March 29, 2017
 
Two Boston Nonprofits Launch Pay for Success Competition

January 23, 2017 — Two Boston nonprofits—Social Finance, Inc. and Jobs for the Future—last week announced that they have launched a competition, supported by $2 million from the federal government, to develop the first-ever pay for success projects in K-12 education.

Funded by the U.S. Department of Education, the competition will award technical support to expand career and technical education programs for underserved, high-need youth through pay for success (PFS) projects that create or scale effective programs aimed at enabling students to reach their full potential.

Maria Flynn, president and chief executive officer of Jobs for the Future (JFF), a national nonprofit that builds educational and economic opportunity for underserved populations, said the partnership will "help advance strategies that not only result in benefits for low-income youth, but also intentionally align our education system with the needs of the workforce through efficient and effective uses of government investments."

Tracy Palandjian, chief executive officer and co-founder of Social Finance, Inc., a fundraising and project management intermediary that mobilizes capital to drive social progress, added, "Through pay for success, governments pay only for positive outcomes, such as increased high school graduation rates and improved earnings for our youth."

Applications to the competition are due by March 17. Social Finance and JFF will select four applicants and explore how PFS would allow them to implement or expand a career and technical education program. Social Finance and JFF will then work with select applicants to develop and launch PFS projects in their communities. Applicants can include local education agencies, postsecondary institutions, and consortia.

PFS is an innovative funding model that combines nonprofit expertise, private funding, and independent evaluation to transform how government leaders respond to chronic social problems.

Through PFS, private investors provide upfront funding to scale effective service providers. Government agrees to repay investors if and when the project achieves its desired impact. This shifts the focus from outputs to outcomes, such as achievement of credentials, directing taxpayer dollars to programs that work.

Since the first PFS project—also called a Social Impact Bond—was launched by Social Finance’s sister organization Social Finance UK in 2010, more than 70 projects have launched in 16 countries.

Over the last five years, several PFS projects have been launched in Massachusetts, including:
  • A $27 million partnership involving Roca, a Chelsea-based service provider, and Third Sector Capital Partners, a nonprofit fundraising and project management intermediary based in Boston, that seeks to reduce incarceration rates and improve employment outcomes for young men.

  • The Adult Basic Education Pay for Success Initiative that pairs Jewish Vocational Services, one of the largest providers of adult education and workforce development services in the Greater Boston area, and Social Finance.

  • The Chronic Individual Homeless, a project that was to use $1 million in philanthropic funding and $2.5 million in private capital investments from Santander Bank N.A., the Corporation for Supportive Housing, and United Way of Massachusetts Bay and Merrimack Valley.

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