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Congressional Bill for Social Impact Partnerships Receives Bipartisan Support

Since the first social impact bond financing was launched in the United Kingdom in 2010, more and more attention is being directed to pay-for-success (or social impact) financing, both domestically and abroad.  Social impact financing aligns the incentives of government agencies, nonprofit service providers, and philanthropic and socially minded investors by encouraging investment in social intervention projects that offer measurable results.  In a pay-for-success deal, private investors provide the working capital for social services programs.  If a program achieves certain verified outcomes, the government agency reimburses the investors and provides a return on their investment.  The program allows the government to offset the financial risk of experimental and often preventative social services programs, and in the long-term may allow the government to save money due to early intervention in complex social problems.

On Wednesday, March 4, 2015, Representatives Todd Young (R-IN) and John Delaney (D-MD) introduced congressional legislation supporting broad federal support for social impact financing.  The Social Impact Partnership Act  (H.R. 1336) contemplates federal funding for social impact financing at the state and local levels relating to, among other things, unemployment, recidivism among individuals released from prison, moving children out of foster care, lowering rates of disease among low-income families, improving education for special-needs and low-income children, and other problems which can be fixed through evidence-based social programs.  Under the Act, a newly formed Federal Interagency Council on Social Impact Partnership would (i) issue requests for proposals from state and local governments for social impact programs, (ii) support feasibility studies for such projects, and (iii) pay up to $300 million to support state and local governments for successful projects over a ten-year period.

The Act is expected to receive wide bipartisan support and builds on strong White House interest in pay-for-success financing.  An earlier form of the Act, then called the Social Impact Bond Act, stalled in the House in 2014.  Senators Orrin G. Hatch (R-UT) and Michael Bennet (D-CO) are expected to introduce companion legislation in the Senate.