In the education sector, new and innovative programs are constantly being developed that have the potential to improve outcomes for students. Yet many of these programs struggle to secure the funding it would take to become fully operational or expand to reach more students because of the time needed for them to prove their effectiveness. State governments with limited resources are understandably hesitant to spend money on new programs that may not succeed. It’s a chicken or egg problem – innovative programs need to prove their effectiveness in order to secure funding, but without initial funding, they may not be able to fully operate their programs and achieve their desired outcomes. These challenges are especially true for programs focused on prevention that may save money over time. For example, programs that build the literacy skills of preschool children may not be able to prove the ultimate success of their students – and subsequent cost-savings for the Commonwealth – until those preschoolers are in high school or college.
So in May 2011, Massachusetts became the first government entity in the United States to pursue something called social innovation financing. The idea behind social innovation financing is that taxpayer dollars should pay for demonstrated success rather than the promise of success. At the same time, social innovation financing provides innovative service providers with the funding they need to fully support their programs. Social innovation financing allows the government to partner with private-sector organizations to expand promising programs and pay only after success is demonstrated. Since funded programs aren’t likely to produce savings for a few years, the state Legislature set aside $50 million for repayments to investors once the selected programs begin to show positive results. The first two investments are focused on 1) chronic homelessness – with the goal of improving the well-being of chronically homeless individuals while simultaneously reducing housing and Medicaid costs, and 2) juvenile justice – with the goal of reducing recidivism and improving education and employment outcomes for a significant segment of the youth who exit the juvenile corrections and probation systems.
In order to build upon and expand the Administration’s work in social innovation financing, we at the EOE are working with our budget team to explore a new round of social innovation financing proposals that would focus on overcoming critical challenges in education. We will be particularly interested in ideas for overcoming persistent education challenges through preventative interventions that will ensure that funding produces improved outcomes across the educational continuum – from birth to adulthood. Using social innovation financing to fund innovation in education holds the promise of ensuring that taxpayers’ substantial investments ultimately result in higher levels of education for students, a better prepared workforce and more productive and engaged citizens of the Commonwealth.
Stay tuned for more updates on our progress toward launching social innovation financing in education over the coming months.