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Social impact bonds (also known as pay-for-success or social improvement bonds) are a new way of financing social services that focus on payment for outcomes rather than the volume of services delivered. Under the social impact bond model, private investors put up funding for a social services program, which the government pays back only if the agreed upon performance measures are met. As of 2018, there were at least 20 social impact bonds in a total of ten states. Funding for social impact bonds totals $166 million, and the maximum payment for the projects total $238.6 million.

Providing funds for social services that result in both social and community benefits has traditionally been the work of government appropriations, program funding through health and human services, or direct grant funded services. This method of funding reimburses social service provider organizations based on the number of individuals served, or the number of services provided. The social impact bond model can be applied to many different health care and social service programs. Of the 20 social impact bond programs currently in progress, eight are for juvenile justice and criminal justice, five are for children and families, and four are for housing.

There are promising interim results for those social impact bonds that are still in progress. In the first year of performance, the Denver Colorado Supporting Housing social impact bond reported being on track to meet milestones: 33 of 40 individuals are on track to achieve the goal of being stably housed for one year, and only one individual has had an unplanned exit from the program. Additionally, participants in Illinois’s early education social impact bond received the maximum early pay-out when 374 children were considered kindergarten ready.

This report explores states with social impact bonds, investor funding, the maximum payments for success, outcome measures, payment for outcomes, and preliminary results from the social impact bonds.

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