2016 Lane Reports

A Model for Change: Cook County engages social enterprise to combat poverty

The Lane Report, November 2016
Tuesday, November 1, 2016 10:00 am
by Elisa Birnbaum

The Cook County Commission on Social Innovation was pioneered in an effort to reduce the burgeoning effects of poverty in Chicago and the surrounding neighborhoods. With a goal of total transformation, it hopes to provide a model for other cities working towards sustainable poverty reduction. This multifaceted approach focuses on catalyzing social innovation through organizations rooted in the market, that use market-based incentives. The Commission is facilitating enterprise and economic development in an area with substantial need for reform.

Cook County is the second most populous county in the United States. It is home to 5.2 million people, 17% of which are living below the national poverty line. A variety of social issues are symptomatic of cities with inflated poverty levels and stagnant, or underdeveloped economies. High degree of unemployment, inadequate access to healthcare and education, food insecurity, and high violent crime rates to name a few. Combating these social ills is a daunting task for an overworked and underfunded social and non-profit sector. The Commission on Social Innovation is being spearhead by Jesus Garcia, former mayoral candidate, and Marc J. Lane, a Chicago based lawyer, who now hold the positions of chair and vice chair respectively.

Lane drafted an Illinois law that allowed for the creation of low profit limited liability companies (L3C’s) in the state. "The law," he says, "may facilitate program-related investments and engage diverse stakeholders around a clear and unambiguous ordering of statutorily imposed charitable or educational priorities that can’t be waived or negotiated away."

L3C’s have received broad support. “[They are] the only business form in the United States that permanently and irrevocably places mission above all other objectives,” he explains. The intention is to encourage a focus on job creation, community revitalization, workforce development and entrepreneurship. In this way the commission hopes to support innovative approaches to social development through alternative means.

Social enterprise, or impact entrepreneurship, is a core component enlisted by Cook County. This business model is an innovative approach to poverty reduction, and has become a rising solution to effective social change. It is a market-based initiative that incentivizes poverty reduction strategies with both financial and social returns. Take Cleanslate. The organization provides the county with a vital for-profit service with concurrent social gains. The roadway cleaning company employs economically marginalized individuals, not only providing meaningful employment, but also valuable work-skills training. This triple bottom line executes the mission of social enterprise perfectly. It provides a community service of neighbourhood maintenance, job creation and skills development, while also being a self-sustaining for-profit business.

The Cook County Commission is a brilliant example of how innovation in the business world can lead not only to economic development, but equality and poverty reduction too. The long-term goals this task force hopes to enable are truly inspiring. Promoting economic and social development through business is a sustainable poverty reduction strategy. Hopefully tackling social challenges in Cook County through the Commission on Social Innovation will inspire similar models in other difficult areas across the country.

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf

The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems.

A SIB isn't a traditional bond where investors are guaranteed a fixed return but a contract among a government agency that agrees to pay for improved social outcomes, a private financing intermediary and private investors. SIBs shift the risk of experimenting with promising but untested intervention strategies from government to private capital markets, with public funds expended only after targeted social benefits have been achieved.

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system.

The government decided which goals would be supported, but exactly how those goals would be achieved was left to the private sector. It was the investors, through a bond-issuing organization, who ultimately endorsed the allocation of investment proceeds — how much would be invested in job training, drug rehabilitation and other interventions.

If the Peterborough plan eventually shrinks recidivism rates by 7.5 percent or more, the government will repay the investors' capital and share the taxpayers' savings with them, delivering up to a 13 percent return. If the target isn't hit, the investment will have failed and the government will owe the investors nothing.

Illinois' SIB effort was spearheaded by the state's Task Force on Social Innovation, Entrepreneurship and Enterprise — the governor's think tank on social issues, which I am privileged to chair — with support from Harvard University's John F. Kennedy School of Government, the Rockefeller Foundation and the Aurora-based Dunham Fund. A request for information issued by the Office of Management and Budget on May 13 yielded responses from service providers eager not only to reduce recidivism here but also to create jobs, revitalize communities, improve public health outcomes, curb youth violence, cut high school dropout rates and alleviate poverty.

Now the governor has issued a request for proposals intended to spur better outcomes for Illinois' most at-risk youth — by increasing placement stability and reducing re-arrests for youth in the state's Department of Children and Family Services, and by improving educational achievement and living-wage employment opportunities justice-involved youth most likely to re-offend upon returning to their communities.

Kudos to Mr. Quinn for bringing SIBs to Illinois. May they soon start delivering on their promise.

- See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf
The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf

Adapted from Elisa Birnbaum's October 11, 2016 article which appeared on SeeChangeMagazine.com. Copyright © 2016 by SeeChangeMagazine.com.


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