Social Impact Bonds: Spurring Innovation in Mass./NYC

“Social impact bonds offer an innovative way for public, private, philanthropic and nonprofit actors to come together and align their skills and resources in pursuit of measurable, positive social change.”

-- Kristina Costa, Center for American Progress, 2014

Last week, Dax-Devlon Ross profiled Roca—a Chelsea and Springfield, Mass. based non-profit designed to steer “high risk” youth away from poverty and violence and toward gainful employment and a middle-class life. Roca has done something all too rare in the social service world—commit to a data-driven approach to securing its goals, whereby success must be proved, rather than assumed.

Roca’s latest project is designed to reduce recidivism among young men. As part of the project, Roca plans to track every interaction between its employees and the participants in an online data system. At the first sign of trouble, employees initiate an intervention to get at the underlying cause of concern and forge a plan to keep the participant on track.

Roca’s program was recently awarded $27 million in seed money from Governor Deval Patrick’s Juvenile Justice “Pay for Success” Initiative. As stated in the award release:

[I]n Massachusetts, 64 percent of young male ex-offenders reoffend within five years, and only 35 percent of these young men gain employment within a year of release. Roca’s groundbreaking approach to positive youth development aims to interrupt the cycle of recidivism by filling a gap in services for high-risk populations. Through this project, Roca will aim to reduce the number of days that young men in the program are incarcerated by 40 percent. If this goal is met, the project would generate millions of dollars in savings to the Commonwealth that fully offset the cost of delivering services. 

The Social Impact Bond (SIB) model (shown in the nifty graphic from the Rockefeller Foundation) holds great promise, not simply as a financing mechanism in an era of budget shortfalls, but as a spur to creative experimentation within cities and states to solve some of our most pressing problems. SIBs allow government to invest in programs today that improve the lives of thousands and save money over the long term.

On some level, this is not a particularly novel concept. Indeed, business owners have long understood that investing in new equipment or hiring additional employees imposes short-term costs in pursuit of long-term profit. American families understand that buying life insurance and depositing money in their children’s college savings plans will pay dividends down the line.

Government should be no different. And yet, we have encountered many situations in recent years where we fail to make short-term investments that yield long-term gains. For instance, in New York City, we continue to shelter families without homes for as much as $36,000 per family per year, while rental assistance with support services for families can cost less than $10,000/family annually.

While SIB programs have heretofore largely been confined to programs concerning recidivism and formerly incarcerated individuals, many have openly wondered whether they can be put to use in other fields, most notably early childhood education and public health initiatives that allow for concrete measurements over a discrete period of time.

In 2012, my boss, then-Manhattan Borough President Scott Stringer, proposed using a SIB to expand availability of Early Head Start (EHS), an early intervention and prevention program for pregnant mothers and families with children ages 0 – 3. Despite the fact that children who attend Early Head Start are more successful educationally and emotionally, the program is so poorly funded that it enrolls less than 1 percent of eligible infants. Only 7000 slots are funded for children in all of New York State. Once full-day pre-K is up and running, the Administration should turn its attention to the critical formative years before pre-K, with SIBs as a possible financing mechanism for EHS or other programs.

SIBs aren’t the only mechanism that should be used to secure long-term savings. Municipal labor should also play a key role in this effort through “gain sharing.” 20 years ago, Mayor David Dinkins launched a “Productivity Advisory Council” that advocated for a gain-sharing model that would streamline city services and share savings with city workers.

One of the great successes was a Parks Department effort to improve efficiencies in the mechanics of tree pruning throughout the five boroughs. In short, New York had been force to cut workers to balance the budget during the early 90s recession. In the winter of 1993, the city’s tree workers were given the power to craft their own strategy, with an implicit promise of hiring back some of those laid off should city workers prove the victors.

As noted in a Harvard Business School case study, “Prior to the study, climbers and pruners had no input into how the crews were configured or what work they would be assigned on a given day; these decisions were the prerogative of the supervisors, only some of whom had any prior forestry experience.”

In two months, the workers’ improvements made them far more efficient than contractors and saved the city an estimated $100,000.

Whether through a public-private SIB model or a gain-sharing model that leverages the expertise and ingenuity of public employees, cities and states owe it to taxpayers to do all they can to reduce preventable costs by proactively investing in innovative programs.

Bike Share: Public Health + Public Transit = Public Subsidy?

“To ride a bicycle is in itself some protection against superstitious fears, since the bicycle is the product of pure reason applied to motion. Geometry at the service of man! Give me two spheres and a straight line and I will show you how far I can take them. Voltaire himself might have invented the bicycle, since it contributes so much to man’s welfare and nothing at all to his bane. Beneficial to the health, it emits no harmful fumes and permits only the most decorous speeds. How can a bicycle ever be an implement of harm?”

-- Angela Carter, “The Lady of the House of Love”, 1979

Last week, the City of Boston announced an innovative partnership with the Boston Medical Center that allows doctors to “prescribe” memberships to Beantown’s “Hubway” bike share system for as little as $5 a year.

The  “Prescribe-a-Bike” program, which comes with a free helmet, is designed to combat an urgent public health crisis: obesity. As noted by the Boston Globe, more than 1 in 4 low-income residents in Boston is obese—twice the rate of higher-income residents.

My precious "Founding Member" key

To date, New York has not made a similar commitment to ensuring that all Gothamites have access to its bike-share program, CitiBike. As DNAInfo reported, of the first 62,000 annual members, only 285 were residents of the New York City Housing Authority (less than 0.5 percent of the total), despite considerable outreach efforts by the NYC Department of Transportation. One considerable barrier continues to be cost. While Boston offers discounted memberships for $5, New York’s discounted membership still costs $60.

Despite innovative public health initiatives to curb smoking and encourage healthy eating, the Bloomberg Administration left office with New York still in the grips of an obesity epidemic.

As noted in NYC’s “Take Care Report”, published in September 2013, more than 50 percent of adults and 40 percent of children in grades K-8 are either overweight or obese. More than 5000 New Yorkers die each year from obesity-related illness. Black New Yorkers are almost three times as likely, and Hispanics twice as likely, as whites to die from diabetes. Furthermore, people living in very high poverty remains twice as likely to report not eating any fruits or vegetables on a daily basis.

New York should follow Boston’s lead by viewing bike share as a core element of the City’s public health infrastructure. By working with our world-class hospitals, we too can curb obesity by “prescribing” bikes as a healthy, efficient option for commuting and recreation.

Of course, bike share isn’t just good public health policy. It’s smart public transportation, too. New Yorkers have taken over 7 million Citibike trips covering over 13 million miles since the system launched last May. By comparison, the East River Ferry—which most have seen as a smashing success—provides about 1.2 million rides annually.

Bike share is now an integrated part of mass transit infrastructure in cities across the country and around the world. It’s time we started treating them that way.

That means amending the federal tax code to permit bike share membership fees to qualify for commuter tax benefits. Today, the federal transit benefits program subsidizes parking fees—encouraging drivers to bring their automobiles and the congestion they create into the hearts of America’s cities. And yet, bike share—with all its attended positive consequences—remains outside the ambit of that critical benefit program.

In addition, cities need to work with private sector partners—as New York City has done with Billy Bey ferry company and others—to expand availability of bike share to new neighborhoods using public dollars, rather than assuming that bike share should be self-sustaining purely on the backs of its users.

Lastly, we need to do a better job of integrating bike share siting decisions into broader, regional mass transit capital programs. For instance, in New York, CitiBike must work with the MTA to plan how bike share can augment the effect of new Select Bus Service routes.

Bike share is here to stay. The question is: will we have the foresight to view its prosperity as part of a broader public health effort and an integrated public transit system? For New Yorkers, Bostonians, and others, here’s hoping the answer is yes.

E-Cigs and the Never-Say-Die Attitude of a Deadly Industry

“The fragile, developing self-image of the young person needs all the support and enhancement it can get. Smoking may appear to enhance that self-image in a variety of ways.”

-- Claude Teague, Senior Researcher, R.J. Reynolds Tobacco, 1973

“The use of e-cigarettes does not discourage, and may encourage, conventional cigarette use among U.S. adolescents.” That was the conclusion of a new study published in the Journal of the American Medical Association last week, highlighting the continued challenge facing public health officials in determining appropriate regulation of a booming new market that simultaneously promises a less harmful alternative to conventional cigarettes, but may well be an end-around the anti-tobacco efforts that have driven youth smoking rates down since the 1990s (see chart from the CDC). Indeed, since 1997, smoking among 8^th, 10^th, and 12^th graders in the U.S. has declined by nearly two-thirds.

Within the public health community, the conclusions reached in the JAMA study are far from consensus. As Thomas J. Glynn, a researcher at the American Cancer Society, told the New York Times, “The data in this study do not allow many of the broad conclusions that it draws.” Furthermore, the study fond that youth who used e-cigarettes were more likely to plan to quit smoking.

While a consensus remains elusive about the effects of e-cigarettes on youth and the population writ large, the plans of the tobacco industry could not be clearer. The tobacco industry has invested heavily in e-cigarettes (see list below) and it is actively working to develop a more addictive cigarette. 

·      Lorillard (LO) (Blue eCigs/SKYCIG)

·      Altria Group (MO) (Markten ecig)

·      British American Tobacco (BTI) (Vype ecig)

·      Reynolds American (RAI) (VUSE ecig)

As RJR researchers noted above 40 years ago, “Realistically, if our Company is to survive and prosper, over the long term we must get our share of the youth market…[T]his will require new brands tailored to the youth market.” This statement is as true today as it was then. As the Surgeon General reported earlier this year in a landmark report, 87 percent of smokers use their first cigarette by 18 years of age, with 98 percent starting by age 26.

It comes as no surprise, then, that the tobacco industry views e-cigarettes, like Joe Camel before them, as a gateway to hook youth on nicotine.

According to the CDC, nearly 7 percent of American youth in grades 6 through 12 tried an e-cigarette in 2012, more than double the rate in 2011. This shouldn’t be a surprise, given that e-cigarette marketing is transparently directed toward kids, both in terms of cost (e-cigs cost significantly less on average than conventional packs) and flavoring. Indeed, as USA Today noted, while the FDA banned flavored tobacco cigarettes, there are no such restrictions on cigars or e-cigarettes. This regulatory loophole has led to flavors like Fruit Loops and cookies and cream.

The tobacco industry is once again leaving no stone unturned to get at this potentially lucrative market. In January, a group of tobacco companies sued the City of New York in federal court to halt new regulations slated to go into effect this month. The companies allege that the City’s ban on coupons and otherwise promotionally priced tobacco products are an unconstitutional restriction of free speech (in addition to being preempted by both federal and New York State law).

If you are rolling your eyes at the idea that barring coupons from being used to circumvent national efforts to boost the price of cigarettes in order to (a) pay for a portion of the health costs imposed by the industry’s product and (b) dissuade children from picking up the deadly habit, implicates the First Amendment, you aren’t alone.

Last week, the Campaign for Tobacco Free Kids filed an amicus brief on behalf of the City, highlighting the inverse relationship between cigarette price and cigarette use. In particular, the Campaign noted how Philip Morris’ 1993 “Marlboro Fridays” program (and the corresponding cuts in prices by competitors) led to an immediate and sharp increase in youth tobacco consumption.

So what are public health officials to do while we await better data about the effect of e-cigs? I think they need to do three things, keeping in mind our first principles:

1.     The government should fund independent research into the effects of e-cigarettes on users and others who breathe in supposedly harmless “water vapor”. Until the “vapor” is found to be safe, e-cigarette use should be banned in public accommodations to reduce the chances of second-hand harm.

2.     The government should aggressively restrict marketing of e-cigs to youth and should, in the interim, classify e-cigs as tobacco products (as the FDA has) for the purpose of taxation, all while keeping in mind that tax breaks (and even credits) could be worthwhile if e-cigs are shown to enable smoking cessation (like nicotine gum).

3.     Public health officials should actively market smoking cessation products to young people—with PR campaigns focused near schools, parks, and malls. Whether hooked on conventional cigarettes or the trendy-tech version, all people—but especially our children—deserve a chance to wean themselves from addiction.

Despite a multi-billion dollar settlement in 1998, the tobacco industry has proven resilient in developing new and deadly campaigns to hook young people on nicotine. We are in the opening stanzas of the E-Cig industry and it is incumbent upon us to not exhibit the same naïveté in the face of the tobacco companies as we did for much of the 20^th century. If we do, the effects will continue to be measured in billions of dollars and millions of lives.