Pay for Success Financing

The President’s 2014 Budget Proposal includes several Pay for Success pilots. The Office of Management and Budget at the White House says the following about this new way of financing: “Pay for Success is an innovative way of partnering with philanthropic and private sector investors to create incentives for service providers to deliver better outcomes at lower cost—producing the highest return on taxpayer investments. The concept is simple: pay providers after they have demonstrated success, not based on the promise of success, as is done now.”

We are interested in exploring the feasibility of Pay for Success for OVAE’s policies and programs. One concrete proposal in the President’s 2014 Budget is a Pay for Success pilot that is part of the budget proposal for the Carl D. Perkins Career and Technical Education Act. Other areas under consideration that would involve OVAE include the possibility of a Pay for Success pilot focused on disconnected youth.

For those interested in the most recent development regarding Pay for Success, the Federal Reserve Bank of San Francisco has dedicated an entire issue of its Community Development Investment Review to Pay for Success Financing. Thirty-nine authors contributed to this issue that explores the background and context of Pay for Success Financing, roles and responsibilities of various partners involved, and applications and models.

Johan Uvin is the Deputy Assistant Secretary for Policy and Strategic Initiatives at OVAE