BILL ANALYSIS Ó
SB 593
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Date of Hearing: August 6, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 593 (Lieu) - As Amended: July 2, 2014
Policy Committee: JEDE Vote:7-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill creates the Social Impact Partnership pilot program
and authorizes the Governor to enter into at least three
pay-for-success social impact partnerships before December 31,
2019, to address policies or programs not currently funded by
the state, in order to improve outcomes or lower state costs,
reduce recidivism, reduce child abuse and neglect, or assist
at-risk and foster children. Specifically, this bill:
1)Defines "pay-for-success contract" as 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. Specifies that
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)Defines "social impact partnership" as a contractual
relationship between a public entity and one or more private
entities for the purpose of addressing a social, economic, or
educational challenge.
3)Authorizes pay-for-success contracts to be entered into to
address a variety of issues, for example, assistance for a
certain demographic that does not currently receive funding;
efforts to improve outcomes in a program designed to reduce
recidivism; efforts to reduce child abuse and neglect through
prevention and treatment; or efforts to improve the stability
of at-risk and foster children through behavioral health and
other trauma-informed care.
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4)Prohibits social impact partnerships from being used in lieu
of funding or administering an existing state program, or to
cause the displacement of any state employee.
5)Authorizes the Governor to enter into a social impact
partnership contract if the pay-for-success meets certain
outcomes and performance measures, specifies how success will
be measured and payment for services will be earned.
6)Requires the state agency ultimately assigned to administer
this program, before finalizing the terms and conditions of
the pay-for-success contract, to undertake an assessment to
determine appropriate baseline metrics, performance standards,
and quality measures to be included in the pay-for-success
contract.
7)Requires, at the conclusion of the pay-for-success contract,
the state agency assigned to administer the program to provide
the Legislature 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.
8)Requires a pay-for-success contract for a social impact
partnership to 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.
Prohibits a pay-for-success contract from being entered into
without funding approval by the Legislature.
9)Requires the Treasurer to separately account for moneys within
the State Treasury for pay-for-success contracts that have
been approved by the Legislature and the Governor.
10)Sunsets the pilot program on January 1, 2020.
FISCAL EFFECT
1)Unknown future cost pressures, likely in the millions of
dollars, related to funding any proposed social impact
partnership contracts. Any potential costs or savings would
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depend upon the provisions in any future contracts for
services pursuant to these partnerships. Funding and approval
of these projects are required to be included in the annual
budget act.
2)Administrative costs to the state agency assigned to
administer the program, potentially in the hundreds of
thousands of dollars, to solicit, evaluate and select
proposals for social impact partnerships. Because this type
of contract would be new, the amount of time needed to develop
the solicitation document and respond to inquiries from
interested parties may be considerable. Staff would need to
develop baseline metrics, performance standards, and quality
measures. Given the potential range and complexity of social
impact partnership proposals, consultation with outside
experts may also be necessary. Additional staff time would be
dedicated to preparing and submitting a report to the
Legislature evaluating the social impact partnership upon
completion.
COMMENTS
1)Purpose . According to the author, Social Impact Partnerships,
also known as "pay for success contracts," are a new financing
mechanism for social programs operated and administered by
non-government organizations (NGOs). The NGO enters into a
contract with a state government agency. Specific program
goals with agreed upon and quantifiable target results are
agreed to within a set time frame. The NGO pays for the entire
up-front costs of providing the service. If the service meets
the agreed upon quantifiable results in the specified time
frame, it is reimbursed by the government for the agreed upon
cost of the service and rate of financial return. If the goals
are not met, the government pays nothing.
2)Background . Social innovation financing is an approach to
contracting utilizing performance-based models to address
larger social challenges. In 2012, Massachusetts announced
plans to use social innovation financing to address two
challenging problems: chronic homelessness and high recidivism
rates among juvenile offenders. Several other states and
local governments have already initiated or will be initiating
projects that include performance-based contracting models.
New York City is seeking to reduce recidivism among young
adults; Minnesota is seeking better outcomes relative to
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workforce development and supportive housing; New York State
is addressing recidivism through employment opportunities for
high-risk adult and juvenile ex-offenders re-entering society;
and Fresno, in partnership with the California Endowment is
seeking solutions to reduce incidents of asthma.
The 2014-15 Budget Act includes $5 million to facilitate the
use of social innovation financing for recidivism reduction
programs, such as housing for former felons. Expenditure of
these funds is subject to further legislation.
3)Related legislation . AB 1837 (Atkins), pending in the Senate
Appropriations Committee, requires the Governor's Office of
Business and Economic Development to lead the state's efforts
in expanding the use of social innovation financing and
performance-based contracts to address significant social
issues, including, but not limited to, homelessness, prison
inmate recidivism, and workforce development.
Analysis Prepared by : Misty Feusahrens / APPR. / (916)
319-2081