Nearly 80 percent of Chicago's voters supported a citywide advisory referendum on the Feb. 24 ballot that would reduce the influence of special-interest money in city–and state–elections by financing campaigns using small contributions from individuals and a limited amount of public money.
It's been widely reported that the issue and two others, none of them controversial, were put to the voters only to block a politically charged, 50-ward referendum on whether members of the Chicago Board of Education should be elected rather than appointed as they are now. State law limits the number of ballot propositions that can be posed across the city to three.
The campaign finance question appears to have been drafted to go nowhere. Short on specifics, it dodged the uncomfortable reality that small contributions and limited public investment wouldn't be enough to fund the city's campaigns.
Still, the voters have spoken: They want their government back, and policymakers are obliged to return it to them.
Contributions of $1,000 or more accounted for 86 percent of the money raised by this year's five mayoral hopefuls, the largest checks coming from out-of-towners who have no right to sway our elections. The influence of wealthy contributors, corporate lobbyists and peddlers of special interests inevitably denies the electorate the promise of democracy.
But when campaigns rely on small contributions, voters who had been marginalized gain the political power they deserve and the public's faith in the election process is restored. Those are urgent objectives: Voter turnout in Chicago's election was a stunningly low 34 percent, down from 42.5 percent four years ago.
In New York's 2013 primary, 149 candidates—92 percent of candidates on the ballot—rejected corporate and PAC contributions to qualify for $6 in public funds for every dollar they received, but only on contributions of $175 or less. Many other cities also are successfully boosting the impact of small contributions by matching them with public dollars. So should Chicago.
The Illinois Campaign for Political Reform estimates that campaign finance reform in Chicago could cost up to $10 million each election cycle, a sum that Common Cause suggests might be funded by a voluntary checkoff on tax forms. But the value of democracy is greater than its cost, especially if leadership in city government inspires state policymakers to follow suit.
Both Mayor Rahm Emanuel and Cook County Commissioner Jesus “Chuy” Garcia have voiced support for the ballot question. Let's urge each of them to embrace the spirit of the referendum and vow that if he wins the April 7 runoff election, he'll lead the City Council to rein in big money in Chicago's mayoral and aldermanic politics.
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
Marc J. Lane is a Chicago-based business and tax attorney and financial adviser.
Reprinted from Marc Lane's March 3, 2015 editorial which appeared in Crain's Chicago Business. Crain Communication Inc.'s permission is gratefully acknowledged. Copyright © 2015 by Crain’s Communications Inc.
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