Social Innovation Financing

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Governor Patrick    FY 2013 Budget Recommendation:
    Issues in Brief

    Deval L. Patrick, Governor
    Timothy P. Murray, Lt. Governor


Social innovation financing is a creative idea based on a simple premise - have government pay for demonstrated success rather than the promise of success.  This approach will result in new and better ways of providing critical state services, achieving better outcomes and stretching every taxpayer dollar as far as possible.

In keeping with the Patrick-Murray Administration's commitment to changing the way government does business, the pay-for-success contracts at the heart of these arrangements should act as a catalyst to accelerate system-wide performance management improvements.  This approach will help us learn which programs work and which don’t, and it will hasten the adoption of new, more effective solutions to improve the way we deliver core programs and services. 

Performance-based investments will help encourage innovation and tackle challenging social issues. 

New and innovative programs have potential for success, but often have trouble securing government funding because it takes time for them to prove their effectiveness.  With limited state resources, governments are hesitant to spend money on new programs that may not succeed.  These challenges are particularly relevant for programs that require an up-front investment in prevention in order to improve outcomes and save money over time.  Examples include preventative interventions to lower incarceration rates among at risk youth, to improve housing stability for the chronically homeless and to increase kindergarten readiness and literacy among low-income children.  Social innovation financing allows the government to partner with innovative service providers to expand promising programs and pay only after we see demonstrated success.

The Patrick-Murray Administration plans to use social innovation financing to tackle two challenging problems:

The Administration plans to expand this initiative to additional policy domains in the future.  The Administration will explore a number of options for social innovation financing to ensure the best use of taxpayer dollars, including:

The Patrick-Murray Administration is filing legislation with the FY 2013 budget to establish funding for social innovation financing and a payment mechanism to support pay for success contracts.  While several other states and cities are actively considering the pay-for-success model, Massachusetts is the first government entity in the United States to issue a competitive procurement to obtain services using this approach. 

Prepared by the Executive Office for Administration and Finance ·
For more information email: (617) 727-2040