A $100 Million “Secret, Bipartisan Political Plan” to Privatize the Public Sector

I travelled to Washington, DC on Thursday June 21, 2018 with fellow activist Ismael Jimenez, an acclaimed teacher of African American history at Kensington CAPA High School in Philadelphia, PA. A week earlier the search engine gods had serendipitously delivered up an Eventbrite link for the launch of the Social Impact Partnerships to Pay for Results Act Fund (SIPPRA), “Pay for Success: Making the New $100 Million Fund Work to Improve Lives.” How could I not go?

SIPPRA was incorporated into the Bipartisan Budget Act of 2018, signed by Trump on February 9, 2018. The legislation allocates $100 million in federal funds to held by the Secretary of the Treasury for outcomes-based payments tied to Pay for Success contracts. It also establishes a Federal Interagency Council on Social Impact Partnerships and a Commission on Social Impact Partnerships.

I compiled a list of elected officials who sponsored or co-sponsored the federal legislation in the House and Senate here. Pennsylvanians should know that DFER (Democrats for Education Reform) Congressman Dwight Evans was a co-sponsor, as was former Congressman Patrick Meehan. I don’t think it is any coincidence that former Pennsylvania Governor Tom Ridge’s merchant banking firm, Ridge-Lane, issued a press release touting their expansion less than a week later. The firm has positioned itself as offering advisory services in education, real estate, IT, and sustainability at the “apex of the public and private sectors.” Clearly they feel the Pay for Success, P3 era has arrived.

Tweets with the hash tags #PayForSuccess and #SIPPRA give a sense for how promoters viewed the event. I was grateful that Ismael, a powerful voice for racial justice in education, was able to come and be another set of eyes, because there was so much to absorb.

My goal for this post is to document how I experienced the event, so I can refer to it in the future. It’s long; so for those who prefer a summary, here are a some highlights:

• 200 + people gathered at the Dirksen Senate Building in Washington, DC for a privately-sponsored event to celebrate the passage of long-awaited legislation hoping it will jumpstart a wave of Pay for Success, outcomes-based contracting of social services.
• It was a bipartisan group, composed primarily of those who anticipate providing services and brokering and evaluating the deals, plus a few foundation and venture capital interests.
• Even though the hosts, Results for America and America Forward, have ties to data-driven education reform, neither early childhood nor K12 education were directly mentioned, which surprised me.
• All of the presenters were white. No discussion of race or racial justice at all.
• There was a heavy Utah presence with Senator Hatch and James Sorenson keynoting. Andrea Phillips, former Goldman Sachs vice president who was involved with the questionable Salt Lake City pre-k social impact bond, participated in the panel discussion. See Tim Scott’s important piece on SIBs here.
• Everyone agreed it was difficult to explain complex policy proposals to elected officials; but after many years and considerable effort, congressman and senators finally “got it.” (Or, rather were convinced their political careers depended on going along with the Pay for Success public fleecing;  since there are scant few bipartisan initiatives out there, and many deep-pocket interests want to see this profit-driven outsourcing move forward.)
• If you’re going to do these deals, keep the metrics simple (check a box simple).
• Don’t call them social impact bonds. The new language is “social impact partnerships,” which sounds friendlier.
• In one-on-one conversations afterwards, attendees tried hard to convince themselves they were “doing the right thing” and had little regard for the serious dangers presented by racially-biased algorithms, data-profiling, internet of things compliance and monitoring, and digital identity that could be tied into PFS contracts.
• Some, however, definitely knew and were surprised to be confronted by someone who knew the truth. Jessica Ramakis of the US Department of Education, for example had a rather icy stare for me as I gave her my handout.

I didn’t go thinking I would change minds, but felt that it was important to be there even if all I could do was bear witness, document it, and confront those perpetrating this hostile takeover. During the reception I pulled out my banner and held it up in protest, drawing curious stares. I brought copies of the half-sheet above and approached every person in the room who stayed for the reception, though I’m sorry to say I missed Mr. Sorenson, who slipped out before I could catch his attention.

I must have handed out at least forty flyers alerting people to pre-k surveillance play tables, the type of technological “solution” that Pay for Success programs will incentivize. Most were indifferent. A few engaged in discussion, including a researcher for Sorenson who was a father of young kids and a social impact investor who wanted to know more about blockchain, because she was starting to have misgivings. She was the one who took our picture holding the banner at the end of the event. I recorded the presentation to make it publicly available. It’s about 90 minutes long. Apologies for the quality, I was holding it in my hand the whole time.

In one of the handouts left on our seats, America Forward describes SIPPRA as “Little Known Legislation with Big Implications.” During the toasts, one person proclaimed it a “secret bipartisan political plan that no one knows about.” It is a plan intended to leverage $100 million to hijack $104 BILLION in taxpayer funds. These are funds earmarked for public services, including education, for cities with a combined population of over 31 million people. See this map from Results for America’s “What Works Cities” web page. This is a travesty. We have to do all we can to stop it.

Additional Background:

Results for America and America Forward, an initiative of New Profit, arranged the gathering. Both organizations promote “evidence-based” policies and outcomes-based contracting for public services. Results for America created the “Moneyball for Government” campaign (see Cheri Kiesecker’s important post “Moneyball for Kids” regarding David Medina’s testimony to the Commission on Evidence Based Policy Making). Medina opened the event. Note John King’s presence in the Moneyball screenshot below.

Results for America manages the “What Works Cities” program on behalf of Bloomberg Philanthropies. Philadelphia’s former mayor Michael Nutter is a “What Works” senior fellow.  Click here for a full list affiliates. In addition, Mayor Kenney’s Policy Director, Anjali Chainani, is Results for America Local Government Fellow. In 2016, Chainani launched the nation’s first municipal level “nudge unit.” Her two-person staff works with six city departments and partners, including academic researchers at the University of Pennsylvania and Swarthmore, to pilot programs in the emerging field of behavioral economics. You can read a 2018 report on the program here. Results for America has also partnered with Chiefs for Change (Superintendent Hite is one) on the Evidence in Education Lab through which state education fellows push Pay for Success initiatives enabled by the Every Student Succeeds Act.

America Forward promotes workforce-aligned education on behalf of their parent organization New Profit. They were instrumental in lobbying to have Pay for Success provisions included in the Every Student Succeeds Act in 2015 and shaped the Workforce Innovation and Opportunity Act in 2014. America Forward and New Profit were key players in the 2009 launch of the Social Innovation Fund, housed within the Corporation for National and Community Service. Since that time, SIF has directed over a billion dollars into “evidence-based solutions.” New Profit manages an extensive innovative investment portfolio of tech-based, education holdings that currently includes: the Highlander Institute, ImBlaze, UnboundEd, Leap Innovations, PowerMyLearning, and Enlearn.

The event was held in an expansive room on the ground floor of the Dirksen Senate Building. Two hundred seats were eventually filled, with another twenty or so people standing around the edges of the room. It was a largely white crowd with few people of color in attendance. There was a mix of veteran policymakers and junior congressional staffers. Most attendees seemed to have either been involved in the passage of the legislation or were hoping to position their non-profit or consulting firm to take advantage of the $100 million windfall.

Among the organizations seen were: AIR, LISC, Boys Town, Goodwill, AYPF, Save the Children, Children’s Defense Fund, Rails to Trails, CHIP, TFA, Jobs For America’s Graduates, UVA Pay for Success Lab, Georgetown, US Impact Investment Alliance and the Urban Alliance. I’m certain it wasn’t expected that members of the general public or actual consumers of social services would attend. Several people were puzzled by our presence. I simply identified myself as a researcher, and Ismael identified himself as a teacher/university instructor.

We arrived early and were greeted by event coordinator Jeremy Ayers, former Alliance for Excellent Education (Future Ready Schools) staffer now Vice President for Policy for Results for America. Shortly after we told him we’d come down from Philadelphia, Ismael and I were approached by Sara Vernon Sterman. Sterman, a Wharton alum and former Teach for America program director in North Carolina, is the Vice President of Strategic Investments for the Reinvestment Fund based in Philadelphia. The Reinvestment Fund, linked to ImpactPHL, announced the creation of a  $10 million Pay for Success fund in May 2017. Vernon is charged with managing new investment approaches for their “healthy communities” projects, which include childcare and education.

With the exception of the entourage from James Sorenson’s social impact investment enterprises and former Goldman Sachs VP Andrea Phillips, I saw few people from the global finance sector or from the big foundations, though I did briefly speak with someone from the Annie E. Casey Foundation and at least one person from the Ford Foundation tweeted from the event. Perhaps the deep-pocket reception was invitation-only with something tonier than house wine and chocolate-covered strawberries on tap? Still, it was an impressive crowd, the size of which drove home just how many middlemen will be required to outsource public services at scale.

It was, in a very real sense, a private reception masquerading as a public event in a Senate building on Capitol Hill. The program’s fourteen sponsors expose the varied interests that stand to benefit from this hostile takeover of the public trust: nonprofit service providers, program evaluators, higher education researchers, community development agencies, deal brokers, and of course the venture capitalists driving it all. It was the embodiment of public-private partnerships writ large and rather breathtaking to experience first hand, having spent so many hours following leads in the virtual, online world. Below is a graphic showing the sponsors. Click here for the interactive version.

The agenda featured many of the key players behind the roll out of Pay for Success and social impact investing in the United States. Two of them, Phillips and Wilkinson participated in Michael Nutter’s 2015 “Capital for Communities” event held with the Philadelphia Federal Reserve at the Jewish Museum, which I reference in this post. Phillips and Sorenson also made an appearance in Philadelphia this past April for the “Total Impact” conference at the Cira Center (see tweet below).

I created a map of the day’s featured speakers and their associations. For the interactive version, click here. It’s a dizzying assortment of self-dealers of all stripes from liberal to Libertarian; among them a political operative who served under Ed Rendell AND Nikki Haley, a Teach for America alum who runs the Pay for Success lab at the Urban Institute, and a Goldman Sachs social impact bond expert who spun off her own venture capital firm. There was also a brief appearance by a ghostly Orrin Hatch (Note: James Sorenson is from Utah, Hatch’s home state).

The elected officials who spoke that day were all Republican. If you didn’t know better you might be tempted to see this as a conservative program; when fact it was the Obama-created White House Office of Social Innovation and Civic Participation that got the ball rolling. David Wilkinson, who ran that office and is now with Connecticut’s Office of Early Childhood, participated in the panel discussion. A 2016 article in Time magazine written by Social Finance’s Tracy Palandjian describes the ways in which the social impact finance space attracts supporters from both sides of the aisle. The article mentions Pay for Success programs initiated by both Haley in South Carolina and Malloy in Connecticut. Both programs were discussed by the panelists.

There was a period for questions, and I was able to ask about the use of social impact bonds to finance social emotional learning programs, which is being floated on the website of Social-Emotional Learning Alliance of Massachusetts. Evidently I didn’t state my concerns about the ethical implications of identifying young students as being “at risk” for addiction and/or incarceration and the intrusiveness of them being tracked over time in order to satisfy the terms of outcomes-based contracts clearly enough. The panelists earnestly offered suggestions about how to make such an initiative work. Afterwards a consultant with Social Capital Valuations even came over proffering a card, sharing how her company had developed ways of forecasting whether students were “on the right track” using proximate indicators. It seems most in attendance couldn’t imagine anyone ever questioning the supposed merits of their Pay for Success “privatization” business model.

To hear them talk, the passage of SIPPRA had been a long time coming. America Forward worked with select members of Congress for over five years to bring it to fruition. Several people expressed frustration that the Pay for Success market had not yet fully taken-off, but the consensus was this infusion of federal money could be the long-hoped-for catalyst. As JB Pritzker has said, “We are in the nascent stages of a social impact bond boom…could be as big as the New York Stock Exchange.”

My guess is we won’t hear much about “social impact bonds” moving forward. Formal SIBs are complex instruments that have been very hard to scale. Pay for Success and Outcomes Based Contracting are easier to structure and offer more flexibility. I also suspect when the focus group results came back, “bonds” weren’t an easy sell when talking about human services; too evocative of “bondage” perhaps? It seems the language will be shifting to “Pay for Success” and “Social Impact Partnerships.” Winners get out in front and frame the conversation to their advantage. To fight this, we’re going to have to devise pithy statements that deflate their assertions that outcomes-based contracts are about “success” and “partnerships.”

But we can do that. Why not get started? Feel free to leave your suggestions in the comments.

Below are screenshots taken of the handouts provided at the event: