A New Approach To Funding Social Programs

As Vermont debates spending on Reach Up and the earned income tax credit, a few states and municipalities are exploring a new approach to funding social programs.

“Social impact bonds” are essentially partnerships between government, service providers and investors.

Investors put money into social programs and if they achieve certain outcomes, the investors are repaid (plus interest) by government.  Proponents of social impact bonds say they’re a way to both fund social programs and introduce greater accountability and results based outcomes. The theory is that taxpayers foot the bill only if a program meets benchmarks.

Last year a bill to establish a study committee to look into social impact bonds was introduced in the Vermont legislature, but it didn’t make it out of committee.  A sponsor of the bill tells me she’s not aware of any effort to revive it.

According to a recent article on the Council On Foreign Relations ‘Renewing America’ blog, Massachusetts, Minnesota and New York City have already set aside funds for social impact bonds. The article points out that programs funded this way may be more expensive to implement.

The Social Impact Bond Technical Assistance Lab at the Harvard Kennedy School has been working with several states to explore the use of social impact bonds.