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Letter to Barack Obama, President of the United States - Pay for Success

February 28, 2014

President Barack Obama
The White House
1600 Pennsylvania Avenue, NW
Washington, DC 20500

Dear President Obama,

We write to recommend that you include Pay For Success funding in your budget for fiscal year 2015.

As you know, the Pay For Success financing model, sometimes known as Social Impact Bonds, is an innovative way for the government to maximize return on investment. Pay For Success models allow the government to be more outcome focused, creating financial arrangements such that the government only has to pay if the desired outcome is achieved and certified by an independent third-party evaluator. This minimizes risk to the taxpayer, and maximizes incentives for effective interventions and outcomes that will both serve the common good and ultimately save the government money, creating a true double-bottom line for both the government and private investors. As you know, more and more private capital has been set aside by philanthropic organizations and social investment funds to fund these initiatives and we should work with them to accomplish our shared objectives.

The Pay For Success model can be used to accomplish a diverse set of policy objectives such as reducing recidivism, providing work-force training, reducing unemployment, and maximizing the effectiveness of early childhood education, and improving health care outcomes. Up to this point, states have taken the lead, but federal involvement is needed in order to ensure incentives are aligned. Without federal involvement, states only have the incentive to fund projects that will save the state money, but they don't have an incentive to use Pay For Success financing for initiatives that will save the federal government money. That is why is so important to include this funding in your FY15 budget and why we support creating a Pay For Success Incentive Fund within the Treasury Department that can help align cost-saving incentives and provide outcome payments, credit enhancement, and technical assistance to agencies on specific projects. This is especially true with our difficult fiscal situation where an opportunity to improve outcomes while saving money is a goal that our colleagues on both sides of the aisle can agree on.

Please do not hesitate to contact our offices with any questions. We look forward to hearing your thoughts on how we can increase the use of Pay For Success programs in this coming fiscal year and in future years.


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