The administration of Governor Deval Patrick is already sifting through more than two dozen suggestions from nonprofits on how to create such performance-based programs.
“We have a new fiscal reality in state government,’’ said Jay Gonzalez, the Massachusetts secretary of administration and finance. “We have to find a way to become more effective.’’
An example of those interested include Roca Inc., a Chelsea nonprofit that works with high-risk young adults. It has proposed an intervention program that would work with an estimated 650 young offenders and cost about $11 million over four years. But Roca estimated the program would save $25 million to $38 million in prison costs during that span by reducing the incarceration rate.
A model for social impact bonds is being tested in the United Kingdom, where the government has pledged to cut budget deficits and is experimenting with novel ways to raise money for social programs.
Faced with the costly problem of petty criminals returning to prison again and again, and unable to spend more on intervention programs that have produced only mixed results, the government last year turned to so-called social impact bonds.
It struck a deal with a nonprofit partnership to create an $8 million program to work with 3,000 inmates over six years at a prison in Peterborough, England, 75 miles north of London. Social Finance Ltd., which helps arrange financing for nonprofits, raised the money from 17 investors, mainly charitable foundations.
If the nonprofits succeed in cutting recidivism by 7.5 percent, the investors will get all their money back. If they reduce the rate further, investors could receive up to $12.8 million, a nearly 60 percent profit.
If the effort fails to reduce recidivism by at least 7.5 percent, the government won’t owe investors anything.
“We can no longer fund everything,’’ said Hugo Biggs, a press officer for the British Ministry of Justice. “So going forward, we are going to pay for what works.’’
