In the 20th
Century, if you wanted to solve a public problem, you’d build a bureaucracy and
scale it up. Today, we’re living in the age of networks, where people can build
all kinds of partnerships to collaborate and solve problems together.
Innovative groups of people can solve problems outside of bureaucracies.
And there
are no more pressing problems facing our communities than those of poverty and
educational opportunity.
Shortly
after the 2012 election I was at a dinner with Skip Li, who was Dan Evans’
legal counsel and went on to found a charitable organization called Agros
International which promotes economic self-sufficiency for poor families in
Central America. We were talking about where Republicans need to go after the
losses in the 2012 election. Skip said this: “Republicans don’t have a
vocabulary for talking about poor and minorities, other than free-market talk.
Republicans must recruit candidates with a heart for the poor.”
And that
really got me thinking—we need to do more than just talking about limited
government. We need real policy solutions to the problems of poverty that
confront our neighbors.
I was on a
panel about poverty issues at the Roanoke Conference earlier this year along
with Jeff Lilley from the Seattle Union Gospel Mission. Jeff said something
that has stuck with me. He said that homelessness is not a resources issue,
it’s a relationships issue.
I think that most center-right Americans would agree with that statement, but it’s not how we talk as a movement, and that’s to our detriment. Because homelessness is a real issue, and simply saying that limited government will solve it is not enough, just like saying that resources will solve it is not enough.
Let’s talk
about the role of resources in connection to relationships. That is, resources
should leverage relationships. Government indeed has a role in leveraging
relationships and creating incentives.
I want to
spend the next few minute talking about Social Impact Bonds. Social Impact
Bonds are an innovative way for government to leverage relationships, engage
the private sector in solving public problems, and drive cost-savings and
program effectiveness. They work when there is money to be saved through
prevention – dropout prevention, homelessness prevention, reduction of prisoner
recidivism, or disease prevention.
I got
interested in social impact bonds after reading a book by former Indianapolis
mayor Stephen Goldsmith called The Power of Social Innovation, which I’d highly
recommend.
At the root
of this, I believe that we need to bring more innovation to the realm of human
services.
We don’t
tend to innovate at present. Government tends to be risk averse – we like to
stick with what we already know. And various stakeholders have become
protective of the status quo.
Innovation requires
risk, but it requires incentives for profit that make the risk worth the
effort.
In the
social services realm, it requires the ability to attract social entrepreneurs
and capital. Through Social Impact Bonds, investors can receive a return if
their investment is effective, in other words if there are demonstrated results
and savings to the state over time. This is good for the investor, good for
taxpayers, and most of all it’s good for those who benefit from improved
outcomes.
A growing
list of states are adopting social impact bonds because they offer the promise
of solving problems, not just funding and maintaining the status quo. Minnesota,
Massachusetts, Utah, and New York City were among the first to get on board.
Just this year a number of state legislatures have passed bipartisan
legislation for social impact bonds. A headline in Governing Magazine in
January said that “Pay for Success Programs will be front and center in 2014,”
and they are.
The Harvard
Business Review has named social impact bonds among the foremost “audacious
ideas to solve the world’s problems.”
And when I
introduced House Bill 2337 to bring Social Impact Bonds to Washington State
this year, we had one of the most diverse coalitions I have ever seen on any
issue. We had a number of Democrats on the bill, led by Ruth Kagi, the chair of
the House Committee on Early Learning and Human Services, as well as
Republicans like Chad Magendanz, Kevin Parker, Dave Hayes, Linda Kochmar,
Maureen Walsh, and Cathy Dahlquist. We
had the Washington Policy Center and human services advocates in the same room
testifying in favor of the bill. Education advocates, housing advocates, state
employees, philanthropists, investors, liberals and conservatives have found
common cause on this issue.
The
libertarian Reason Foundation blogged in support. And the Seattle Times wrote,
“This is a smart approach. Government alone cannot solve social problems, and
the state must direct more money into education. Wooing investors to fund
proven prevention programs is a win-win.”
We’ll press on next year and we’re bringing together stakeholders next month to
strategize. And next year, I
want to zero in a specific issue that we can tackle with Social Impact Bonds.
It’s the issue of dropout prevention for low-income students. Everything during
the 2015 legislative session will be linked to K-12 education. We need to
attract new sources of funding to help our low-income students succeed in
school.
Let me just
briefly give one example of where investments could be put to good use. The
example comes from McCarver Elementary on the Hilltop in Tacoma. Going to visit
McCarver last year was one of the most inspiring things I’ve done as a
legislator.
A few years
ago, there was 179 percent turnover among students within a single school year,
and that’s tragic. That means single moms moving their kids from place to place
to place. It means a kid’s world turned upside down as they leave behind their
friends and their neighborhood, and you repeat that with all the other problems
of poverty, and you’re talking about the conditions that lead to dropouts later
on.
And McCarver
had zero credibility with these low-income parents to get them involved in
their kids’ education.
One agency
that did have some credibility was the Tacoma Housing Authority. Some visionary
leaders at THA decided to initiate an innovative partnership between the Tacoma
School District, THA, and 30 nonprofits. They made a deal with parents: you can
stay in THA housing for 5 years if you commit to staying there, getting
involved in your child’s education, and improving yourself to become better
educated and having a steady job. The Gates Foundation is tracking the project
and showing amazing results.
After just a
couple years, turnover has fallen from 179 percent down to 75 percent. Parents
are feeling engaged in the school, they are learning skills, they have a sense
of place and community that they’ve never had before. And that’s just the
parents. Parents matter a whole lot. And the kids are improving their scores in
reading and math. It’s amazing.
This is the
kind of program that we could scale up if the private sector could come in with
strategic investments through Social Impact Bonds. Let’s continue this work in
2015. This is about engaging the private sector in our response to public
challenges. It’s about creating market incentives to solve problems. If you
want to get involved in the discussion, come find me afterwards and I’ll let
you know how you can help. Thanks so much.
