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N.Y. Shuts Down ‘Pay for Success’ Recidivism Program

July 7, 2015

New York City’s first attempt to implement a social program via the “pay for success” model failed to meet performance goals but was nonetheless hailed by officials because the experiment cost taxpayers nothing, writes The Bond Buyer, an outlet covering municipal finance.

The nonprofit-run program, launched in 2012 with a $9.6 million commitment from banking giant Goldman Sachs, aimed to reduce recidivism among adolescent inmates at Rikers Island prison by 10 percent. Originally scheduled to run for four years, the program will instead end Aug. 31 after missing its benchmark.

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New York City’s first attempt to implement a social program via the “pay for success” model failed to meet performance goals but was nonetheless hailed by officials because the experiment cost taxpayers nothing, writes The Bond Buyer, an outlet covering municipal finance.

The nonprofit-run program, launched in 2012 with a $9.6 million commitment from banking giant Goldman Sachs, aimed to reduce recidivism among adolescent inmates at Rikers Island prison by 10 percent. Originally scheduled to run for four years, the program will instead end Aug. 31 after missing its benchmark.

Pay-for-success efforts, also known as social-impact bonds, involve private or philanthropic investors funding new approaches to social issues, with an opportunity to earn returns if programs meet preset targets and governments take them over. Goldman Sachs ended up spending $7.2 million on the Rikers effort but will recoup $6 million from a loan guarantee offered by Bloomberg Philanthropies.

The model “can unlock new pieces of funding, private capital especially,” said Jim Anderson, who leads the Bloomberg foundation’s government-innovation program. “Even though we didn’t get the result with the [recidivism] program that we all wanted and hoped for, we now know that definitively, thanks to the social-impact bond structure that we put in place.”

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