The Test Case Behind Goldman’s Investment in Jail Inmates
5 AUG By Karen Weise
Social impact bond (Photo credit: Wikipedia)
Goldman Sachs (GS) is offering $9.6 million in funding to help New York City keep Rikers Island jail inmates from ending up back behind bars after they’re released. This isn’t a regular donation, though—it’s a new type of investment called a “social impact bond,” designed to use market incentives to encourage private funding for public problems.
The Rikers project is the first social impact bond in the U.S., but the idea has origins in the U.K. In 2010 a British do-good investment bank called Social Finance issued the first social impact bond. The bank lined up 17 investors—mostly foundations and charitable trusts—to support an $8 million program to rehabilitate 3,000 men released from a prison in Peterborough, a London suburb. The program set the goal of reducing the recidivism rate for the men by at least 7.5 percent over six years as compared with a control group at other prisons.
Social impact bonds require investors to front the money for nonprofits to provide social services, and if the nonprofits don’t meet the goal, the government doesn’t lose a penny—and the investors won’t recoup all their funds. If the Peterborough program meets or surpasses the goal, the government (with some help from Britain’s lottery fund) will repay investors the original capital as well as a return, as much as 13 percent per year over an eight-year period.
If MDRC, the New York group spearheading the Rikers program, succeeds in helping lower the prisoners’ recidivism rate 10 percent over four years, the city’s Department of Correction will give the nonprofit the money it needs to repay Goldman Sachs for the loan. Should MDRC double that goal, Goldman could stand to make an additional $1.1 million (PDF). Uniquely in this case, New York City Mayor Michael Bloomberg’s private foundation is providing a $7.2 million guarantee on the loan. (The mayor is founder and majority owner of Bloomberg LP, the parent of Bloomberg Businessweek.)
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Related articles
- Goldman to Invest in City Jail Program, Profiting if Recidivism Falls Sharply(nytimes.com)
- Goldman Sachs In Jail: Why Is Big Money Moving Into Social Impact Bonds? (ibtimes.com)
Source:
EDITORIAL
Too Many Prisoners
Published: August 4, 2012
The Justice Department in its recent annual report on federal sentencing issues wisely acknowledged that public safety can be maximized without maximizing prison spending. As it noted, the growing federal prison population, now more than 218,000 inmates, and a prison budget of almost $6.2 billion are “incompatible with a balanced crime policy and are unsustainable.”
The department calls for reforms “to make our public safety expenditures smarter and more productive.” Yet it fails to address sentencing changes that should be made, which would significantly reduce the problem of overincarceration in federal prisons.
Last fall, the United States Sentencing Commission issued a comprehensive report that said mandatory minimum sentences are often “excessively severe,”
There is no good evidence that long mandatory sentences deter crime. There is very good evidence that older prisoners (45 and up) are the least dangerous and that many should be released.
The unsustainable federal prison budget and the rising inmate population reflect the country’s long, wasteful embrace of retribution. Both numbers are higher than they need to be for public safety.
To Read Complete Article: http://www.nytimes.com/2012/08/05/opinion/sunday/too-many-prisoners.html?_r=2
Sounds like a good idea
I agree