Funding Outcomes: Governments Weigh in on What it Really Takes

This blog was originally posted on NFF's Pay for Success Learning Hub.

A cell phone began beeping just as Patricia Olivares began her remarks at Ventura County Probation Agency’s first Cognitive Behavioral Therapy graduation ceremony. Olivares felt a surge of annoyance when one of the young graduates dropped his eyes to his phone and announced, “I have to go.” A minute later, the graduate returned with an older man in tow. “I’m sorry,” he said to Olivares, “but my dad didn’t know where to go.” Her heart softened. That was just like her son, she thought, not quite polished in his phone etiquette. And it hit her: these young men were the same age as her own son, whom she still thought of as a “kid.”

All the graduates that day were 18-24 years old; indeed, this population makes up the majority of the clients Olivares serves as Chief Deputy over Adult Probation Services. They are the largest demographic group in County jails, and they are also the group most likely to move on to first-time prison stays. Among the 700 offenders eligible for programs like the one at which she was speaking, Olivares had seen the recidivism rate go down impressively. That success was bittersweet, because Olivares’ department didn’t have the funding to extend these life-changing services to the 9,000 other clients on their books.

Across the US, local government agency leaders know there are effective up-stream interventions that change people’s lives and potentially save taxpayers money. It’s arguably far less costly to provide a proven preventive program than it is to pay for jail and prison stays. But too often, the upfront money just isn’t there.

Enter Pay for Success (PFS) projects, part of a movement toward outcomes-oriented contracting, where governments pay for measurable results like reductions in recidivism after they’ve been verified, with investors providing the upfront capital to run programs. Since 2014, the California Pay for Success Initiative—underwritten by the James Irvine Foundation and implemented by Nonprofit Finance Fund (NFF)—has spurred governments to test-drive outcomes-based projects in California. The Initiative, continuing through 2017, provides flexible funding and expert support to a cohort of service providers and government agencies exploring outcomes projects. The cohort includes Olivares and her team at Ventura County, as well as teams at Alameda County (2 projects), Santa Clara County (2 projects), Los Angeles County, the City/County of San Francisco, Children and Families Commission of Orange County, First 5 LA, Nurse Family Partnership, and Center for Employment Opportunities.

In October 2016, Irvine and NFF convened Initiative participants to take stock. With two projects launched in California, three more set for launch in 2017, and nearly a dozen more in development, the Initiative has clearly succeeded in catalyzing PFS exploration across the state. However, as one leader said, “it’s not as easy as it sounds.” Project leaders spent the day identifying the elements–from a government perspective–that led to successful explorations of this powerful new approach. Three keystones surfaced: a broad base of cross-agency buy-in, access to data, and a culture of innovation.

Cross-agency buy-in: County managers cited the importance of taking time upfront to garner broad buy-in of a shift away from organizing and funding intervention activities or “outputs,” such as job training programs, toward funding results or “outcomes,” such as successful job placements. In Los Angeles County, for example, the PFS project team developed the “LA County Blueprint,” a primer/roadmap to familiarize county agencies with the PFS outcomes approach and outline a democratic process to select projects. The Blueprint process took more than a year, and led to broad support for the county’s first foray into PFS–a permanent supportive housing project for formerly homeless ex-offenders. The up-front investment in the Blueprint broke down so many silos that even agency leaders not directly involved in the project stepped up to offer referrals and ideas to enhance the program design.

Access to data: Governments need integrated systems to collect and track data, and staff to analyze results. For some counties, this has meant delaying an outcomes project until data issues were resolved. When San Francisco considered a PFS project to tackle family homelessness, leaders discovered the city’s data systems were highly fragmented. “Our intake systems weren’t talking to our long-term tracking systems,” says Rebecca Foster, of Mayor Ed Lee’s Office. San Francisco has since merged homeless services from the Mayor’s Office, the Human Services Agency, and the Department of Public Health into a new Department of Homelessness. Eventually, San Francisco city and county will know the breadth of services provided to an individual or family and can compare that with outcomes such as successful placement in long-term housing. This alignment of data systems will enable the county to better determine what works and what doesn’t.

Culture of Innovation: Successful agency leaders said counties have—and continue to build through the PFS exploration process—a culture of innovation. Alameda County, for example, has a dedicated Innovation Unit within the County Administrator’s Office. Cutting-edge county activities include the nation’s first community “hackathon,” teaming up with local tech leaders to tackle social problems, and partnering with Google to engage county workers in “moon-shot thinking.” This openness to new ideas has proved a fertile ground for PFS, as evidenced by multiple PFS projects in development in Alameda County.

Back in Ventura County, the Olivares team’s PFS project was recently up for approval by the Board of Supervisors. When the Board passed the project on consent, the team rushed outside to high-five, but they know their work is far from done. As Olivares puts it, “the real celebration is when we launch services.” That’s scheduled for early 2017.

Nonprofit Finance Fund thanks the James Irvine Foundation for its leadership and support of the California PFS Initiative and salutes all the participants for demonstrating the promise and challenges of Pay For Success and for their commitment to improving social outcomes across their communities. We see great value in more governments exploring PFS/outcomes contracting, not only for specific project goals, but also as an avenue into broader innovation. In 2017, we plan to expand our work leveraging PFS as a catalyst for broad systems change. Please visit our newly designed Pay For Success Learning Hub to learn more.