Pay for Success: A Roadmap for Implementation in Minnesota

Abstract

Pay for Success (PFS) is a promising financing model that encourages investment in programs that produce improved social outcomes resulting in future cost-savings for the government. In a PFS project, investors provide initial capital to scale-up effective social programs and the government pays back the investors only if the desired outcomes are achieved. Minnesota emerged as a pioneer in this field, being the first U.S. state to enact legislation authorizing a Pay for Performance pilot in 2011, even before the first PFS program was launched in New York. However, despite having the legislation in effect for more than 6 years now, no PFS project has been implemented in Minnesota. Meanwhile, over 20 PFS programs have been launched in other states such as Illinois, Ohio, Colorado, and South Carolina among others, some of which have also seen their first success payments made out to the investors.