BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 1837
Author: Atkins (D), et al.
Amended: 8/4/14 in Senate
Vote: 21
SENATE BUSINESS, PROF. & ECON. DEV. COMM. : 8-0, 6/23/14
AYES: Lieu, Wyland, Berryhill, Corbett, Galgiani, Hernandez,
Hill, Torres
NO VOTE RECORDED: Block
SENATE APPROPRIATIONS COMMITTEE : 6-0, 8/14/14
AYES: De León, Gaines, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Walters
ASSEMBLY FLOOR : 69-0, 5/27/14 - See last page for vote
SUBJECT : Board of State and Community Corrections: social
innovation
SOURCE : Author
DIGEST : This bill enacts, until January 1, 2020, the Social
Innovation Financing Program, which the Board of State and
Community Corrections (BSCC) would administer, as specified.
ANALYSIS : Existing federal law establishes the Social
Innovation Funds grant program to make grants on a competitive
basis to eligible entities.
Existing state law:
CONTINUED
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1.Establishes BSCC to collect and maintain available information
and data about state and community correctional policies,
practices, capacities and needs, as specified.
2.Requires BSCC 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:
1.States legislative intent to establish partnerships between
local governmental agencies, private investors, nonprofit
organizations, and for-profit service providers to facilitate
the use of SIF to achieve measurable social benefits; and that
as part of the package to reduce recidivism in California, the
concept of "pay for success" or SIF should be included to take
advantage of available philanthropic and private investment.
2.Enacts, until January 1, 2020, the SIF Program and requires
the BSCC to administer the Program. Authorizes the BSCC to
adopt regulations to implement the Program.
3.Requires the Chair of the BSCC, upon appropriation of funds by
the Legislature for deposit in the Recidivism Reduction Fund,
to award a grant in an amount of not less than $500,000 and
not more than $2 million to each of the three counties
selected, as specified, for the purposes of entering into a
pay for success or SIF contract, as defined. Limits the total
amount of the grants awarded to $5 million.
4.Defines "social innovation financing contract," also known and
referred to as a "pay for success contract," as 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.
5.Requires the Chair to report annually to the Governor and
Legislature on the status of the Program, including, but not
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limited to, a description of the desired outcome and an
overview of the independent evaluator's findings. Requires
the report to also contain an accounting of the moneys
awarded.
6.Provides that the SIF Program does not create a statutory
entitlement to services or any contractual obligation on the
part of the state.
Background
The Senate Business, Professions and Economic Development
Committee held a hearing in June 2013 titled "What is the Role
of Social Innovation Financing in California? Are We Ready for
Social Impact Bonds?" The hearing outlined the social impact
bond or pay-for-success approach and highlighted efforts
underway by state and local government throughout the nation to
explore these opportunities.
Social impact partnerships (SIPs), also known as social impact
bonds, SIF, and Pay for Success contracts are a financing
mechanism for social programs operated and administered by
non-government organizations (NGOs). The NGO enters into a
contract with a local, state or federal government agency to
administer a specific program, including goals and quantifiable
target results with a set timeframe by which they must be
achieved. The NGO pays for the entire up-front costs of
providing the service and if the service meets the agreed upon
quantifiable results in the specified timeframe, the NGO is, in
turn, reimbursed by the government for the cost of the service
plus an agreed upon rate of financial return. If the goals are
not met, the government does not reimburse the NGO and no public
monies are expended. In essence, nonprofit organizations
deliver a program and the government only pays if a program
succeeds.
SIF is seen as having a number of benefits, including:
Transferring risk away from government and taxpayers; in that
public entities are not subject to repay for services if the
outside organization is unable to achieve the desired outcome.
An ability to fund preventive services that may provide cost
savings to government money down the road.
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An ability to overcome the "silo" problem in government where
agencies may find it difficult to pool resources or direct
money toward effective programs.
According to a recent New York Times article, projects would
allow social activists and philanthropists to be more effective
with their donations and there may be opportunities to put
private venture capital and market discipline and innovation to
work solving social problems that government so far has found
intractable.
Examples of SIFs . According to the White House Office of Social
Innovation and Civic Participation, the federal Social
Innovation Fund (SI Fund) is a program of the Corporation for
National and Community Service (CNCS) and combines public and
private resources with the intention of growing "promising
community-based solutions that have evidence of results in any
of three priority areas: economic opportunity, healthy futures,
and youth development."
The SI Fund was established in 2009 as part of the bipartisan
Edward M. Kennedy Serve America Act and makes grants to
experienced intermediaries well-positioned within communities to
identify the most promising programs and guide them towards
greater impact and stronger evidence of success. These grants
typically range from $1-5 million annually for up to five years.
The intermediaries then match the federal funds
dollar-for-dollar and hold open competitions to identify the
most promising nonprofit organizations working in low-income
communities that have evidence of compelling results. Once
selected, these nonprofits must also match the funds they
receive, and participate in rigorous evaluations of the impact
of their programs.
In addition to funding, SI Fund grantees receive significant
technical assistance from CNCS to support implementation of
their innovative programs. Participation in the SI Fund gives
grant-makers greater visibility and plugs them into a national
network of funders and nonprofits that are committed to
fostering social innovation to improve lives in low-income
communities throughout the U.S.
The SI Fund launched its first competition in April 2010 and
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selected 11 intermediary grantees. These 2010 grantees have
made awards to more than 150 subgrantees serving low-income
communities across the country. The SI Fund began its second
competition in February 2011, and selected five additional
grantees. The SI Fund initiated its third competition in
February 2012, and will engage between three and five new
grantees. As of February 2012, $95 million in federal funds
have been awarded, and $250 million in additional private funds
have been leveraged through the program. Over 150 private
philanthropic funders have partnered with SIF including private
foundations, community foundations, corporations, and individual
donors. More than 100 cities in 33 states and the District of
Columbia are being directly impacted by the SI Fund.
Organizations in cities throughout California have received
subgrants from the SI Fund.
California entities have recently entered into contracts with
organizations under the SIF model. With funding from The
California Endowment, Collective Health and Social Finance,
Inc., Fresno is currently piloting a demonstration project to
reduce costs related to the treatment of children with asthma
through active management. If the pilot program, which launched
in April 2013, is successful, the partners plan to scale the
intervention through an SIP. In August 2013, Santa Barbara
County released a Request for Information on SIPs and approved a
feasibility study to explore the potential use of pay for
success financing in reducing prisoner recidivism. Santa Clara
County recently agreed to fund a pilot project exploring SIP
feasibility in the areas of reducing chronic homelessness and
improving services for the severely mentally ill. In May 2014,
Nonprofit Finance Fund and The James Irvine Foundation awarded
five grants totaling $2.5 million to projects in Los Angeles
County, the City and County of San Francisco, Santa Clara
County, San Diego, and the Nurse Family Partnership.
Comments
According to the author, "in times of economic uncertainty,
ongoing budget liabilities, and volatile revenue streams, one of
the biggest challenges government encounters is finding upfront
resources to invest in innovation. Even when innovative
strategies have proven to be successful through research, pilot
programs, and data, finding upfront investment to expand
successful programs amidst competing priorities proves to be an
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enormous barrier. The unfortunate reality is California misses
out on improved outcomes that save governments and taxpayers'
money simply because we can't find the startup money to fund
successful intervention. California should be open to tools
that encourage more investment to accomplish measurable social
benefit, save taxpayer money, and meet public policy goals.
Social innovation financing is one such tool.
"Reducing recidivism is an area where we must improve. AB 1837
seeks to support counties that are interested in using a social
innovation financing model to reduce recidivism. In doing so,
AB 1837 sets California on a path to better tap into private and
philanthropic resources, support local governments that are
already exploring these partnerships, and take advantage of
future federal funding for social innovation."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, BSCC estimates
that up to 5% of the grant awards could be necessary for general
administrative costs to implement and administer this program
resulting in costs to BSCC of up to $250,000 (special fund).
The grants provided under this bill are designed such that their
payment is conditioned on the achievement of specific outcomes
based upon defined performance targets. BSCC is tasked with
selecting independent evaluators who will objectively determine
whether the targets have been achieved. The amount of the
awarded grants must be fully matched by non-state funds
(including local government, federal government, or from private
donors).
Costs to BSCC include (1) hiring a consultant to help facilitate
the process, including convening an Executive Steering Committee
to develop a request for proposals, (2) proposal evaluation, (3)
associated travel costs, (4) providing technical assistance to
counties, (5) conducting public meetings, (6) developing
templates to collect information from counties, and (7)
preparing reports, as specified.
SUPPORT : (Verified 8/15/14)
County of Santa Clara
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ARGUMENTS IN SUPPORT : The County of Santa Clara states that
it is currently in the process of implementing its Pay for
Success/Social Innovation Financing Project which has created an
opportunity to move the county's contract process from outputs
to outcomes and attract new revenue streams to address
especially difficult social issues. The County notes that this
bill will set California on a path to better tap into private
and philanthropic resources as well as supporting local
governments that are already exploring SIPs.
ASSEMBLY FLOOR : 69-0, 5/27/14
AYES: Achadjian, Alejo, Ammiano, Bloom, Bocanegra, Bonilla,
Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau,
Chávez, Chesbro, Conway, Cooley, Dababneh, Dahle, Daly,
Dickinson, Eggman, Fong, Fox, Frazier, Garcia, Gatto, Gomez,
Gonzalez, Gordon, Gorell, Gray, Grove, Hagman, Hall, Harkey,
Roger Hernández, Holden, Jones-Sawyer, Levine, Linder, Logue,
Lowenthal, Maienschein, Medina, Melendez, Mullin, Muratsuchi,
Nazarian, Nestande, Olsen, Pan, Perea, John A. Pérez, V.
Manuel Pérez, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas,
Skinner, Stone, Ting, Waldron, Weber, Wieckowski, Williams,
Yamada, Atkins
NO VOTE RECORDED: Allen, Bigelow, Donnelly, Beth Gaines, Jones,
Mansoor, Patterson, Quirk-Silva, Wagner, Wilk, Vacancy
MW:e 8/16/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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