The U.S. Department of Labor (DOL) awarded the Massachusetts Executive Office of Labor and Workforce Development and the New York State Department of Labor Workforce Innovation Fund grants in order to operate Pay for Success (PFS) pilot projects. The PFS model uses financing from private sector and philanthropic sources to “promote innovation and to allow evidence-based practices to be scaled up, thus improving social or environmental outcomes for people and communities” (p.iii). The PFS pilots were the first financing model of their kind to be funded and tested by a federal agency.
“Both projects focus on improving employment outcomes and reducing recidivism among newly released ex-offenders. The Massachusetts project targets young male parolees, while the New York pilot focuses on adult ex-offenders generally.
DOL…sponsored a process study of the two PFS pilots…to document project implementation and provide information on the PFS approach for policymakers and program administrators. This is the process study’s first report…. The report is based on in-person interviews … and reviews of grantee documentation and performance data that was reported to DOL…. [T]his report examines the pilots’ early planning and operational experiences, including developing working partnerships and management structures, securing private and philanthropic capital and financing mechanisms, establishing the service intervention, setting up the evaluation design, and establishing outcome measures, outcome targets and payment amounts” (p.iii).
In order to qualify for the grants, DOL required applicants to establish the following elements:
- “A government agency to identify the social problems to be targeted by the project and set aside grant funds to repay investors if target outcomes are achieved
- A target population and specific employment and training related problem that would be the focus of the intervention strategy
- An intermediary to manage the PFS pilot
- Investors to provide operational financing for the program
- An independent validator to verify if outcome targets were achieved, based on the results of the project’s experimental or quasi-experimental evaluation, andA service provider…to deliver an intervention to the target population” (p.iv).
Full publication title: Process Study of the U.S. Department of Labor’s “Pay for Success” Pilots in Two States: Development of the Grant Applications and Initial Implementation
(Abstractor: Author and Website Staff)
Major Findings & Recommendations
Both Massachusetts and New York had an interest in PFS before the grant opportunities were announced in 2012. “In both states, the governors and high-level workforce and public safety agency leadership were knowledgeable about PFS and interested in testing an innovative approach to improving employment outcomes and reducing recidivism for recently released offenders” (p.iv). The authors highlight findings related to the development of the grant programs. Each state: • Provided additional funding (p.iv). • Targeted individuals who were experiencing problems of recidivism. (p.iv). • Hired an intermediary to develop the project (p.v). • Acquired private and philanthropic investors (p.v). • Hired evaluators to develop an experimental or quasi-experiential evaluation (p.v). • Used service providers to provide services to ex-offenders (p.vi). • Established partnership agreements (p.vi). • Established outcome measures, such as reductions in incarceration, but outcomes varied across the two projects (p.vi). • Had varying approaches to the structure of payments made to investors (p.vi-vii). Both pilots had already established random assignment procedures; however, both expressed having limited knowledge of implementing such procedures. State agencies, including court systems and workforce development data sources, provided baseline data, recidivism outcomes, and employment outcomes for each pilot. Observations from the early implementation data suggested that: • ”The support and influence of each state’s Governor’s Office, as well as other state leaders, was important in launching the initiative.... • Educating pilot partners about the PFS approach was a necessary part of the planning process.... • Carefully structured contracts and a strong management and communication process are needed to guide the organizational PFS partnerships.... • While private capital remains the cornerstone of the PFS approach, partners reported the value of a diverse funding base.... • Recognizing the need for rigorous evaluation was an important milestone that was eventually reached by both projects, but implementing these designs has been challenging.... • Determining how to measure the outcomes of the service interventions and the potential budgetary savings associated with them was a difficult task.... • Establishing payout thresholds and amounts for the private investment required significant time and negotiation” (p.54-55). (Abstractor: Author and Website Staff)