Bridging the Opportunity Divide

New York Enlists Venture Capitalists To Help Keep People Out of Prison

April 10, 2014
by
New York Enlists Venture Capitalists To Help Keep People Out of Prison
Joe Raedle/Getty Images
A new program links private investors with social programs that need funding.

A surprising initiative in New York City has wealthy investors opening their wallets not to start-ups in Silicon Valley, but instead to a program that prevents recidivism for people just released from prison.

Last December, Governor Andrew Cuomo introduced New York’s Pay For Success Program, which links private investors with social programs that need funding. Investors can expect returns if the programs meets specific performance standards, according to the National Journal.

One such program receiving funds through Pay For Success is the Center for Employment Opportunity (CEO). This organization trains recently-released prisoners to search for jobs, find temporary paid work, and hold down steady employment. CEO has reduced the recidivism of its participants by up to 22 percent, according to a recent study by MDRC, a non-partisan social policy research organization.

Through Pay For Success, investors have put up enough money for CEO to serve an additional 500 people every year. If CEO reduces recidivism among its clients by at least 8 percent, or increases employment by at least 5 percent, then investors get their money back, or even more if the program does better. Part of the investor payout will come from the Labor Department, and part will come from New York State.

Pay for Success is a way to reform public spending so that it aligns with the public good. New York spends about $60,000 per inmate per year, and 3.6 billion dollars a year on its prisons, according to The National Journal. By funding CEO, New York state officials hope that public money can be used to prevent citizens from returning to prison.

The outcomes of the program look pretty good: Investors are motivated to have social programs work efficiently and effectively, and social programs have more money to do their work. And in addition to financial profits for investors, there’s another bonus: Tracy Palandjian, CEO of Social Finance, says, “They all say what excited them is this is a vehicle that will allow them to invest in people’s lives actually improving, and that’s a source of return.”

Comments