Results-Based Funding

Earlier this month, Congress passed bipartisan legislation that has significant implications for the  (PFS) movement.

As part of the budget agreement, Congress  to provide competitively awarded outcomes-based financing to state and local governments and to conduct feasibility studies on their efficacy. This program — the  (SIPPRA) — will be run out of the US Department of the Treasury and will be launched within a year, with awards announced six months after that.

This infusion of capital will have significant benefits for the communities that participate, addressing critical issues ranging from child and maternal health to homelessness, recidivism to youth employment, and more. In addition to this impact, we are equally as excited about its implications on the PFS movement more broadly. For one thing, it indicates a commitment from lawmakers in Washington to funding and evaluating outcomes-based financing. It also formally embeds an outcomes-based approach in federal programs and incentivizes state and local governments to engage in the market. By including feasibility studies, it also has the potential to provide learnings that will fundamentally shape the future of the PFS movement. Collectively, these developments represent an enormous opportunity to more deeply embed PFS in our governmental infrastructure, better providing critical services to those in need and .

This milestone is the result of years of tireless efforts on the part of numerous leaders throughout the Pay for Success community. Expanding PFS programs was also one of the key policy recommendations included in “Private Capital, Public Good.” Authored by the US National Advisory Board on Impact Investing (now the ), the report was the first industry-wide publication that not only emphasized the benefits of impact investing, but included recommendations about how policy could support an increased flow of capital to the sector. With the passage of SIPPRA, the three strongest recommendations have now officially been enacted: 1) updating ERISA guidance to allow pension funds more flexibility in investing in impact; 2) allowing charitable foundations to consider mission and values in their investment decisions, paving the way to do more with their MRIs and PRIs; and finally, 3) this month’s commitment to supporting outcomes-based financing.

As former co-chairs of the National Advisory Board and current supporters of and participants in the US Alliance, Omidyar Network and Social Finance are tremendously grateful to the leaders from across the impact investing movement who have continued to advocate for not only these important policy changes, but other critical developments including Treasury’s improved tax treatments for Opportunity Zones and Congress’s pending bill to expand the US’s development finance capabilities. We look forward to watching these efforts continue to bear fruit, including SIPPRA’s positive impact on expanding the PFS movement to include more municipalities, service providers, and private partners who are working together to improve the lives of some of the most underserved populations in this country and drive measurable, lasting results for communities.

Related Insight

An Introduction to Pay For Success
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An Introduction to Pay For Success

Pay for Success is a set of innovative outcomes-based financing and funding tools that directly and measurably improve lives by driving resources toward results. Watch this video overview.

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