MA Courts Private Investors for Social Programs

The investors earn a return only if the program achieves results

The state has authorized up to $50 million to pay back investors in a few years with a modest level of interest, but only if the state sees the savings it expects. The up-front money most likely will come from a mix of philanthropic donors and private investors seeking some social impact from their funds. The $50 million pot will be shared among HUES to Home, a related program focused more broadly on the homeless, and an entirely different effort aimed at preventing juvenile offenders from landing back in prison.

It is the first state-led, rubber-meets-the-road test of a concept referred to in Massachusetts as "social innovation financing" but known more broadly by the label of "social impact bonds." Despite minimal real-world experience — a two-year-old effort in Peterborough, England, to cut prison recidivism — the idea has seized the imagination of state policy makers around the country.