Government Interest in Models of Social Innovation and Alternative Funding Models
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1 The Centre for Literacy Fall Institute 2012 Social Finance and Innovation for Adult Basic Learning: Opportunities and Challenges October 14-16, 2012 Saint John, NB Government Interest in Models of Social Innovation and Alternative Funding Models October 15, 2012 Johan E. Uvin Deputy Assistant Secretary for Policy and Strategic Initiatives Office of Vocational and Adult Education U.S. Department of Education
2 2 What is the context? Adult training, skills, and employability Architecture Nine (9) federal agencies spent approximately $18 billion to administer 47 employment and training programs (including adult education) in 2009 The Departments of Labor, Education, and Health and Human Services (HHS) largely administer these programs. - GAO Coordination and Efficiency Challenges Inefficiencies and data challenges due to multiple administrative structures. Overlap is a reality: similar services to similar populations.
3 Context (2) Adult training, skills, and employability 3 Evidence base is growing but still modest Only five (5) programs have had a net impact study completed since No definite word on best in class but multiple promising approaches are emerging. Performance and quality are uneven Performance of status quo/legacy programs and systems (particularly those focused on vulnerable populations), on average, is not optimal. There is great variation between and within States and programs in outcomes and costs..
4 4 Context (3) Adult training, skills, and employability Limited access due system capacity constraints Demand for services (e.g., ESL, training, vocational rehabilitation) is often greater than supply.. Systems are not well-equipped to achieve favorable outcomes at scale through traditional service delivery and funding. Growth in performance-based funding models After federal technical assistance effort, 26 States implemented performance-based funding voluntarily in adult education and 2 more are getting ready to do so. Similar developments in postsecondary education in select States.
5 Context (4) Adult training, skills, and employability Fiscal outlook is uncertain New investments Temporary boost in funding through the American Recovery and Reinvestment Act of New resources ($2 billion over 4 years) for TAACCCTI to build community college capacity. Increase in Pell grants. New challenges Decline in select State investments in adult education, higher education, and K-12. Deficit reduction needs and sequestration. 5
6 Context (5) Adult training, skills, and employability Policy interest/support for reform/ innovation Federal policy support aimed at development of products and services that lead to significant improvements in outcomes for individuals beyond the status quo through the use of flexibility and competitive funding to stimulate innovation tied to evidence tiers 6
7 Greater Impact How We Talk About Innovation Invention Innovation product, process, strategy, or approach that improves significantly upon the status quo and reaches scale Baseline Trend Scale 7 Note: The definition of innovation on this slide is presented as an overview of the concept, not as a specific definition in any of the Department s innovation programs.
8 Context (6) Federal policy efforts in support of innovation in States and local organizations National activities (e.g., P2P) State leadership activities (e.g., PD for IET) Non-formula, competitive funding (e.g., budget requests) Flexibility requests/waivers (e.g., disconnected youth) Other (e.g., prizes) Federal policy issues that may hinder innovation in States and local organizations Eligibility, allowable fund use, and other Recent efforts Pre-K-12: RTT (State, ELC, Districts) & i3 Workforce Innovation Fund 8
9 Why is the government interested? What is attracting the U.S. government to models of social innovation and to alternative funding models (within and outside the designation of social finance ) to address various social problems, in particular those related to adult training, skills and employability? 9
10 What is the Administration interested in? Pay for Success Model Federal programs must be measurably effective and designed to do more with fewer resources. Pay for Success is an innovative way of partnering with philanthropic and private sector investors to create incentives for service providers to deliver better outcomes at lower cost producing the highest return on taxpayer investments. The concept is simple: pay providers after they have demonstrated success. 10
11 What is the Administration interested in? Pay for Success Model Pay for Success bonds: Engage philanthropic and private sector investors to deliver better outcomes. Can help achieve better outcomes in many program areas. Support better outcomes for federal, state, and local governments. Minimize risk to the government. Special funding provisions allow existing programs to support pay for success bonds. Certain programs are likely candidates for pay for success bond financing. 11
12 12 Why is the government interested? Get at best possible outcomes at greater scale Individual prosperity; Business and Industry competitiveness; Government reduced risk, greater returns, savings; Society reduced social ills Create opportunity to provide more support to most vulnerable in face of fiscal cutbacks Pay for Success offers a new approach to invest in services for vulnerable populations while saving. Offer a new, alternative vehicle for targeting limited resources to achieve a positive, measurable outcome. Bring into play and engage non-traditional stakeholders/investors.
13 Why is the government interested? See if potential benefits can be realized Overcoming the challenges of blending programand population-specific government funding Creating incentives for social innovation, improved workforce outcomes, public sector cost savings, and efficiency gains Identifying effective preventative services Allowing for more rapid learning about which strategies are most effective Transferring social investment risk from the government to private investors through carefully designed pilots 13
14 Why is the government interested? Selected Pay for Success Pilots City, State, and National Pilots Under Way Massachusetts Maryland New York City Department of Justice Pilot Department of Labor Competition National Pilots Being Planned Department of Education Career and Technical Education Budget Proposal Exploring Potential and Issues Interagency effort re: disconnected youth Adult education
15 Why is the government interested? Department of Labor Pilot $20 million Department of Labor Competition (In Progress) Objectives Test a model for government investment in preventative and innovative service delivery models that transfers risk to the private sector. Learn whether the Pay for Success concept is feasible in the workforce development policy arena. Determine whether preventative social services complementing workforce development programming pay off. 15
16 Why is the government interested? Department of Labor Pilot Critical Elements of the Pay for Success Model A well-defined problem and target population A flexible and preventative service delivery strategy Committed funds from investors to cover operating costs Well-defined, achievable outcome targets Outcome measurement methodology Project timeline for outcome achievement dates Financial model showing public sector savings Payment arrangement details between the applicant and intermediary
17 Why is the government interested? Department of Labor Pilot Required Partners State/local/tribal government agency The intermediary The investors The independent outcome validator Other entities involved Service Providers U.S. Department of Labor
18 Why is the government interested? Department of Labor Pilot Award Amount: Up to $20 million in grant funds, with awards ranging up to $12 million for approximately 1-3 grantees Period of Performance: Awards expected in Spring 2013 Total technical grant performance period - 48 months 36 months for start-up, implementation, and delivery of intervention 6 months for outcome measurement and documentation 6 months for DOL approval and payment
19 Why is the government interested? Department of Labor Pilot Eligible applicants State Workforce Agencies eligible for assistance under Title I of the Workforce Investment Act (WIA) of 1998 Local government agencies responsible for workforce programs under Title I of WIA Federally recognized Indian tribal governments
20 Why is the government interested? Other Efforts Planning Under Way for a PFS Pilot in Career and Technical Education Budget (2013) and reauthorization proposals include approximately $100 million for local innovation and reform including a Pay for Success pilot. Given the importance of alignment with and responsiveness to labor market needs and the skill demands that business and industry have, there is great opportunity to engage business and industry as investors. There are sufficient intermediaries for a pilot. There is sufficient capacity in the market place for independent outcome validation.
21 Why is the government interested? Department of Justice 21 Three Pay-for-Success Grant Opportunities under the Second Chance Act Helps individuals exiting jail or prison make a safe and successful transition to the community. Eligibility for these grants is limited to states, local governments, and Indian tribes. The three grant programs are: Adult Offender Reentry Program for Planning and Demonstration Projects; Reentry Program for Adult Offenders with Co-Occurring Substance Abuse and Mental Health Disorders; Family-Based Offender Substance Abuse Treatment and Reentry Program.
22 Why is the government interested? Key questions in exploring possible Adult Education PFS Pilots Some key questions from other sectors that are highly relevant (Adapted from McKinsey) Are the current remedial costs on a scale that would make the economic savings generated by substituting a preventative solution meaningful? And, what would be the features of such preventative solution? Are there proven preventative interventions to help the target population? Are there enough service providers who could scale these interventions? Is there a meaningful number of constituents who could be served?
23 Why is the government interested? Key questions in exploring possible Adult Education PFS Pilots Is the evidence base sufficiently strong? Relationship between literacy and numeracy and multiple economic and social outcomes is observed in the population but evidence re: net impacts (causal effect) of participation in programs is thin/emerging for selected new models (IET programs such as I-BEST). Changes in net fiscal contributions for adults with and without high school credentials are well-documented, conclusive and strong (from to +). Can the financing model work in adult education? How do we best address selectivity threats to ensure the most vulnerable can access services?
24 Why is the government interested? Key questions in exploring possible Adult Education PFS Pilots (2) Is there sufficient intermediary capacity? There is limited intermediary capacity in adult education overall. There would be a need to incentivize development of the specific intermediary capacity required or to motivate intermediaries in related sectors to expand into adult education. How do we make sure federal, State, and local staff expertise is developed quickly? How do we motivate private investors? What type of technical assistance is needed?
25 Why is the government interested? Key questions in exploring possible Adult Education PFS Pilots (3) What are the specific costs and possible benefits (McKinsey)? Benefits to taxpayers Costs of providing the services Costs of the PFS structure Net savings Savings to taxpayers Returns to investors Success fees to service providers and intermediary/-ies
26 Why is the government interested? Next steps re: adult education PFS Pilot Think of this in phases with proof points being the focus of the initial pilot stage (McKinsey) This year, as part of the pilot phase, we plan to: Establish a cross-functional design team Conduct further feasibility research and deeper research into the economics Identify possible investors, intermediaries, and independent outcome validators Develop design proposal and technical specifications Draft a solicitation document
27 Appendix Additional Slides 27
28 Role of Evidence in Innovation Tiered System of Evidence Standards (i3) Types of Innovation Grants (i3) 1. Development 2. Validation 3. Scaling 28
29 OVAE and Innovation 29 Purpose Focus Funding Applicants For several years now, OVAE has proposed and the President s budget has included requests for AEFLA and Perkins to provide competitive grants to applicants with a record of improving student achievement, attainment or retention in order to expand the implementation of, and investment in, innovative practices that are demonstrated to have an impact on student achievement and outcomes and on enrollment in postsecondary education and training and on completion and placement rates. OVAE s focus has been on career pathways system development including bridge programs, concurrent enrollment programs, onramp programs, and enhanced ASE programs including face-to-face technology-enabled learning opportunities. Growing interest in Pay for Success. Non-formula funding for competitive grants to be awarded through a national competition. Just over $100 million in Perkins in FY2013 and $15 million in AEFLA (WIF). In addition, $200 million to begin scaling Career Academies. Varies. States and local eligible providers or consortium.
30 Development Grants: Require Evidence to Support Intervention Theoretical support for the proposed practice, strategy, or program that is based on research findings or reasonable hypotheses, including related research or theories in education and other sectors and Some empirical evidence of the promise of the proposed practice, strategy or program based on prior implementation and evaluation of something similar, albeit potentially on a limited scale or in a limited setting Note: We expect most grant proposals in AEFLA and PERKINS to be development-type proposals 30
31 Validation Grants: Require Moderate Evidence of Effectiveness Validity of the evidence High internal validity and moderate external validity or High external validity and moderate internal validity Minimum size of evidence base At least one well-designed experimental or quasi-experimental study May have small sample sizes OR may fail to demonstrate equivalence between the intervention & comparison groups, but has no other major flaws or A correlational study with strong statistical controls for selection bias and for discerning the influence of other potential confounds Note: We expect some validation-type grant proposals in AEFLA and PERKINS 31
32 Scale-up Grants: Require Strong Evidence of Effectiveness High internal validity of the evidence Studies designed and implemented in ways that support causal inference High external validity of the evidence Studies based on a sufficient representation of participants and settings that the findings support scaling Minimum size of evidence base More than one well-designed and well-implemented experimental or quasi-experimental study OR One large, well-designed and well-implemented multi-site randomized controlled trial Note: We don t expect many scaling grant proposals in AEFLA and PERKINS 32
33 Caution: Not All Associations Support Causal Inferences (Mis-) Interpretive Statement: Based on the evidence, early care & education programs should reduce pupil teacher ratios in order to lower the expulsion rate. Problem: There are competing explanations for why expulsions increase with increases in pupil-teacher ratios 33
34 WWC Standards Would Apply to Causal Designs Eligible Designs Randomized controlled trials (RCTs) Quasi-experimental designs (QEDs) Potentially Eligible Designs Regression discontinuity (RDD) Single case (SCD) Ineligible Designs Anecdotes and testimonials Case studies Descriptive Correlational 34
35 Draft Stylized Depiction of Formula & Innovation Funding Relationships Federal Formula Funding National Activities Funding National Competitive Funding for Local Innovation and State Reform State State Reform Initiatives Local 35 Effective Practices Participation of Local Eligible Providers Scaling Development Validation
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