Social Impact Bond

New York State Social Impact Bonds

The recidivism issue

Based on the statistics, there are nearly 700,000 individuals are released from prisons nationwide annually. Moreover, many of them would continue to engage in criminal behaviour and back to prison which consists two-thirds rearrested and half return to prison within three years of their release. Since they have fewer connections in the community (such as family engagement), and less support on the residence and job-seeking for the prejudice of prisoners, they would less likely to learn to get along with others and losing the abilities to obtain the jobs because of the long-time imprisonment. Therefore, the individuals could be higher risk of recidivism and even have more serious prior

Because the individuals are facing the challenges in looking for jobs after release, the increasing unemployment would stimulate the increase of criminal activity leading to the instable economic which finally caused a greater burden on the public sector’s criminal justice and welfare system. Based on the data of government budget, the spending on prison has become the fastest growing item on government budget over the last 20 years. With the spending of New York State reached an average of $60,000 per inmate annually, the total state prison cost up to $3.6 billon every year. The large amount spending on recidivism problem motivates government supporting the improvement on skills and employment prospects which benefits the released prisoners reducing incentives to back to crime.

Therefore, the new source of funding known as social impact bonds (SIBs) has been promoted to the investors aiming at solving a particular social problem. The SIBs become a tool for non- profit organizations (NPOs) to raise capital supporting their social programs and release the government burden.

The NYS PFS/SIB

Outcome as public sector benefits

The implications of SIBs

From the above analysis, the SIBs could work successfully in solving a particular social problem based on the performance-based payment system. And as the new funding method, the participated stakeholders could benefit from the SIBs.

For the investors, even they might lose the investment if the project failed, there are possibility for them to gain both social and financial return once the project succeed. Because the SIBs are evaluated by the social outcome metrics, there might be incentives for investors to access the advanced knowledge of interventions, understand the government policy and pay attention to the social outcomes rather than the previous donation method.

Moreover, as the NPOs, the PFS system could motivate the NPOs operating more efficiently and effectively. The NPOs with sufficient experience in programs could focus on the operation than distracting their time for searching the donation and government supports which would contribute to the successes of the projects. This new funding method could save NPOs time and cut down the number of staff which reduce the waste in NPOs so that they could focus on their