Social Impact Bonds Proposed to Save Tax Dollars, Promote Investment

By: Josh Sidorowicz Email
By: Josh Sidorowicz Email

Some of the biggest social issues facing Michigan now from homelessness to early childhood development could soon be tackled without costing taxpayers a dime.

It'd be possible through social impact bonds and it's a possibility Eric Hufnagel, executive director with the Michigan Coalition Against Homelessness, said could make fighting homelessness in the state a higher priority.

"When we look at the landscape of where resources are available for homeless services there's not a lot out there," Hufnagel said.

"As we've seen state and federal dollars shrink we've not necessarily been successful in finding that other significant source of revenue to allow us to continue to do what we're doing."

But when a cash-strapped state cannot invest, Joe Pavona, special advisor to Gov. Snyder, says the Snyder administration is hoping private investors step up instead.

Michigan is the eighth state in the country to try this experimental "pay-for-success" program.

Pavona said if a program is successful and profitable for the state, taxpayers would pay back the investor. But if the program doesn't live up to certain expectation taxpayers keep their money and investors take the loss.

"We can look for something that's new and innovative to help us solve some of the toughest social problems we have out there and at the same time be looking at saving taxpayer dollars," Pavona said. "It's a win-win."

A program could tackle anything from juvenile justice, to obesity and preventative healthcare, to homelessness.

Right now, Pavona said the administration has issues a request for information and is working on gauging interest from both potential investors and the public and hope to have 2-3 projects narrowed down by the end of the year.

There will be an open forum for interested investors and the public on Sept. 24 at 1:30pm at the Michigan Library and Historical Center in Lansing.

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