Amended in Assembly August 22, 2014

Amended in Assembly August 18, 2014

Amended in Assembly July 2, 2014

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 in the Governor’s office and sets forth its powers and duties as the comprehensive state planning agency, including, among other things, to evaluate plans and programs of departments and agencies of state government.

This bill would state findings and declarations of the Legislature regarding the social problems currently facing the state and the function of social innovation funding, pay-for-success contracts, and social impact partnerships. The bill would authorize the Governor, or his or her designee, begin insert to solicit proposals for social impact partnerships using pay-for-success contracting and end insert to enter into begin delete at least 3 end delete pay-for-success social impact partnerships, as defined, or other model of social innovation financing, before December 31, 2019, to address policies or programs not currently funded by the state, to address a particular component of a state program 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 does not cause the displacement of any state employee and the contractual agreement contains specified provisions. The bill would require a pay-for-success 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 require the Treasurer to separately account for moneys approved by the Legislature and the Governor to use for payment for these contracts, upon appropriation by the Legislature.

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

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) 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.

(b) 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.

(c) 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.

(d) 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.

(e) Research and experience at the federal level and in other
states show that the public can benefit from the use of social
innovation financing to establish partnerships between
governmental agencies, private investors, and service providers
using pay-for-success contracts to achieve measurable social
benefits.

(f) Social innovation financing and the use of pay-for-success
contracting can be an especially effective tool for addressing social
and community development challenges where private sector
innovations are needed and multiple approaches are appropriate.

(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.

(h) This act will authorize the state to enter into begin delete at least three end delete
pay-for-success contracts to meet state goals to reduce recidivism
and improve outcomes in the child welfare system. These contracts
are in addition to any contract entered into in connection with the
Social Innovation Financing Program authorized by Title 15.8
(commencing with Section 97008) of the Government Code.

(i) The social impact partnership model was first used in the
United Kingdom in 2010 and has since been adopted in New York.
Twelve other states are developing social impact partnerships,
including Illinois, Michigan, New Jersey, Ohio, and Washington.

(j) 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.

SEC. 2.  

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.  

This title shall be known, and may be cited, as the Social
Impact Partnerships Pilot Program.

97000.5.  

(a) For purposes of this title, the following definitions
shall apply:

(1) “Pay-for-success contract” means a type of contract that the
state may enter into with a service provider that sets performance
and quality standards that must be met in order for the service
provider to be paid. Pay-for-success contracts are often used to
address a defined demographic group’s particular needs for which
payment will be made after predetermined measurable results have
been achieved.

(2) “Social impact partnership” means a contractual relationship
between a public entity and one or more private entities for the
purpose of addressing a social, economic, or educational challenge.
The context, authorities, and responsibilities of a social impact
partnership are laid out in a pay-for-success contract.

(3) “Social innovation financing” means an investment
arrangement using private funding to finance a social program
administered by a nonprofit organization or a for-profit service
provider on behalf of a government agency pursuant to a
pay-for-success contract, social innovation bond, or other model
that results in the state paying for performance.

(b) Pay-for-success contracts, excluding those contracts entered
into pursuant to Title 15.8 (commencing with Section 97008), may
be entered into, subject to the conditions and requirements of this
title, for any of the following:

(1) To address policies or programs that may be appropriate to
meet a defined demographic group’s particular need, but that are
not currently funded by the state.

(2) To address a particular component of a state program in
order to improve outcomes or lower state costs.

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

(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.

(c) A social impact partnership entered into pursuant to this title
shall not be used in lieu of funding or administering an existing
state program nor cause the displacement of any state employee.

begin insert

(d) The Governor, or his or her designee, may solicit proposals
for social impact partnerships using pay-for-success contracting
pursuant to Section 97001. At a minimum, each application for a
contract shall include all of the following:

end insert begin insert

(1) A description of the proposed social program.

end insert begin insert

(2) A description of the organization’s experience in providing
the proposed social program.

end insert begin insert

(3) A description of the financial stability of the organization.

end insert begin insert

(4) An identification of each component of the social program
to be provided.

end insert begin insert

(5) A description of the manner in which the social program
will be provided.

end insert begin insert

(6) A description of the recruitment or selection process, or
both, for participants in the social program.

end insert begin insert

(7) The proposed quantifiable results upon which the success
of the program will be measured.

end insert begin insert

(8) An itemization of all expenses proposed to be reimbursed
under the contract.

end insert begin insert

(9) A description of how the final payments for successful
programmatic outcomes are structured in the contract.

end insert begin insert

(10) A description of all parties to the proposed contract,
including prospective investors and philanthropic foundations.

end insert begin delete

(d)

end delete

begin insert (e) end insert  The Governor, or his or her designee, is authorized to enter
into begin delete a end delete social impact begin delete partnership, end delete begin insert partnerships, end insert subject to the
conditions and requirements of this chapter, for the purposes set
forth in subdivision (b) if the pay-for-success contract contains all
of the following:

(1) A requirement that payments for services be conditioned
upon the achievement of specific outcomes based on defined
baseline metrics, performance measures, and quality standards.

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

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

(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.

(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.

(6) Safeguards to protect the well-being of the population being
served including, but not limited to, privacy, health, and safety.

begin delete

(e)  If the Governor exercises the authority set forth in
subdivision (d), he or she shall enter into at least three
pay-for-success contracts for social impact partnerships or other
model of social innovation financing before December 31, 2019.

end delete

(f)  Before finalizing the terms and conditions of the
pay-for-success contract, the state agency that is assigned to
administer or oversee the pay-for-success contract authorized by
this title shall undertake an assessment to determine appropriate
baseline metrics, performance standards, and quality measures to
be included in the pay-for-success contract. At the conclusion of
the pay-for-success contract, the state agency shall provide the
Joint Legislative Budget Committee, the Senate Committee on
Business, Professions and Economic Development, and the
Assembly Committee on Jobs, Economic Development, and the
Economy, with an assessment of how effective the social impact
partnership model was in meeting the particular needs of the
targeted demographic group and make recommendations on how
the structure or process of undertaking a social impact partnership
through pay-for-success contracts may be improved.

97001.  

(a) A pay-for-success contract for a social impact
partnership shall be submitted to the Legislature as part of the
Governor’s proposed budget, including any statutory changes that
may be necessary for the pay-for-success contract to move forward.
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. A pay-for-success contract shall
not be entered into without funding approval by the Legislature.
This subdivision shall not apply to any contract entered into
pursuant to Title 15.8 (commencing with Section 97008).

(b) The Treasurer shall separately account for moneys within
the State Treasury for pay-for-success contracts that have been
approved by the Legislature and the Governor, and hold those
moneys, until the outcome of the social impact partnership has
been evaluated, pursuant to subdivision (g) of Section 97000.5,
and the moneys appropriated by the Legislature for payment of
the pay-for-success contract.

97002.  

(a) This title shall not apply to any contract entered
into pursuant to Title 15.8 (commencing with Section 97008).

(b) This title does not create a statutory entitlement to services
or any contractual obligation on the part of the state.

97003.  

This title shall be repealed on January 1, 2020.