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Innovative Fuentes, Coutinho, Jimenez, Burzichelli & Mosquera Bill to Entice Private Entities to Fund Public Policy Initiatives Released by Assembly Panel

(TRENTON) – Legislation Assembly Democrats Angel Fuentes, Albert Coutinho, Angelica Jimenez and John Burzichelli sponsored to create a five-year pilot program that allows private entities to fund public policy needs through pay-for-success contracts was released Thursday by an Assembly panel.
The bill (A-3289) seeks to attract private funding for public programs aimed at reducing the cost of providing health care to low-income and uninsured residents.
The Economic Development Authority (EDA) would administer the program and oversee a study commission established by the bill.
If the cost-saving goals outlined by the study commission are met, backers will receive a return on their investment in what has been called Social Impact Bonds.
“Providing adequate healthcare to our neediest residents can be costly to service providers, governments and residents,” said Fuentes (D-Camden/Gloucester). “This bill seeks to reduce healthcare costs in the long run while increasing the wellness of our residents without raising taxes.”
The study commission will aid the EDA by issuing annual reports detailing the progress of the program, and determining a non-profit to receive the investment funds from private investors.
Social Impact Bonds have been used in Great Britain to fund OneService, a non-profit committed to reducing recidivism and helping recent parolees adjust to life outside of prison.
In August, New York City announced a partnership with Goldman Sachs for $9.6 million over four years to see social service provider MDRC’s Adolescent Behavioral Learning Experience – a program designed to reduce adolescent recidivism rates – implemented at Rikers Island.
If recidivism among adolescents at the prison is not reduced by more than 10 percent, Goldman Sachs receives no return on its investment, with no public funds jeopardized. However, Goldman Sachs stands to realize profits of up to $2.1 million if recidivism is reduced by 20 percent and the city saves over $20 million in incarceration costs.
“This could revolutionize the way we fund social change, shifting the financial risk of implementing these programs from the public to private investors,” said Coutinho (D-Essex). “If we can reduce the shared cost of healthcare, everyone wins. At the same time, we’re improving people’s health and well-being while saving taxpayer money.”
“The legislation will be the first of its kind to fund healthcare initiatives through Social Impact Bonds,” said Jimenez (D-Hudson/Bergen). “The State of Massachusetts is exploring two bonds – one to help juveniles transition from the justice system to adult life, and the other to house the chronically homeless. These pilots could open the door for Social Impact Bonds to generate capital for a number of initiatives throughout our state and across the country.”
“We need to look at different ways to fund public policy needs in this difficult economy when many working class families are struggling to make ends meet,” said Burzichelli (D-Gloucester/Salem/Cumberland). “If this type of legislation can open the door to funding needs without relying on taxpayers, then it must be explored.
“This is a new way of looking at accomplishing our goals,” said Mosquera (D-Gloucester/Camden). “We cannot continue to do things the old way with limited resources and expect different results. We need to be innovative.”
The bill was released by the Assembly Appropriations Committee.