Governor Pat Quinn today announced that Illinois will be the second state in the nation to initiate a Social Impact Bond (SIB) program, an innovative and cutting edge way to address complex social problems by partnering with private investors, who will provide the up-front financial investment needed to bring effective programs up to scale. The announcement is part of Governor Quinn's agenda to drive the Illinois economy forward by improving innovation across Illinois and making government smarter. At a time when the state is facing historic financial challenges, the program aims to provide critical resources that will help address pressing community needs while requiring no additional taxpayer dollars.
"The social innovation model is a unique way to invest in our community priorities without dipping into the pockets of Illinois residents," Governor Quinn said. "Illinois is one of two states to pioneer this creative program that will tackle major social problems and strengthen our communities."
Exploration of social impact bonds, also known as "pay for success contracts," was recommended by the Governor's Task Force on Social Innovation, Entrepreneurship and Enterprise after its commencement in August of 2012. The bonds are an innovative financing model in which a private investor makes an initial investment through the state to achieve a specific social goal, whether it be to improve education or reduce homelessness or recidivism rates. The investor receives a return on their investment only if or when that goal is reached, and the state can utilize the remaining savings to reinvest in critical programs.
Illinois is on the leading edge of social impact bonds in the U.S., following New York City and the state of Massachusetts. The world's first SIB was introduced in the U.K. in 2010.
The Harvard Kennedy School's Social Impact Bond Technical Assistance Lab (SIB Lab), with support from the Rockefeller Foundation, will receive $275,000 from the Dunham Fund to establish the initiative in Illinois. The Rockefeller Foundation has been a leader in helping to bring the SIB model to states and the Dunham Fund is expanding that investment to Illinois. In the coming weeks, the SIB Lab will assist Illinois in issuing a Request for Information (RFI) to explore potential social impact bond initiatives in targeted policy areas. Governor Quinn made today's announcement at the Council on Foundations annual meeting.
The technical assistance provided through this grant will help Illinois develop or expand proven, evidence-based programs so they can have a greater impact in communities in need, such as increasing school graduation rates, improving outcomes for at-risk youth or lowering hospital readmission rates, or reducing recidivism of ex-offenders.
"The Rockefeller Foundation wants to commend Governor Quinn for his visionary leadership in advancing innovative ideas, like social impact bonds, to help find solutions to pressing problems," Judith Rodin, President of The Rockefeller Foundation said. "The Rockefeller Foundation supported social impact bonds from their beginning in Peterborough in the UK and helped to build the infrastructure and ecosystem in the United States. By bringing in financing from private and philanthropic sources for demonstrated social interventions, social impact bonds offer a win-win-win proposition for governments that can provide well-proven interventions without using tax dollars, for local organizations that can take their programs to scale, and for investors that can get both a social and financial return."
Using the SIB model, New York City last year implemented the Adolescent Behavioral Learning Experience (ABLE), to focus on personal responsibility education, training and counseling, with the goal of reducing the likelihood of incarceration. The initiative is managed by MDRC, a leading non-profit in New York, and is financed by Goldman Sachs with grant support provided by Bloomberg Philanthropies.