Strategies To Accelerate the Testing and Adoption of Pay for Success (PFS) Financing Models, 60998-61000 [2013-24078]

Agencies

• DEPARTMENT OF THE TREASURY

[Federal Register Volume 78, Number 191 (Wednesday, October 2, 2013)]
[Notices]
[Pages 60998-61000]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24078]


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DEPARTMENT OF THE TREASURY

[Docket ID TREAS-DO-2013-0006]


Strategies To Accelerate the Testing and Adoption of Pay for 
Success (PFS) Financing Models

AGENCY: Office of Domestic Finance, Department of the Treasury.

ACTION: Request for Information.

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SUMMARY: The President's FY 2014 budget included a request for a $300 
million one-time mandatory appropriation for a new Incentive Fund to 
help state and local governments implement PFS programs. In order to 
inform the Administration's development of this legislative initiative, 
this request for information (RFI) seeks information on options for 
financing models and the most promising programmatic areas \1\ that 
could be served by the Incentive Fund. The input we receive will inform 
the Treasury Department and an interagency working group on PFS \2\ 
about the best use of the authority requested in the President's FY 
2014 Budget for the Incentive Fund \3\ and on other state, local, and 
tribal performance-based funding mechanisms. In addition, responses may 
be used to identify opportunities for flexibility within existing 
authorities to support PFS and similar outcomes-based efforts.
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    \1\ THE BUDGET FOR FISCAL YEAR 2014--See page 978 of the 
President's FY 2014 Budget Appendix (see https://www.whitehouse.gov/omb/budget/Appendix).
    \2\ See www.payforsuccess.org for general information on PFS and 
social impact bonds.
    \3\ THE BUDGET FOR FISCAL YEAR 2014--See page 978 of the 
President's FY 2014 Budget Appendix (see https://www.whitehouse.gov/omb/budget/Appendix).

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DATES: Responses must be received by December 2, 2013.

ADDRESSES: Submit your comments through the Federal eRulemaking Portal 
or via U.S. mail, commercial delivery, or hand delivery. We will not 
accept comments by fax or by email. To ensure that we do not receive 
duplicate copies, please submit your comments only one time. In 
addition, please include the Docket ID and the term ``PFS Incentive 
Fund RFI'' at the top of your comments.
     Federal eRulemaking Portal: Go to www.regulations.gov to 
submit your comments electronically. Information on using 
Regulations.gov, including instructions for accessing agency documents, 
submitting comments, and viewing the docket, is available on the site 
under a tab titled ``Are you new to the site?''
     U.S. Mail, Commercial Delivery, or Hand Delivery: If you 
mail or deliver your comments, address them to Cara Camacho, Attention: 
Pay for Success Incentive Fund RFI, U.S. Department of the Treasury, 
1500 Pennsylvania Avenue NW., Room 1325, Washington, DC 20220.
     Privacy Note: The Department's policy for comments 
received from members of the public (including comments submitted by 
mail, commercial delivery, or hand delivery) is to make these 
submissions available for public viewing in their entirety on the 
Federal eRulemaking Portal at www.regulations.gov. Therefore, 
commenters should be careful to include in their comments only 
information that they wish to make publicly available on the Internet.

FOR FURTHER INFORMATION CONTACT: Cara Camacho by email: 
cara.camacho@treasury.gov.
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION:

[[Page 60999]]

Purpose

    This request for information offers states, tribal governments, 
localities, community based and other non-profit organizations, private 
sector donors, researchers, and other interested individuals and 
entities the opportunity to provide information on effective approaches 
for improving outcomes for social services and other program areas by 
employing financing mechanisms that pay for results.

Background

What is pay for success?

    PFS is an innovative financing model that offers new ways for the 
government to partner with philanthropic and other lenders to provide 
capital to test promising practices and scale programs that work, 
significantly enhancing the return on taxpayer investments. PFS 
maximizes taxpayer dollars by paying for demonstrated results, and 
allows effective and evidence-based solutions to be identified and 
implemented.

Administration Activities to Date (FY 2011-2013)

    The President's 2012 and 2013 Budget Proposals sought authority 
from Congressional appropriators to use limited funding across select 
program areas in agencies including the Department of Education, the 
Department of Labor, the Department of Justice, the Social Security 
Administration and the Corporation for National and Community Service, 
and to extend the availability of funds for PFS beyond a single fiscal 
year, to enable longer term projects to achieve the desired outcomes.
    Under existing statutory authority, the Administration implemented 
several PFS initiatives in 2012: The Department of Justice announced 
three awards in September 2012 under the Second Chance Act,\4\ and the 
Department of Labor announced the availability of up to $20 million 
within the Workforce Innovation Fund for PFS \5\ projects.
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    \4\ See https://www.justice.gov/opa/pr/2012/October/12-ag-1185.html.
    \5\ See https://www.dol.gov/opa/media/press/eta/ETA20121237.htm.
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Strengthening the Commitment in FY 2014

    The Administration is reinforcing its commitment to advancing the 
use of PFS in the federal government by proposing $495 million in 
mandatory and discretionary programs in the President's FY 2014 Budget. 
This includes $195 million in discretionary programming across three 
agencies (Education, Justice, and Labor).

The Pay for Success Incentive Fund

    In addition, the President proposes to establish a $300 million 
Incentive Fund, as a one-time mandatory appropriation, to strengthen 
the achievement of program outcomes by accelerating adoption of PFS to 
improve program outcomes.

What is the purpose of the new PFS Incentive Fund?

    Over the past three years, multiple states and local communities 
have embraced PFS because it offers the potential to bring significant 
new capital to scale programs that work. It does this by harnessing the 
savings that are generated by providing services that mitigate the need 
for more costly remedial interventions in the future. Successful 
outcomes may generate savings at multiple levels of government 
including local, state and federal. However, in many cases, state and 
local jurisdictions investigating potential Pay for Success projects 
find that the savings they capture are not sufficient to justify the 
investment and have difficulty accessing savings that occur at the 
state or federal level.
    The first purpose of the Incentive Fund is to help states and local 
communities to partner with the federal government to realize savings 
when PFS projects achieve the agreed-upon outcomes. These early 
projects will provide substantive evidence of these savings and inform 
future policy decisions to enable sustainable investment.
    Lenders and investors are becoming interested in financing PFS 
programs, but this market is still new. If this market develops, 
private financing may expand the potential for PFS and the positive 
outcomes it generates.
    The second purpose of the Incentive Fund is to better allocate 
program performance and other risk to catalyze testing of PFS models 
where there is a federal financial interest.
    The Fund would be managed by the Department of the Treasury in 
consultation with a Federal Interagency Council on PFS. To support the 
cross-cutting nature of PFS, the Incentive Fund would help state, 
local, and tribal governments advance projects that achieve savings 
across programs and across levels of government and provide limited 
credit enhancement to build investor confidence in this emerging model. 
In some cases, promising PFS projects are likely to result in savings 
in other governmental programs or activities. Projects may also have 
savings and cost implications that cut across levels of government, 
e.g., for a program with both federal and state funds the fund might 
support projects that yield savings at the federal level as well as the 
state and local level.
    A Federal Interagency Council on PFS would advise Treasury on 
specific programmatic and policy matters related to the use of the 
fund. The Council also would:
    1. Coordinate Federal Pay for Success efforts by:
     Aligning evidence standards used to determine and measure 
PFS outcomes across federal agencies and programs;
     Sharing best practices for effectively coordinating PFS 
programs at the federal, state, and local levels.
    2. Understand and respond to needs in the field by:
     Soliciting ideas from a broad array of stakeholders on 
strategies for accelerating PFS adoption and learning, including 
facilitation of comprehensive, multi-systems approaches and leveraging 
existing resources;
     Disseminating tools for defining, measuring, and 
evaluating outcomes in PFS projects, especially where cost and savings 
implications cut across multiple funding streams.
    3. Foster partnerships across stakeholders by:
     Assessing the potential for the development of public-
private partnerships to support promising pilot projects;
     Working with states and localities to align authorities 
necessary to support implementation of PFS projects and achieve better 
outcomes.

Request for Information

    Through this RFI, Treasury and the interagency working group on PFS 
are soliciting ideas and information from a broad array of stakeholders 
on the Incentive Fund. We are also seeking input on how the Incentive 
Fund could be linked to existing federal, state and local resources in 
more coordinated and comprehensive ways to leverage private and 
philanthropic investment. Responses to this RFI will inform work on the 
design, logistics, and implementation of the Incentive Fund.
    This RFI is for information and planning purposes only and should 
not be construed as a solicitation or as an obligation on the part of 
the Treasury or other participating federal agencies.
    In general, we are interested in receiving information on current 
challenges in implementing PFS, and essential elements for development 
of a robust PFS market. Additionally, we are seeking information on the 
potential impact of the Incentive Fund on market

[[Page 61000]]

development and the potential advantages to taxpayers.
    We also ask respondents to address the following questions where 
possible, in the context of the discussion in this document. You do not 
need to address every question and should focus on those where you have 
relevant expertise. You may also address the questions in the context 
of a detailed pilot proposal outlining how a state, local, or tribal 
government could use the Incentive Fund to implement PFS projects that 
achieve better outcomes across a variety of programs and levels of 
government.
    To the extent possible, please clearly indicate which question(s) 
you address in your response.
    Key Questions:
    1. Instead of focusing on particular programs, the budget language 
proposing the Fund is broad in scope. What agencies and/or program 
areas are best suited for the Fund and why? What level of evidence 
exists in these areas about interventions that work? What is the 
threshold of evidence that a program should have in order to merit 
consideration for a PFS approach? What other factors should be 
considered in setting resource priorities for the Fund?
    2. The budget proposal encourages maximizing the leverage of 
Federal funds by engaging intermediaries, including state, local and 
tribal governments. What other kinds of groups should be considered as 
intermediaries? Are there other organizational constructs that should 
be considered? The ability to demonstrate whether a PFS intervention 
produces the desired results is the backbone of the model. How can the 
Federal government encourage the adoption of low-cost yet rigorous 
outcome measures? What are some of the barriers to using administrative 
data in a PFS scenario, and how might they be addressed?
    3. Outcome payments and financing support (e.g., credit 
enhancement, loans or advances) are two forms of assistance meant to 
complement one another in stimulating PFS approaches. What criteria 
should be used to decide how to split the Fund between these two forms 
of assistance? Should a certain proportion of the fund go toward 
outcome payments versus financing support, such as 50/50, 30/70, etc.?
    4. Is there an optimal structure for both the timing and tiering of 
outcome payments? For example, should the projects allow for some 
degree of ``progress payments'' based upon achievement of early 
outcomes? Should the projects allow for ``bonus payments'' for 
extraordinary performance? What are the trade-offs of adapting 
different structures to different projects versus supporting a 
standardized approach?
    5. Among the possible forms of financing support, would credit 
enhancements, loans or advances be most helpful? What role would 
financing support play in the overall structure of a PFS structure?
    6. Please suggest one or more examples of promising PFS projects or 
programs. For each example, what are its characteristics or features 
that make it a good candidate for PFS? Who would be the key partners 
and what would be their roles? How would the activity be funded? How 
would risks be shared and interests aligned among the partners? What 
might be appropriate outcomes and metrics? Over what timeframe would 
outcomes be determined?
    7. What process would be most helpful to states, local governments 
and tribes to apply for either outcome payments or financing supports? 
What do states and localities need in order to be ready to participate 
in a competitive process and resulting projects?
    8. The ability to ensure that outcome payments are available for 
successful projects, either directly or via credit enhancement has been 
a significant risk that the Fund would help to address. Are there other 
functions that the Fund should serve in order to accelerate adoption 
and testing of the PFS model?
    9. Please address any other factors you believe important for 
consideration in development of the Fund. You may also provide examples 
to illustrate how the Fund could be used to accelerate or enhance 
implementation of PFS.

Guidance for Submitting Documents

    We ask that each respondent include the name and address of his or 
her institution or affiliation, and the name, title, mailing and email 
addresses, and telephone number of a contact person for his or her 
institution or affiliation, if any.

    Dated:
Donet Graves,
Deputy Assistant Secretary for Small Business, Community Development 
and Housing Policy.
[FR Doc. 2013-24078 Filed 10-1-13; 8:45 am]
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