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By Leah Lundquist

This is a cross-posting from the pubTalk blog.

I decided to bring a little pub-priTalk to the pubTalk blog this week. The term "public-private partnerships" buzzes wildly around the centers and classes at the Humphrey. These kinds of partnerships promise to leverage the private forces of competition, evidenced based decision making and most of all private funding to give us the most bang for our public buck. These partnerships, ideally, make our solutions more effective and leverage increasing amounts of private dollars to meet social goals.

But as with any buzz term or jargon-y concept, it's interesting to see how these types of partnerships actually plays out on the ground. How effective are they? Do they actually achieve all that they promise? I was particularly interested to see this concept of "social impact bonds" in an article that ran yesterday morning in the NY Times.

David Leonhardt, the author of the article, defines these bonds as follows:

Nonprofit groups like foundations pay the initial money for a new program and also oversee it, with government approval. The government will reimburse them several years later, possibly with a bonus -- but only if agreed-upon benchmarks show that the program is working.

The article goes on to highlight an example of this concept being tested in a prison north of London where the recidivism rate within a year stubbornly sits at 60 percent.

As I read about this, it sounded similar to what Conchy Bretos, an Ashoka Fellow, spoke about at Tuesday night's Ashoka Solutions Forum in the Twin Cities. She's helping redesign nursing care for elderly eligible for public housing by doing it more efficiently and effectively than the government but through close partnerships with and financing from HUD and HHS.

While not receiving funding from the government, Felipe Vergara, the other Ashoka Fellow who spoke at the event, has similarly applied a new financing model to something traditionally under government purview. He's making higher education affordable for low-income students by managing the first profitable education investment funds.

Both of these entrepreneurs have created new finance models that seem like they have sticking power. Their ideas, like the concept of a "social impact bond," appear on their face to be a win-win-win for government entities, private funders, and recipients of social services.

On one hand, I can see how designing new markets between the public and private sectors are just the kind of rethinking of social services that needs to be happening right now. With these social impact bonds taxpayers get their money's worth by not putting a dime on the line until they see hard evidence of success.

On the other hand, I'm skeptical. Who's going to upfront the high amounts of capital needed? According to the Foundation Center, all foundation types granted out $42.9 billion in 2009. This is miniscule when compared to the amount that is currently being paid out by the federal government for Medicaid, Medicare, and other social services. How do we find the right performance measures and make sure the data isn't being manipulated or programs aren't only letting in the most "promising" constituents? How will the balance be maintained between financial gain and social mission? As strategic consultant Lucy Bernholz suggests over at Philanthropy 2173, these new socially focused markets could spark the emergence of other new markets to keep them in check (she poses the interesting concept of "mission insurance").

What do you think? Do you think these new financing models can prove more effective while keeping the intended service recipient at the heart of their work? Will they be able to reach the kind of scale they need to? I'd love to hear your comments!

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