The term “Pay for Success” (PFS) refers to an innovative model for financing and implementing social services through a collaboration of public, private, and nonprofit sectors. Sometimes known as “Social Impact Bonds,” PFS financings enable government agencies to finance important social projects in a nontraditional way. Under a PFS model, a government sets a specific, measurable outcome it wants achieved in a population and promises to pay for such services if and only if the social services agency providing the services accomplishes the outcome. The social services are initially funded by investors from the private sector and, if success is achieved, the government repays the investors.
This white paper addresses the legislation that has been adopted at the state level, pointing out the various functions of the PFS financing structure and how individual states have treated these components within their legislation. Given the varying scope of the legislation adopted thus far and the inconsistent approaches taken by individual state legislatures, model state legislation is included as an appendix to this white paper.