Oklahoma announces Pay for Success program to reduce female incarceration
OKLAHOMA CITY – On Monday, Oklahoma Gov. Mary Fallin announced a new public-private partnership called Pay for Success to help lower the state's female incarceration rate, which is the highest in the nation.
Under the Pay for Success model, the state of Oklahoma entered into a contract with the Tulsa-based Family & Children’s Services (F&CS) to reduce female incarceration by securing public-private investment in the Women in Recovery (WIR) prison diversion program, enabling WIR to expand its services to admit up to 125 women into the program annually for up to five years.
Pay for Success (PFS) is an funding model founded in the United Kingdom in which a private entity pays for programs, shifting the financial burden from public entities. That private investor then receives money back if the program achieves concrete and measurable results. Through PFS, non-government funders provide the upfront capital to service providers.
In Oklahoma’s PFS contract, the state will repay only if WIR program participants are not incarcerated in the Oklahoma Department of Corrections (DOC).
“Government too often pays for programs that it hopes work, but under this arrangement, government will pay for what works,” said Fallin. “Women in Recovery is a cost-effective alternative that improves public safety and helps preserve Oklahoma families. Through this agreement, the state will partner with private entities to expand its success and reduce Oklahoma’s unacceptable female incarceration rate in the process.”
The first PFS project was launched in Peterborough, United Kingdom, in 2010 and was aimed at reducing prisoner recidivism. More than 70 PFS projects exist in 18 countries, with 16 projects in the U.S.
“Our hope is for this arrangement to pave the way for more like it in the future that give taxpayers a far better return on their dollar than traditional government programs do. Government service delivery innovations like Pay for Success are always appropriate, especially in times of fiscal duress like we have today,” said Secretary of Finance, Administration and Information Technology Preston L. Doerflinger, who is also director of OMES.
Under the program requirement, F&CS will have to raise $2 million in capital to fund the program each year before the contract can be renewed. The George Kaiser Family Foundation will continue its financial support for the program as part of its current promise to give $1.8 million a year to services that address female incarceration in Tulsa County.
If the outcomes are achieved, then the payments from the state will be re-invested directly back into the program. Social Finance, a nonprofit organization that manages PFS projects, served as project advisor.
The PFS project was made possible by Senate Bill 1278, which Fallin signed into law in 2014. The bill allowed the state to authorize OMES to enter into PFS contracts with qualified criminal justice service providers.
According to a release from Fallin’s office, the contract presents no financial risk to the state, which was “particularly appealing to state officials at a time of budget challenges.”
Additionally, the total payments made for a successful program outcome are considerably less than the direct costs of incarceration and the costs of all of the documented negative future impacts of incarceration on employment, health, family stability and social assistance, according to the Governor’s office.
Since 2009, Women in Recovery has served more than 570 women, impacting the lives of more than 1,200 children. WIR is an outpatient alternative for women facing prison sentences for drug-related crimes. Participants receive mental health and substance abuse treatment, work training and other assistance.
What is Pay for Success
Through PFS, government and other entities enter into a contract to pay for concrete, measurable outcomes only after they are achieved for specific people or communities in need. Instead of funding services regardless of the results, these payments are made only if the outcomes agreed upon in advance are achieved.
For example, instead of paying for job training simply to be provided, a community might use PFS to pay only when individuals gain stable employment in good jobs.
In 2012, New York City launched the first PFS contract in the United States to reduce juvenile recidivism. Of the 3,000 adolescent males targeted, the city aimed for a 10 percent reduction in recidivism. Under the PFS program, Goldman Sachs contributed $9.6 million as the initial investment to cover the $9.6 million program cost over four years. If maximum success was achieved, that investment would garner a return of $11.7 million.
According to a study by the Stanford Social Study Review, this model is showing success. In January 2014, Massachusetts entered into a PFS contract with the nonprofit service provider Roca to reduce juvenile offender recidivism.
Of the nearly 800 young men released from prison in Massachusetts at the time annually, nearly 65 percent would return to jail within five years and a large number of the 3,000 young men on probation each year were also likely to violate their probation.
According to the study, the estimated incremental cost of housing each prisoner is $12,500 annually with a total cost of including housing, prison administration and other overheads of $47,500 annually
Roca, a community-based nonprofit headquartered in Chelsea, Mass., demonstrated that its intervention was capable of reducing recidivism rates by 25 to 60 percent. The $21.3 million total program cost was covered by a $9 million by Goldman Sachs Social Impact Fund, and the targeted payback was $22 million.
Where PFS financing is used, the government typically makes outcome payments covering the cost of services and offers investors in the program a modest return on their investment.
The PFS model is used for a variety of social impact programs. Earlier this month, Salt Lake County, Utah, launched two PFS projects, one to reduce recidivism rates among adult men at high risk of repeat stays in the county jail and the other to addresses persistent homelessness. Through the two initiatives, approximately 550 people are expected to be affected.
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