Canadian Government Executive - Volume 25 - Issue 03

14 / Canadian Government Executive // August/September 2019 to be engaged. Second, the long-term con- tracts required by SIBs are not compatible with political cycles. Political ideology changes can put SIBs in a vulnerable posi- tion. Third, even if prevention services are effective and fewer services are needed, it is unlikely that the government will cut down these services (e.g., services to sin- gle mothers or the homeless) to actually realize savings because of political resis- tance. Last, both the government and the outcome assessment agency can be under pressure to repay the private investors. Al- though some investors might be willing to assume the risk, some investors do pursue repayments and returns. An unsuccess- ful program without repayment can lead to harm, such as early termination of the program by the funders, legal disputes, and pessimism towards SIBs in the future. This pressure can potentially lead to bias in assessing service outcomes. However, even so, one benefit of a SIB is that, under the SIB arrangement, the gov- ernment does avoid funding unsuccessful programs or experiments. This is exempli- fied by the Rikers Island SIB. The Rikers Island SIB failed to meet its target; there- fore, the city did not need to repay for the project. However, in this case, the private investors’ investment was backed up by a third-party loan guarantee by Bloomberg Philanthropies, which means the loan guar- antee (US$7.2 million) absorbed three-quar- ters of Goldman Sachs’ loss (US$9.4 million). As a social innovation, the SIB exhibits similar ideological characteristics to other more commonly employed tools invented in the Neoliberal era, such as contracting out and social enterprises. Because the SIB also utilizes the private market to provide solutions to social problems, SIBs attract similar criticisms to other market-based policy alternatives. The most prominent concern is that of “privatization through the backdoor,” shifting the boundaries between business and social issues which may lead to weakened democracy and state authority, and the potential moral concern about profiting from others’ suf- ferings. Financially, SIBs seem to be a financing tool responding to shrinking government budgets. However, the rise of SIBs does GOVERNMENT SIBs offer service providers – typically non- profit organizations – stable, long-term funding, and greater flexibility in use of the money. This contrasts sharply with government contracts with nonprofits, which are often project-based, short-term, with restrictions on the use of funds. investment. Second, the savings can only be seen as realized from a long-term per- spective. SIBs are most suited to preventive ser- vices but not core services, because effec- tive preventive services can lead to cost- savings. Popular social policy areas for SIB operations include reduction of recidi- vism, prevention of institutionalization of children, prevention of unemployment, and chronic homelessness. For example, Canada’s first SIB – Sweet Dream Project – launched in Saskatoon in 2014, aimed to provide new supported living homes for at-risk single mothers; a safe place to live with their children while they receive parenting support, access to educational opportunities and the chance to develop employability skills. The outcome tar- get of the project is to keep 22 children out of foster care by keeping them safely with their mothers continuously for more than six months after participating the program. By design, if the program is ef- fective, it would prevent the government from spending on foster child care, unem- ployment, and other associated welfare costs. Savings can only be realized in a long- term perspective. For example, the Peter- borough SIB is designed to operate for seven years. The Rikers Island SIB ran for five years. Saskatoon’s Sweet Dream Proj- ect also ran for five years. Difficult social problems such as homelessness cannot be solved quickly and outcomes cannot be demonstrated in a short time period. “Cashable” benefits can only be seen in the long run. In the case of reducing re- cidivism, there might be savings if the outcomes endured and a significant num- ber of former inmates remained out of the prison even after the first seven years, or the children in the Sweet Dream Project remained with their mothers who even- tually became self-sufficient members of society. Admittedly, many SIBs do face chal- lenges of realizing cashable benefits. There are a few contributing factors. First, the upfront costs to set up SIBs are high. SIBs are seen to be complicated to initiate; therefore, making SIB arrangements is costly. Frequently, six or more contractual relationships need to be arranged legally. An intermediary agency often is needed in order to operate, coordinate, monitor, and manage the SIB. In addition, an indepen- dent outcome assessment agency needs