Plan would draw private investors to pay for social services
Some state lawmakers are backing a plan to create a new financing plan that could draw private investors into helping pay for the state's social services.
The plan would sell appropriation bonds. The proceeds would go to human services non-profits that can show their services saved the state more than the cost of borrowing the money.
Republicans Rep. Keith Downey and Sen. Julie Rosen say some programs, like job training or chemical dependency treatment, might be financially worth funding through a new form of state bonds.
Downey, of Edina, said the key would be documenting the savings. But he thinks a significant number of organizations are already trying to measure concrete results.
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"Large nonprofits and the foundations in Minnesota are quite a bit ahead of us here in the public sector," Downey said. "They have been working on return on investment models, and how to identify for them where the best bang for the buck is through their grant program. So I think we've got a lot to learn."
Rosen, of Fairmont, is introducing the idea in the Senate. Supporters say they want to start out with a small pilot program of $20 million or less.
Steven Rothschild, a former General Mills vice president, proposed what he called human capital bonds.
"We believe that some fairly large percentage -- I don't know if its a third, a half, 60 percent, 20 percent, of the state's social enterprises are creating a return on capital right now, well above the cost of capital to the state for borrowing money," he said.
The plan calls for the state to track individual clients. The state and non-profits would split the savings if the new system cost less per person than existing programs.