It’s been five years since the first Pay for Success transaction closed in the U.S. At Living Cities, we’ve been asking ourselves: “Five years later, what has Pay for Success (PFS) achieved and what does its future look like?” Our new blog series will share reflections from us and our partners on new directions in PFS. Today we are featuring Third Sector Capital Partners, Inc. Follow our Pay for Success Newsletter for updates!
Nearly one in every seven youth and young adults across the United States are neither employed nor in school. Nationwide, this amounts to approximately six million disconnected or “opportunity youth” who face barriers to employment, including limited community resources, low-performing schools, and inadequate assistance from the systems that serve them. Meanwhile, billions in federal funding is spent on workforce development and training every year through government systems that do not consistently promote innovation and are not hitting the critical outcomes of getting all participants into family sustaining wages with career path opportunities.
Important changes in the 2014 Workforce Innovation and Opportunity Act (WIOA) provide a favorable opening to focus on improving outcomes by incorporating Pay for Success (PFS) components into the Act. With a shift towards longer-term outcomes through new performance measures and the authorization of Pay-for-Performance (P4P) contracts, there is a window of opportunity for workforce boards to build on the rich history of performance-based contracting, develop more comprehensive services, and deploy resources in increasingly outcomes-driven ways.
WIOA P4P represents both a new iteration in the long history of performance-based contracting, as well as an evolution in performance-based payments, drawing on many of its features and benefits. While the workforce system has benefited from decades of performance-based contracts and is familiar with the concept of paying for results, often those results were in the form of inputs and outputs. Certainly some outcome measures were tracked, but given the short two-year funding cycle, it was not possible to develop contracts that would link payment directly to high-bar, long-term outcomes for participants. WIOA P4P requires a focus on these types of longer-term outcomes, allowing for longer interventions and participant tracking to incentivize comprehensive services.
WIOA P4P requires a focus on…longer-term outcomes, allowing for longer interventions and participant tracking to incentivize comprehensive services.
In 2016, as our second cohort of Social Innovation Fund sub-recipients, Third Sector selected workforce boards in Austin, Boston, Denver, San Diego and Northern Virginia to explore how the P4P provisions of the WIOA can strengthen their youth programming and develop replicable models to inform and scale outcomes-based contracting across the nation. We recently held an in-person cohort convening where teams shared their early wins and challenges. While the work to develop the data sharing agreements, employer partnerships, and contracts is not easy, teams agreed that the benefits of improving outcomes for youth while deploying funds more efficiently were well worth the effort.
P4P has provided a rallying point for governments, employers, providers and funders to come together and strategize on how to better serve opportunity youth in these communities. With the Austin Workforce Solutions Capital Area team, we are working to scale the highly successful Youth Employment Partnership program in Austin/Travis County through targeted engagement of employers as end-payers. In Boston, we are working with the Mayor’s Office of Workforce Development (OWD) to strengthen their summer youth employment program (SYEP), which provides summer job opportunities to youth, many of whom come from low-income households. We are also working with the Denver Office of Economic Development to combine P4P funding, rigorous evaluation and performance-driven service provision to increase educational and employment outcomes for pregnant and parenting youths. In Northern Virginia, we are partnering with the SkillSource Group to launch a P4P pilot focused on reaching foster care and justice-involved 18-24 year olds in Fairfax, Prince William and Loudoun Counties. With the San Diego Workforce Partnership (SDWP), we are exploring the opportunity to use the P4P provisions to increase the rate of placement and retention in employment or postsecondary education, as well as reduce the rate of recidivism for justice-involved youths.
These five pilot projects demonstrate the flexibility and diversity that exists within the parameters of WIOA P4P. Even in cases, such as Austin, where P4P funding will not be necessary, the opportunity to explore outcomes-based contracts under WIOA was the catalyst for developing innovative partnerships and attracting and deploying funds in evidence-based ways. We believe that these examples can serve as models for other workforce boards across the country, as well as uncover ways that state and national leadership can better support P4P efforts. Increased access to data, including individual tax and wage records, and ensuring that state level policies allow local areas to fully take advantage of the P4P provisions are essential to encouraging continued exploration of P4P. Outreach and collaboration with accounting professionals in state and local government will also ensure that the innovative solutions developed through P4P are supported by financial practices and systems.
Pilot projects will be wrapping up between the summer and end of year 2017, so stay tuned for project summaries and tools and templates based on the successes and challenges we uncover throughout the projects. If you would like to join our Learning Community and keep up with the progress of these projects, as well as future opportunities to explore P4P in your own community, please contact Celeste Richie at crichie at thirdsectorcap dot org.
About the Social Innovation Fund
The Social Innovation Fund is a program of the Corporation for National and Community Service, a federal agency that engages millions of Americans in service through its AmeriCorps, Senior Corps, Social Innovation Fund (SIF), and Volunteer Generation Fund programs, and leads the President’s national call to service initiative, United We Serve. For more information, visit NationalService.gov.
In 2009, President Obama authorized the creation of the Social Innovation Fund as part of the Corporation for National & Community Service to find solutions that work, and make them work for more people – by proving, improving and scaling effective models. SIF and its non-federal partners have invested nearly $1 billion in effective community solutions since the program’s inception. Launched in 2014, the SIF Pay for Success (PFS) program is designed to help cities, states and nonprofits develop Pay for Success projects where governments pay service providers only when there are demonstrable results.
Note: Pay for Success (PFS) is a general term for performance-based contracting between government and social service providers, where government only pays providers if target outcomes are achieved, e.g. reduced recidivism or improved health outcomes, as opposed to providing cost reimbursement payments.