Lisa Sanbonmatsu has a tough job ahead of her. The Cambridge policy analyst will be the judge of whether a new effort by the Patrick administration succeeds in cutting recidivism rates among former juvenile offenders and young men on probation. More than pride rides on her verdict: If Sanbonmatsu declares that the program has met or exceeded its goals, the state has agreed to award up to $27 million to the group of investors that are paying for it. If she determines the effort has failed, though, those investors — which include charitable foundations and the main funder, investment bank Goldman Sachs — could lose money.
Targeted at men age 18 to 23 who are at a high risk of reoffending, the recidivism project represents the state’s first experiment with “pay-for-success” contracts, a model for financing government services with private-sector funds that holds enormous potential to extend the reach and accountability of social programs. The Patrick administration has devoted significant effort to crafting the plan and deserves a lot of credit for trying a new approach. The payoff to investors, if any, will be based on how much the state projects it will save from reduced prison costs.
But for all its promise, pay-for-success also comes with potential pitfalls: It relies on having a rigorous, impartial evaluation system that maintains the confidence of both investors and taxpayers. Because Massachusetts is such a pioneer, the infrastructure for evaluating pay-for-success contracts barely exists now. Although Sanbonmatsu is an accomplished academic researcher, her company, Sibalytics, has no track record. But Sibalytics forms the deal’s most crucial link, and will be in the position of determining whether the state shells out millions. Analysis of social programs isn’t a new field — but conducting such studies and delivering definitive verdicts when Wall Street’s profits hinge on the outcome is.
So a lot of careful monitoring will be needed. That said, there’s a strong reason to believe that this pilot will be successful. Roca, the Chelsea-based organization that will receive the funds, has an impressive track record. Its director, Molly Baldwin, describes how Roca’s workers aggressively seek out their targets and talk them into attending intervention programs. The money from Goldman Sachs and the other investors will enable Roca to reach another 929 men; Sanbonmatsu will judge Roca’s success by comparing those men’s performance to a control group of other troubled young men. Under the contract, the primary measure of success will be days of imprisonment — the fewer days the 929 men spend in prison over the next five years, the more money the investors will make.
The program is only a few weeks old, but officials are already working on a second pay-for-success contract, wooing investors to fund an effort aimed at chronic homelessness. Potentially, these contracts can channel money to services that wouldn’t otherwise receive funding, and provide an incentive for success that should breed new, entrepreneurial approaches. The best way to make the pay-for-success program successful will be to ensure evaluators are insulated from outside pressure and able to render fair, trusted judgments.