Pima County Administrator Chuck Huckelberry is proposing a new way to fund social services that would allow people to invest in specific, measurable outcomes from the nonprofits they support, and get their money back if the investment is successful.
The process is called social impact bonding.
"It's investments in programs that have outcomes mostly in the social service area, to look at trying to save money in other expenditure areas of either local government or state government," Huckelberry said.
It would involve a number of steps, he said.
An investor would choose a nonprofit organization, and invest money in a specific goal. Pima County would manage the money, and a third party would measure the agency's progress in achieving the goal. If the nonprofit accomplished its goal with measurable progress, and the attempt saved the county money, the county could pay back the investors, and possibly lower taxes at the same time, Huckelberry said.
"Some of the first investors will be philanthropic organizations, who now just basically donate their money but if they could make their money stretch further, they would probably do that," he said.
One example, he said, is reducing the number of times a mentally ill person goes to jail in a year. Fifty percent of the people who end up in jail need medication to control mental illness, he said.
If a nonprofit organization enrolled an inmate in health insurance as a condition of release from jail, the former inmate may be better able to afford the medication he or she needs to control illness and avoid being arrested again.
"We want to track those particular individuals to ensure they are successful at enrollment and getting their medications and not coming back to jail," he said.
It costs the county $57 million a year to operate the jail, at $90 a day per inmate. If fewer people went to jail, some of the county's jail budget could be returned to people who invested in the nonprofit enrolling inmates in health insurance programs, Huckelberry said.
"You set the standards going in and make sure there has to be a very measurable outcomes and benefits to the program because if there aren't, investors shouldn't get their money back," he said. "If they exceed those goals perhaps we talk about returning 1 percent on investment, or 2 percent, it just varies by program."
Taxpayers pay for the jail, not private investors, but Huckelberry said the public could save money through reduced taxes if the social enterprise investments are successful.
"The taxpayers receive most of the benefits but the investor can look forward to a return on investment of perhaps 2 percent, which to many philanthropic organizations is something that's very desirable," Huckelberry said.