Massachusetts Launches Landmark Initiative
to Reduce Recidivism Among At-Risk Youth
$27 Million Initiative Is Largest Financial Investment
in a Pay for Success Contract in the Country
Massachusetts Governor Deval Patrick has announced the launch of the nation’s largest financial investment in a PFS initiative, which is designed to improve outcomes for hundreds of at-risk young men in the probation system or leaving the juvenile justice system. The Massachusetts Juvenile Justice Pay for Success Initiative will not only improve the lives of young people, but also reduce crime, promote safer and stronger communities and save taxpayer dollars.
Pay for Success (PFS) contracts, also called Social Impact Bonds, combine nonprofit expertise, private sector funding, and rigorous evaluation to transform the way government and society respond to chronic social problems. In a PFS initiative, funders assume up front financial risk, and taxpayers pay for a program only if a third-party evaluator determines that the initiative has achieved specific outcomes that create benefits to society and generate savings for government.
The initiative will allow Roca to provide its high-impact intervention to 929 at-risk young men aged 17 to 23 who are in the probation system or exiting the juvenile justice system. Roca’s programming aims to reduce recidivism and increase employment through intensive street outreach and targeted life skills, education and employment programming. The Roca intervention is delivered over an intensive two-year period followed by two years of follow-up engagement.
Massachusetts will make up to $27 million in success payments for this seven-year project, which is the largest investment in a PFS initiative in the U.S. to date.
Funding for the Massachusetts initiative includes commercial and philanthropic funding as well as risk sharing, in the form of deferred service fees, from the service provider (Roca) and project intermediary (Third Sector Capital Partners). The funders assume project risk by financing services up front with the promise of repayment from government sources only in the event of success.
Massachusetts will repay funders only if Roca’s services are proven to produce positive societal outcomes and savings for the Commonwealth. These success payments will come from the Commonwealth and the U.S. Department of Labor, which awarded the Commonwealth a first-of-its-kind PFS grant of $11.7 million. The additional funding for success payments from the Department of Labor grant will enable the Commonwealth to extend the project, should it prove successful, to an additional 391 young men, thereby serving a total of up to 1,320 young men over nine years.
Read the press release and Fact Sheet (Revised 12/16/2014) about the initiative
Read Frequently Asked Questions (Revised 12/16/2014) about the initiative
Read the PFS contract released by the Commonwealth
View a video from Goldman Sachs about the Massachusetts PFS initiative
View an infographic from Living Cities about the potential of the initiative (graphic only here)
For more information or inquiries, please contact Tim Pennell at firstname.lastname@example.org.
Commonwealth of Massachusetts
The Commonwealth makes payments for success if the independent third-party evaluator and validator determine that Roca’s program has reduced the number of days that participating young men spend in prison, has improved their job readiness, and has increased their employment. At higher levels of success the funders can receive a small percentage return on their funding in return for assuming the up front financial risk.
Roca is a nonprofit that has delivered an evidence-based high impact intervention to young people in the Chelsea and Springfield, Massachusetts areas for 25 years. Roca’s model is based on proven behavioral change theories and trains high-risk young men in job readiness, educational readiness, and life skills. The program has a proven track record of reducing incarceration rates among the highest risk individuals. In this PFS project, Roca is deferring 15% of its service fees; it will only be paid that portion of its fees if results are achieved.
Third Sector Capital Partners, Inc.
Third Sector Capital Partners, Inc. is a nonprofit advisory firm that works with government, service providers, and funders to develop and launch PFS projects. As project intermediary for this initiative, Third Sector arranged project funding and is responsible for overseeing project implementation, distributing funding to Roca and managing repayment to funders. New Profit Inc., a national venture philanthropy fund and social innovation organization, will provide additional management support. Third Sector is deferring 15% of its management fees; it will only be paid that portion of its fees if results are achieved.
Goldman Sachs will provide $9 million in senior loan financing through its Social Impact Fund.
The Kresge Foundation and Living Cities together will provide $3 million ($1.5 million each) in junior loan financing.
Laura and John Arnold Foundation, New Profit and The Boston Foundation together will provide $6 million in grants ($3.7 million from Laura and John Arnold Foundation, $2 million from New Profit and $300,000 from The Boston Foundation).
- Goldman’s Bullish on Boston Bloods Staying Out of Jail – Bloomberg
- Tackling Mass Incarceration – New York Times
- Massachusetts uses largest ‘social impact bond’ to tackle crime – Reuters
- Unlocking Private Capital to Invest in Human Capital – Institutional Investor
- Massachusetts Governor Patrick unveils recidivism initiative – Boston Herald via Associated Press (also featured in San Francisco Chronicle, South Coast Today)
- Massachusetts Started a $27 Million Experiment to Reduce Youth Recidivism – Next City
- Social Impact Bonds to Fund Program to Reduce Recidivism – Nonprofit Quarterly
- Goldman Sachs, Kresge to Kickstart Largest Social Impact Bond – aiCIO
- Goldman’s $27M stay-out-of-prison bond – CNBC
- The Biggest Social Impact Bond In The U.S. Will Keep At-Risk Young Men In Jobs And Out Of Prison – Fast Company Co.Exist
- Mass. Unveils Biggest U.S. ‘Pay for Success’ Effort – The Chronicle of Philanthropy’s Philanthropy Today
- Biggest ‘Social Impact Bond’ In The U.S. Targets Stubborn Recidivism – Forbes
- Massachusetts Pay for Success Initiative Advances Government, Private Sector, and Philanthropic Investment in Human Capital – Huffington Post
- This State May Have Discovered the Secret to Saving Tax Dollars While Doing Good – NationSwell
- Massachusetts $27M Social Impact Bonds Aim at Recidivism – Bond Buyer
- Massachusetts’ juvenile justice Pay for Success initiative: An interview with George Overholser, CEO, Third Sector Capital Partners – Gov Innovator
- A new way to invest in change – The Boston Globe
- Social impact bonds: Getting better at doing good – The Boston Globe (op-ed)
- State’s social innovation financing is thorny legal matter – Boston Business Journal
- $27 million state program to fund Roca outreach program in Greater Springfield and Greater Boston – MassLive via The Republican
- State partners with private sector to curb crime – Metro via State House News Service
- Congratulations, Roca and CEO Molly Baldwin on the Launch of Pay for Success (PFS) Initiative – Chelsea Record
- Roca to prepare 300 Western Massachusetts young men for work, avoidance of crime, through unique state-funded program – MassLive via The Republican
- Public-private partnerships show new way to pay for success – Boston.com (op-ed)
- Goldman Sachs, Others Invest In Initiative To Reduce Recidivism – 90.9 WBUR (two audio files)
- Massachusetts Begins Juvenile Justice Initiative – WAMC Northeast Public Radio (audio)
- Patrick Unveils ‘Pay for Success’ Program For Troubled Young Men – CBS Boston (video)
- Investors Bet on Turnarounds for Ex-offenders – BNN News (video)
- Iniciativa para frenar reincidencia de jóvenes en delitos – Univision Boston (video)
- Gov. Patrick Aims to “Pay for Success” – WGGB (video)
- Pay for Success Initiative Launches in Springfield – ABC40 (video)
- Millions Invested in Pay For Success Program – CBS3 Springfield (video)
- New program to help former criminals – 22 News WWLP (video)
- Preparing for a Pay for Success Opportunity: Third Sector, with support from the Rockefeller Foundation, published a case study on its experience working with Roca, Inc. on their successful response to Massachusetts’ Social Innovation Financing project for juvenile justice. The case discusses the challenges, lessons learned, and process of launching the nation’s first state-level Pay for Success contract.