Amended in Assembly June 10, 2014

Amended in Senate January 27, 2014

Amended in Senate January 6, 2014

Amended in Senate April 23, 2013

Senate Bill No. 593

Introduced by Senator Lieu

February 22, 2013

An act to add and repeal Title 15.5 (commencing with Section 97000) of the Government Code, relating to social impact partnerships.

LEGISLATIVE COUNSEL’S DIGEST

SB 593, as amended, Lieu. Social impact partnerships: pilot program.

Existing law establishes the Office of Planning and Research begin insert in the Governor’s office end insert and sets forth its powers and duties as the comprehensive state planning begin delete agency. end delete begin insert agency, including, among other things, to evaluate plans and programs of departments and agencies of state government. end insert

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This bill would require the Office of Planning and Research to conduct the Social Impact Partnership Pilot Program. The bill would authorize the Director of the Office of Planning and Research to identify and submit proposed social impact partnerships to the Legislature for consideration with the May Revision of the Governor’s Budget each year beginning in 2015. The bill would create the Social Innovation Financing Trust Fund from which funds appropriated by the Legislature would be spent on contracts entered into by the office with approved applicants, as specified. The bill would authorize the office to adopt regulations to implement these provisions and to establish an application fee to cover the expenses of the office. The bill would also require the director to report annually to the Governor and Legislature on the status of ongoing social impact partnerships and the Social Innovation Financing Trust Fund, as specified. This bill would repeal these provisions on January 1, 2020.

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This bill would state findings and declarations of the Legislature regarding the social problems currently facing the state and the function of social impact partnerships. The bill would authorize the Governor to enter into at least 3 social impact partnerships, as defined, each fiscal year to address policies or programs not currently funded by the state, to address particular components of state programs in order to improve outcomes or lower state costs, to reduce recidivism, to reduce child abuse and neglect, or to assist at-risk and foster children, provided that the social impact partnership is not used to operate entire state programs, does not cause the displacement of any state employee, and the contractual agreement contains specified provisions. The bill would require a contract for a social impact partnership to be submitted to the Legislature as part of the Governor’s proposed budget, and any funding necessary for that fiscal year to be included in the Governor’s proposed budget for the state agency that would administer or oversee the contract. The bill would provide that for contracts approved by the Legislature in prior fiscal years, payments made under the contract would be subject to appropriation according to the terms of the contract.

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This bill would repeal these provisions on January 1, 2020.

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Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

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begin insert The Legislature finds and declares all of the
following: end insert

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(a) This act shall be known, and may be cited, as the California
Social Impact Partnership Act.

end insert begin insert

(b) Over six million people are currently living in poverty in
California, and 22 percent are children. One in five children in
California lives in poverty and nearly one-half of children in
California either live in poverty or perilously close to it.

end insert begin insert

(c) The recidivism rates in California are among the highest in
the nation. According to a 2012 report by the Department of
Corrections and Rehabilitation, just over 65 percent of those
released from California’s prison system return within three years.

end insert begin insert

(d) Approximately 55,000 children are in the foster care system
in California, yet, according to the Pew Charitable Trusts, by 19
years of age only 57 percent of emancipated foster youth have
received high school diplomas or general education development
(GED). Over 70 percent of all state prison inmates have spent time
in the foster care system.

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(e) Despite current efforts to address these challenges, there
are simply not sufficient resources available through traditional
funding mechanisms. Innovative approaches that can be shown to
achieve defined goals should be pursued.

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(f) Social impact partnerships are essentially
pay-for-performance contracts that can be used for social
programs administered by nongovernmental organizations whereby
governmental agencies pay only for successful programs with real,
measurable outcomes after the results have been achieved.

end insert begin insert

(g) This act will authorize the state to contract with
nongovernmental organizations to provide a service to a targeted
population over a specified period of time. If the results of the
services provided meet predetermined program goals, the state
will repay the nongovernmental organization for the services
rendered plus an agreed upon rate of return. If the social program
does not meet the targets, the government pays nothing.

end insert begin insert

(h) The social impact partnership model was first used in the
United Kingdom in 2010 and has since been adopted in New York
City, Massachusetts, and Ohio, and contracts are being formulated
in other states such as Michigan, Colorado, Utah, North Carolina,
and New Jersey.

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(i) In a time of limited public funds and a decrease in
philanthropy, the social impact partnership model is being used
across the nation to address social problems, to reduce recidivism,
to reduce chronic homelessness, and to fund early childhood
intervention and prevention services and job training programs.

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begin delete SECTION 1. end delete
begin insert SEC. 2. end insert   

Title 15.5 (commencing with Section 97000) is added
to the Government Code, to read:

 

Title 15.5.  SOCIAL IMPACT PARTNERSHIPS PILOT
PROGRAM

 

Chapter  1. General

 

97000.  

(a) For purposes of this title, “social impact
partnership,” also referred to as a “pay for success contract,” means
a contract for services begin delete provided end delete to address a defined demographic
group’s particular needs begin delete that are traditionally addressed through
state programs and funding therefor, in order to improve outcomes
and lower costs because payment is made only after measured
results are end delete begin insert for which payment will be made after predetermined
measurable results have been end insert achieved.

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(b) “Director” means the Director of the Office of Planning and
Research established pursuant to Section 65037.

end delete begin insert

(b) Social impact partnerships may be entered into, subject to
subdivision (d), for any of the following:

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(1) To address policies or programs not currently funded by
the state.

end insert begin insert

(2) To address particular components of state programs in order
to improve outcomes or lower state costs.

end insert begin insert

(3) To improve outcomes in programs designed to reduce
recidivism in the population of formerly incarcerated individuals.

end insert begin insert

(4) To reduce the incidence of child abuse and neglect through
prevention and treatment, to improve the stability of at-risk and
foster children through behavioral health and other
trauma-informed care, and to improve educational outcomes and
job preparedness for at-risk and foster children.

end insert begin insert

(c) Social impact partnerships shall not be used for the operation
of entire state programs nor cause the displacement of any state
employee.

end insert begin insert

(d) The Governor is authorized to enter into a social impact
partnership for the purposes set forth in subdivision (b) if the
contractual agreement contains all of the following:

end insert begin insert

(1) A requirement that payments for services be conditioned
upon the achievement of specific outcomes based on defined
performance measures.

end insert begin insert

(2) A requirement that an independent evaluator be used to
determine whether the performance outcomes have been achieved.

end insert begin insert

(3) Specifications for how success will be measured and
payments for services are earned.

end insert begin insert

(4) A calculation for the amount of, and the timing of, payments
that will be earned by the service provider during each year of the
agreement, if performance outcomes are achieved as determined
by the independent evaluator.

end insert begin insert

(5) If applicable, pursuant to paragraph (2) of subdivision (b),
a statement that the contract will result in significant performance
improvements or budgetary savings if the performance outcomes
are achieved.

end insert begin insert

(e) If the Governor exercises the authority set forth in
subdivision (d), he or she shall enter into at least three contracted
agreements for social impact partnerships during the fiscal year
in which the state enters into the first contractual agreement.

end insert

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97001.  

(a) The Office of Planning and Research shall conduct
the Social Impact Partnerships Pilot Program.

(b) (1) The director may identify and submit proposed social
impact partnerships to the chairs of the Senate and Assembly
budget committees and the chairs of the relevant subcommittee
for consideration with the May Revision of the Governor’s Budget
each year beginning in 2015.

(2) Prior to the submission of any proposed social impact
partnerships, the director shall consult with the appropriate state
agency or department responsible for administering any affected
state program.

(3) At a minimum, each submission 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 how 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.

97002.  

(a) Upon appropriation of sufficient funds by the
Legislature, the director shall enter into a contract with the
approved applicant.

(b) Each contract 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 director, 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 director that the contract will result
in significant performance improvements and budgetary savings
across impacted agencies or departments if the performance targets
are achieved.

(c) The director shall not enter into any contract that exceeds
the funds appropriated for it by the Legislature.

97003.  

(a) The Social Innovation Financing Trust Fund is
hereby created in the State Treasury. All funds appropriated by
the Legislature pursuant to Section 97002 shall be deposited into
the Social Innovation Financing Trust Fund.

(b) Social impact partnership contracts entered into by the office
with approved applicants shall be paid from the Social Innovation
Financing Trust Fund.

97004.  

(a) The Office of Planning and Research may adopt
regulations to implement this title.

(b) The office shall adopt an application fee that is sufficient to
cover the expenses incurred by the office, including startup costs.

97005.  

The director shall report annually to the Governor and
Legislature on the status of each ongoing social impact partnership,
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 Social Innovation
Financing Trust Fund.

97006.  

This title shall not create a statutory entitlement to
services or any contractual obligation on the part of the state. It is
the intent of the Legislature that a proposed contract under Section
97001 is subject to legislative review and approval before its
execution, and that any appropriation only occur after the review
and approval.

97007.  

This title shall be repealed on January 1, 2020.

end delete begin insert

begin insert 97001. end insert   

(a) A contract for a social impact partnership shall be
submitted to the Legislature as part of the Governor’s proposed
budget, and any funding of the contract for that fiscal year shall
be included in the Governor’s proposed budget for the state agency
that would administer or oversee the contract.

(b) For contracts approved by the Legislature for prior fiscal
years, payments made under the contract shall be subject to
appropriation according to the terms of the contract.

end insert begin insert

begin insert 97002. end insert   

This title shall be repealed on January 1, 2020.

end insert