywords: Criminal Justice FundingPartnershipsPrisoner ReentryPrivate InvestmentSocial Impact Bonds |