Mayor Michael Bloomberg unveiled the nation’s first Social Impact Bond (SIB) program in partnership with Goldman Sachs, Bloomberg Philanthropies, MDRC, the Vera Institute of Justice, and the Department of Correction. The investment is part of the New York City’s Young Men’s Initiative to improve outcomes for young black and Latino men.
SIBs began as a “pay for success” model of financing social solutions in the UK, in which funds raised from private investors are used to run prevention programs and would save public sector money. In 2010, a pilot scheme was launched in the UK to prevent re-offending. Repayment to investors come from reductions in public spending on services.
Goldman Sachs will fund the four-year program – called Adolescent Behavioral Learning Experience (ABLE) – through a $9.6 million loan to MDRC, who will oversee the project’s day-to-day implementation and non-profit service providers Osborne Association and Friends of Island Academy.
As part of its $30 million commitment to the Young Men’s Initiative, Bloomberg Philanthropies is providing a $7.2 million grant to MDRC to guarantee a portion of the investment. Should the project reduce re-admissions, the Department of Correction will pay MDRC the associated costs savings, and in turn, MDRC will repay the loan. Independent evaluation will be done by the Vera Institute of Justice to determine the effectiveness of the program.
ABLE will target those who enter jail as 16-18 year olds and have a high likelihood of re-admission. Nearly 50% of these adolescents who leave Rikers Island return within one year. The goal of the program is to improve social decision-making, problem solving, and self-control skills needed to decrease the likelihood of future criminal behaviour.
“We believe this investment paves the way for a new type of instrument that enables the public sector to leverage upfront funding from the private sector,” Lloyd Blankfein, CEO and Chairman of Goldman Sachs, said in a statement.
“As the first city in the nation to launch a Social Impact Bond, we are taking our efforts to new levels and we are eager to see the outcome of this groundbreaking initiative,” said Mayor Bloomberg.
Lessons learned from the nation’s first Social Impact Bond will be shared with other jurisdictions who are eager to test the approach.
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