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Mayor Pursues Nation’s First Social Impact Bond for Financing Programs to Reduce Teen Pregnancy & Improve Education

Wednesday, May 14, 2014

Mayor Pursues Nation’s First Social Impact Bond for Financing Programs to Reduce Teen Pregnancy & Improve Education

Request for Qualifications for Evidence-Based Program Issued

(WASHINGTON, DC) – Today, Mayor Vincent C. Gray’s Office of Budget and Finance announced that the District will become the first jurisdiction in the nation to implement a Social Impact Bond (SIB) – an outcome-based public-private partnership – to finance services aimed at reducing teen pregnancy and improving education outcomes in the District.

A SIB brings together government, service providers, investors and a financial intermediary to mobilize new private capital to fund the expansion of evidence-based social programs. Under a SIB, governments pay for the achievement of pre-determined outcomes. Socially conscious investors who provide the up-front capital to fund the program would be repaid if the program has helped achieve the desired social outcome. This innovative approach has the potential to draw new funding sources for programs that deliver measurable social benefits while ensuring that taxpayer dollars only pay for success. The District is working with Social Finance US, a non-profit intermediary, to develop and launch its first SIB.

The SIB under development is designed to reduce the incidence of teen pregnancy while improving educational outcomes for high-school-aged youth in the District. While the District has already seen significant improvements in reducing the incidence of teen pregnancy, it continues to have a teen pregnancy rate that outpaces that of the national average.

“A Social Impact Bond has the potential to catalyze significant improvements in some of our most pressing social challenges by scaling up solutions that require considerable up-front capital to implement,” said Mayor Gray. “SIBs are also an innovative way to ensure better outcomes while reducing risk exposure for the taxpayers of the District. We look forward to working with Social Finance US to structure a SIB that brings rigor, discipline and private capital to help improve the lives of our young people and our entire city.”

Social Finance will release a Request for Qualifications (RFQ) today to identify qualified programs to improve teen pregnancy and education-related outcomes for high-school-aged youth in the District. The RFQ will be the first step in a two-step process to identify programs that are well-suited for SIB financing. The RFQ will be followed by a Request for Proposals (RFP) from well-qualified programs. Programs that are well-suited for SIB financing have clear and measurable outcomes, a strong and research-tested evidence base, a need for  significant up-front capital investment, a well-defined target population, and an ability to generate significant savings to the taxpayers.

Other jurisdictions in the United States have explored the use of SIBs in the areas of criminal justice, nurse home visits, and education. The District would be the first jurisdiction to launch a SIB targeted at reducing the rates of unplanned teen pregnancy and its related educational and social effects. There are currently four SIB projects operational in the U.S., in New York City, New York state, Massachusetts and Utah. At the federal level, President Obama’s Fiscal Year 2015 Budget also includes almost $500 million in investments for states to undertake Pay for Success programs.

“We are honored to partner with the District on the first Social Impact Bond globally to reduce the incidence of teen pregnancy. We are committed to expanding the District’s most effective programs tackling this important issue and to harnessing new private-sector resources to improve the lives of thousands of District residents,” said Tracy Palandjian, CEO and Co-Founder of Social Finance.