Social Innovation Financing

Through its four Pay-for-Success (PFS) projects and other evidence-based and results-focused initiatives, the Commonwealth uses innovative, public-private financing mechanisms to scale programs and improve outcomes for vulnerable populations.

In these projects, investors cover the upfront service delivery costs, and the Commonwealth repays investors only if the initiatives meet desired outcomes. In other words, the Commonwealth pays for demonstrated success rather than the promise of success. This model allows the Commonwealth to clearly articulate goals, gain insight into program efficacy, and drive investments into what works.

In addition to its PFS projects, A&F also supports state agencies through PFS 2.0, which takes the best practices developed in PFS – like active contract management, iterative data analysis to track performance, and evidence-based investments – and deploys those tactics in core, line-item spending without private investment. The PFS 2.0 approach has the potential to reorient millions of dollars of social service spending toward securing measurable improvements for Massachusetts residents.

Pathways to Economic Advancement

• Description: To increase employment opportunities for English language learners, the Commonwealth and its partners offered vocational English language classes, job search assistance, and higher education coaching to immigrants and refugees in the Greater Boston region. This is the first PFS project in the world to focus exclusively on workforce development.
• Years: 2017 – present
• Partners: Jewish Vocational Services, Social Finance, Massachusetts Executive Office of Labor and Workforce Development, Massachusetts Executive Office of Education, Massachusetts Executive Office of Administration and Finance
• Investors: Bank of America Merrill Lynch acted as the placement agent for certain qualified high net worth and institutional investors. The project’s 40 impact investors include Living Cities Blended Catalyst Fund, Prudential Financial, Maycomb Capital Community Outcomes Fund, Combined Jewish Philanthropies’ Donor Advised Funds, Barbara Bush Foundation for Family Literacy, Blue Haven Initiative, The Boston Foundation, Boston Impact Initiative, ImpactAssets, The Inherent Foundation, The Kresge Foundation, The Shapiro Foundation, The Sorenson Impact Foundation.
• Evaluator: Economic Mobility Corporation
• Contract

Related Links:

• Fact Sheet
• Request for Response
• Social Finance
• Social Finance Fact Sheet
• Jewish Vocational Services
• Government Performance Lab
• “Interim Findings on JVS Boston’s English for Advancement Show Large Earnings Gains,” Economic Mobility Corporation
• “First-of-its-kind study finds ‘stunning’ earnings gains for immigrants who learn English,” The Boston Globe

Juvenile Justice

• Description: To reduce recidivism and increase employment among at-risk young men in the probation system or leaving the juvenile justice system, the Commonwealth and its partners provided intensive street outreach and targeted life skills, education, and employment programming the Boston, Chelsea, and Springfield areas. This project is one of the largest PFS projects in the country.  
• Years: 2014 – present
• Partners: Roca, Youth Services, Third Sector, Massachusetts Executive Office of Administration and Finance
• Investors: The Boston Foundation, Goldman Sachs, Laura and John Arnold Foundation, The Kresge Foundation, Living Cities, New Profit
• Evaluator: The Urban Institute, Child Trends 
• Contract

Related Links:

• Fact Sheet
• Request for Response
• FAQ
• Roca
• Third Sector
• “Massachusetts Launches Landmark Initiative to Reduce Recidivism Among At-Risk Youth,” Commonwealth of Massachusetts Press Release
• “Case Study: Preparing for a Pay for Success Opportunity, “Third Sector
• “Massachusetts Pay for Success Initiative Advances Government, Private Sector, and Philanthropic Investment in Human Capital,” Huffington Post
• “Social impact bonds: Getting better at doing good,” The Boston Globe

 

Veterans Coordinated Approach to Recovery and Employment (Veterans CARE)

• Description: To support unemployed and underemployed veterans with post-traumatic stress disorder, the Commonwealth and its partners deployed individual placement and support programs for veterans to attain competitive and gainful employment. This project is the first PFS project in the country to focus on improving employment and health outcomes for Veterans.
• Years: 2018 – present
• Partners: U.S. Department of Veterans Affairs, Social Finance, The Tuscaloosa VA Medical Center, New York City, City of Boston, Massachusetts Department of Veterans’ Services, Executive Office of Administration and Finance
• Investors: BNP Paribas, Northern Trust Corporation, The Dakota Foundation, Deutsche Bank, Robin Hood Foundation
• Evaluator: Westat
• Contract

Related Links

• Fact Sheet
• “VA, partner organizations launch innovative approach using long-term employment to improve lives of Veterans with PTSD,” U.S. Department of Veterans Affairs Press Release

Chronic Homelessness

• Description: To address chronic homelessness, the Commonwealth and its partners deployed permanent supportive housing units and offered wrap-around, community-based services such as service coordination, daily living skills support, and assistance with obtaining other health and housing benefits.
• Years: 2015 – present
• Partners: Massachusetts Alliance for Supportive Housing, Massachusetts Housing and Shelter Alliance, United Way of Massachusetts Bay and Merrimack Valley, Corporation of Supportive Housing, Massachusetts Department of Housing and Community Development, Massachusetts Executive Office of Administration and Finance
• Investors: United Way, Santander Bank, Corporation of Supportive Housing
• Evaluator: Root Cause
• Contract

Related Links:

• Fact Sheet
• Request for Response
• Massachusetts Housing and Shelter Alliance
• United Way of Massachusetts Bay and Merrimack Valley
• Root Cause
• Government Performance Lab
• Urban Institute
• “The Massachusetts PFS Story: Social Innovation Financing as a Catalyst for Change?” Journal of Affordable Housing

Family Homeless Shelter Procurement (PFS 2.0)

• Description: The Massachusetts Department of Housing and Community Development family homeless shelter procurement applies the best lessons from pay-for-success — like the clear definition of goals, rigorous use of data, and payments based on performance — to a strategic realignment of Massachusetts shelter contracts.

Related Links:

• Request for Information - Cover Memo
• Request for Information – Questions
• 2016-11 Request for Responses

Legislation

Massachusetts’ four Pay-for-Success (PFS) projects are funded through the Commonwealth’s Social Innovations Financing Trust Fund (SIFTF). Enabled through legislation known as 35VV, SIFTF was the first trust fund created in the United States specifically designed to facilitate innovative, outcomes-oriented financing of social services.

Section 35VV: SIFTF Enabling Legislation