Pay-for-success law would help those in need, save tax money

In February, Gov. Nikki Haley announced a trail-blazing pay-for-success project that will help thousands of young families while doing so in a fiscally responsible way, transforming government accountability and holding providers responsible for outcomes. But it took years to launch that project under current federal law, and the federal government still can’t pick up its fair share of the tab.

On Tuesday, the U.S. Senate Finance Committee, of which Sen. Tim Scott is a member, will take up the Social Impact Partnership Act, which will allow the federal government to contribute its fair share toward states’ pay-for-success programs. It’s the sort of smart, responsible bipartisan legislation that the Congress should consider more often.

Pay for success is an innovative funding model that drives government resources toward social programs that prove effective at providing results to the people who need them most. It gives highly effective service providers access to flexible, reliable and upfront resources to tackle critical social problems by tapping private funding to cover the up-front costs of the programs. Not-for-profits deliver those scaled-up programs. If the programs succeed, governments then pay investors back for the outcomes achieved.

In South Carolina’s pay-for-success project, philanthropic partners are funding an expansion of nurse-family partnership, which helps young children and their families. If the program works as expected, the state will pay back the foundations’ investment. Moreover, those foundations have agreed to reinvest the payments to sustain the partnership’s long-term work in South Carolina. If the program doesn’t work as expected, the taxpayers pay nothing.

The legislation being considered on Tuesday will provide a system through which the U.S. government can contribute to similarly structured deals across the country. It provides a modest $300 million fund that can help states and local governments pay for good results, with a focus on improving birth outcomes, reducing child abuse and increasing employment. If the bill had already passed, it would have allowed the federal government to contribute to the S.C. program, which will provide significant savings at the federal level.

This financing tool is fiscally responsive, innovative and bipartisan. I hope the Senate Finance Committee will advance the bill to full consideration for the Senate.