- Associated Press - Tuesday, November 3, 2015

CHICAGO (AP) - The state of Illinois is launching a pilot project of a public-private partnership that would have investors pay for services to people in need in exchange for a potential return on investment.

The project set to launch Tuesday gives investors the opportunity to cover upfront costs of services and be reimbursed with a profit if the program meets objectives to improve outcomes and save the state money. Former Democratic Gov. Pat Quinn first commissioned the project, and it has the support by his successor, Republican Gov. Bruce Rauner.

The program could be a model for funding social services and give providers more certainty than the state budgeting process, the Chicago Tribune (https://trib.in/1RsqZ0j ) reports. State officials say details about the project’s structure, costs and measures for success will be sorted out in the coming months.

An agreement over the state budget has eluded state leaders for months now. Some bills are being paid through court orders and state law, and lawmakers and state employees are collecting their salaries. But local governments aren’t getting their share of gasoline taxes or state gambling receipts. Human service agencies that contract with Illinois aren’t getting paid or are getting partial payments months late.

Wealthier communities with a stronger property tax base and cash reserves have gotten by, though even they are warning of serious consequences ahead. Many places in the state’s poor southern region, however, have no cushion.

The Department of Children and Family Services will focus the pilot program on youth in four counties who are in the child welfare and juvenile delinquency systems. Private investors will cover upfront costs of services that could save the state money by reducing recidivism and better preparing children for adulthood.

Investors would absorb the loss if the program doesn’t meet objectives.

“It’s an exciting opportunity for our state and provides us with a way to save money, be more effective and better serve youth,” said Andrew Flach, a spokesman for the Department of Children and Family Services. “Instead of just writing checks, we’re ensuring that we’re getting outcomes we’re asking for.”

Flach said the possible rate of return for investors hasn’t been determined. He said the program wouldn’t cost the state more than it already pays.

Harvard Kennedy School professor Jeff Liebman said the model is “like a money-back guarantee for taxpayers.” But Elizabeth Lower-Basch, a public policy expert at the Center for Law and Social Policy, wrote in a paper that this mechanism “imposes costs beyond the cost of providing services.”

“If you can make a case that convinces investment bankers that it will pay for itself, you ought to be able to convince the public that it will pay for itself and just pay for it,” Lower-Basch said in an interview.

The program is among other so-called social impact bond initiatives across the country. Chicago launched a program last year using nearly $17 million in such bonds to enroll more low-income children in pre-kindergarten.


Information from: Chicago Tribune, https://www.chicagotribune.com



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