BILL NUMBER: AB 1837 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 4, 2014
AMENDED IN ASSEMBLY MAY 1, 2014
INTRODUCED BY Assembly Member Atkins
(Coauthors: Assembly Members Fox, Medina, and V. Manuel Pérez)
FEBRUARY 18, 2014
An act to amend Section 13997.6 of, and to add Article
4.5 (commencing with Section 12096.6) to Chapter 1.6 of Part 2 of
Division 3 of Title 2 of, the Government Code, relating to state
government. An act to add and repeal Title 15.8
(commencing with Section 97008) of, and to repeal Section 97013 of,
the Government Code, relating to corrections.
LEGISLATIVE COUNSEL'S DIGEST
AB 1837, as amended, Atkins. Governor's Office of
Business and Economic Development: social innovation financing.
Board of State and Community Corrections.
Existing law establishes the Board of State and Community
Corrections to collect and maintain available information and data
about state and community correctional policies, practices,
capacities, and needs, as specified. Existing law also requires the
board to develop incentives for units of local government to develop
comprehensive regional partnerships whereby adjacent jurisdictions
pool grant funds in order to deliver services to a broader target
population and maximize the impact of state funds at the local level.
This bill would enact, until January 1, 2020, the Social
Innovation Financing Program, and would require the board to
administer the program. The bill would authorize the Chair of the
Board of State and Community Corrections, upon appropriation of funds
by the Legislature for deposit in the Recidivism Reduction Fund, to
award grants in amounts of not less than $500,000 and not more than
$2,000,000 to each of 3 counties, selected as specified, for the
purpose of entering into a pay for success or social innovation
financing contract, pursuant to which private investors agree to
provide financing to service providers to achieve social outcomes
agreed upon in advance and the government agency agrees to pay a
return on the investment to the investors if successful programmatic
outcomes are achieved by the service provider. The bill would limit
the total amount of the grants awarded to $5,000,000. The bill would
require the chair to report annually to the Governor and Legislature
on the status of program. The bill would also make legislative
findings and declarations in this regard.
The Economic Revitalization Act establishes the Governor's Office
of Business and Economic Development, also known as "GO-Biz." GO-Biz,
among other duties, serves the Governor as the lead entity for
economic strategy and the marketing of California on issues relating
to business development, private sector investment, and economic
growth.
This bill would require GO-Biz to serve as the lead entity for
efforts to explore social innovation financing, as defined. The bill
would also require GO-Biz to develop recommendations for implementing
social innovation finance models, including performance-based
contracts, as defined, for achieving measurable social benefits. The
bill would authorize GO-Biz to establish an advisory board to help
guide the implementation of the act.
Other existing law creates the California Economic Development
Fund in the State Treasury for the purpose of receiving federal,
state, local, and private economic development funds, and receiving
repayment of loans or grant proceeds and interest on those loans or
grants.
The bill would establish the Social Innovation Account within the
fund for the purpose of receiving federal, state, and local
governmental moneys and private moneys to be used to implement social
innovation financing methods. The bill would authorize GO-Biz to
accept nonstate moneys for the purposes of facilitating,
administering, or collaborating on social innovation financing and
implementing performance-based contracts. The bill would require
GO-Biz to post on its Internet Web site prescribed information on
private donations. The bill would authorize GO-Biz to expend moneys
in the account, upon appropriation, to make payments to private
investors and service providers and to fund other expenditures
directly related to performance-based contracts and other social
innovation financing methods and models.
The bill would also make legislative findings and declarations in
this regard.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) It is the intent of the Legislature to establish partnerships
between local governmental agencies, private investors,
nonprofit organizations, and for-profit service providers to
facilitate the use of social innovation financing to achieve
measurable social benefits.
(b) Social innovation financing and the use of performance-based
contracting can serve as an effective tool for addressing social and
community development challenges where private sector innovations may
be useful and multiple approaches may be appropriate. Research shows
that the selection and design of these types of social interventions
should be done with care in order to ensure successful outcomes.
Among other criteria, selected projects should meet the following
requirements:
(1) Address social needs that are unmet, high priority, and
large-scale.
(2) Address target populations that are well-defined and can be
measured with scientific rigor.
(3) Result in outcomes that are credible and readily available by
cost-effective means.
(4) Propose interventions that are highly likely to achieve
targeted impact goals.
(5) Be carried out by proven service providers that are prepared
to scale with quality.
(6) Include safeguards to protect the well-being of the
populations served.
(7) Be cost-effective programs that can demonstrate financial
savings for government.
(c) The focus of initial social innovation financing efforts
should be toward decreasing recidivism rates in our criminal justice
system, reducing homelessness, and promoting workforce development.
SEC. 2. Article 4.5 (commencing with Section
12096.6) is added to Chapter 1.6 of Part 2 of Division 3 of Title 2
of the Government Code, to read:
Article 4.5. Social Innovation Financing
12096.6. (a) The office shall serve as the lead entity for
efforts to explore social innovation financing and provide technical
assistance to local governments that are exploring the creation of
social innovation financing.
(b) The office shall develop recommendations for implementing
social innovation finance models, including performance-based
contracts for achieving measurable social benefits. These
recommendations shall include, but are not limited to, the following:
(1) Strategies for engaging with private investors, nonprofit
organizations, and for-profit and nonprofit service providers.
(2) Parameters for determining which projects are appropriate for
performance-based contracts.
(3) Parameters for establishing baseline, setting performance
metrics, and measurable outcomes.
(4) A model for a performance-based contract, including parameters
for writing a statement of work and quality standards that
encompasses the requirements of paragraph (3).
(c) The office may establish an advisory board to help guide the
implementation of this chapter.
(d) As used in this section only:
(1) "Performance-based contracts" means contractual agreements
between government, private investors, and service providers where
private investors agree to provide up-front financing to service
providers to achieve social outcomes agreed upon in advance and the
government agency agrees to pay a return on investment to the
investors if successful programmatic outcomes are achieved by the
service provider.
(2) "Social innovation financing" means an investment arrangement
using private funding to finance a social program administered by a
nonprofit organization or for-profit service provider on behalf of a
government agency pursuant to a performance-based contract.
SEC. 3. Section 13997.6 of the Government Code
is amended to read:
13997.6. (a) The California Economic Development Fund is hereby
created in the State Treasury for the purpose of receiving federal,
state, local, and private economic development funds, and receiving
repayment of loans or grant proceeds and interest on those loans or
grants.
(b) Upon appropriation by the Legislature, moneys in the
California Economic Development Fund may be expended by the Governor'
s Office of Business and Economic Development to provide matching
funds for loans or grants to public agencies, nonprofit
organizations, and private entities, and for other economic
development purposes, consistent with the purposes for which the
moneys were received.
(c) (1) The Social Innovation Account is hereby established within
the California Economic Development Fund for the purpose of
receiving federal, state, and local governmental moneys and private
moneys that will be used to implement social innovation financing
methods including performance-based contracts, as defined and
authorized in Section 12096.6.
(2) (A) The Governor's Office of Business and Economic Development
may accept nonstate moneys, including, but not limited to, private
sector funds, for the purposes of facilitating, administering, or
collaborating on social innovation financing and implementing
performance-based contracts.
(B) The Governor's Office of Business and Economic Development,
for each private donation that it receives to fund a social
innovation finance activity or performance-based contract, shall post
a report on its Internet Web site within 30 days of receiving that
donation. The report shall contain all of the following information:
(i) The name and address of the donor.
(ii) The amount of the donation.
(iii) The date the donation was made.
(iv) The name and address of the entity receiving or using the
donation.
(v) A brief description of the goods or services provided or
purchased, if any.
(vi) A description of the specific purpose or event for which the
donation was made, if any.
(3) Upon appropriation by the Legislature, the Governor's Office
of Business and Economic Development may expend moneys in the Social
Innovation Account to make payments to private investors and service
providers and to fund other expenditures directly related to
performance-based contracts and other social innovation financing
methods and models.
SEC. 2. Title 15.8 (commencing with Section 97008)
is added to the Government Code , to read:
TITLE 15.8. Social Innovation Financing Program
97008. For purposes of this title, the following definitions
apply:
(a) "Board" means the Board of State and Community Corrections.
(b) "Chair" means the Chair of the Board of State and Community
Corrections.
(c) "Social innovation financing contract," which may also be
known and referred to as a "pay for success contract," refers to a
contractual agreement between government, private investors, and
service providers pursuant to which private investors agree to
provide financing to service providers to achieve social outcomes
agreed upon in advance and the government agency agrees to pay a
return on the investment to the investors if successful programmatic
outcomes are achieved by the service provider.
97009. (a) It is the intent of the Legislature that as part of
the package to reduce recidivism in California, the concept of "pay
for success" or social innovation financing should be included to
take advantage of available philanthropic and private investment.
(b) The Legislature hereby declares that a variety of approaches
have been shown to be successful in reducing recidivism, including
addressing homelessness, substance abuse, and workforce participation
within specific demographic groups.
97010. (a) There is hereby established the Social Innovation
Financing Program.
(b) The board shall administer the Social Innovation Financing
Program.
(c) (1) The chair shall solicit proposals for social innovation
financing from county boards of supervisors and shall select three
counties to receive grant funding.
(2) Before awarding a grant pursuant to paragraph (1), the chair
shall consult with the board regarding the quality of the proposal
for which the grant is to be awarded.
(3) At a minimum, each application for a grant shall include all
of the following:
(A) A description of the proposed social program.
(B) A description of the organization's experience in providing
the proposed social program.
(C) A description of the financial stability of the organization.
(D) An identification of each component of the social program to
be provided.
(E) A description of the manner in which the social program will
be provided.
(F) A description of the recruitment or selection process, or
both, for participants in the social program.
(G) The proposed quantifiable results upon which success of the
social program will be measured.
(H) An itemization of all expenses proposed to be reimbursed under
the contract.
(I) The amount of matching funds provided by the county.
(J) A description of how the final payments for successful
programmatic outcomes are structured in the contract.
(K) A description of all parties to the proposed contract,
including prospective investors and philanthropic foundations.
97011. (a) Upon appropriation of funds by the Legislature for
deposit in the Recidivism Reduction Fund for the purposes of this
title, the chair shall award a grant in an amount of not less than
five hundred thousand dollars ($500,000) and not more than two
million dollars ($2,000,000) to each county selected pursuant to
Section 97010 for the purposes of entering into a pay for success or
social innovation financing contract. The total amount of the grants
awarded pursuant to this section shall not exceed five million
dollars ($5,000,000). Any unused state moneys shall revert to the
General Fund.
(b) Each contract described in subdivision (a) shall include all
of the following:
(1) A requirement that the payment be conditioned on the
achievement of specific outcomes based upon defined performance
targets.
(2) An objective process by which an independent evaluator,
selected by the chair, will determine whether the performance targets
have been achieved.
(3) A calculation of the amount and timing of payments that would
be earned by the service provider during each year of the agreement
if performance targets are achieved as determined by the independent
evaluator.
(4) A determination by the county that the contract will result in
significant performance improvements and budgetary savings if the
performance targets are achieved.
(5) A requirement that an amount equal to a minimum of 100 percent
of the Social Innovation Financing Program grant awarded to the
county be matched by other county, federal, or private, including
philanthropic, funds. The board may adopt regulations allowing
in-kind contributions in lieu of monetary contributions for this
purpose.
(c) Up to 10 percent of the grant funds awarded pursuant to this
title may be used by the counties for administrative expenses related
to the development of the pay for success or social innovation
financing contract. The remainder shall be contributed toward final
payments to investors for successful programmatic outcomes achieved,
as stipulated in the contract.
(d) If, after receiving a grant pursuant to this title, a county
does not enter into a contract for which the grant was awarded, the
county shall return all moneys awarded by the board pursuant to this
title, to the state.
97012. (a) The board may adopt regulations to implement this
title.
(b) The board is encouraged to consult with relevant state
agencies and departments in the evaluation of the social innovation
financing program, including, but not limited to, the Governor's
Office of Business and Economic Development and the Office of Health
Equity, in order to determine the efficiency and viability of
proposals.
(c) The board may adopt a reasonable grant application fee that is
sufficient to cover the expenses incurred by the board in reviewing
an application for a grant pursuant to this title.
97013. (a) The chair shall report annually to the Governor and
Legislature on the status of each ongoing social innovation financing
program, including, but not limited to, a description of the desired
outcome and an overview of the independent evaluator's findings. The
report shall also contain an accounting of the moneys awarded.
(b) A report made pursuant to this section shall be made in
accordance with the requirements of Section 9795.
(c) This section shall remain in effect only until January 1,
2020, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2020, deletes or extends
that date.
97014. This title does not create a statutory entitlement to
services or any contractual obligation on the part of the state.
97015. This title shall remain in effect only until January 1,
2020, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2020, deletes or extends
that date.