The process of his reentry is not finished.  His housing situation remains unstable, and Andre is working to get him into Covenant House.  Andre follows up with his probation officer on a weekly basis; John has attended faithfully for three weeks now.  He comes to Friends regularly for support and positive relationships, and he continues MRT with Judith Wallen.  He is currently applying to Buffalo State and other colleges.

Goldman to Invest in City Jail Program, Profiting if Recidivism Falls Sharply

Photo: Ángel Franco / The New York Times / Joyce Gendler working with inmates at the Robert N. Davoren Center on Rikers Island under the Bloomberg administration’s Young Men’s Initiative.

By DAVID W. CHEN

Published: August 2, 2012 

New York City, embracing an experimental mechanism for financing social services that has excited and worried government reformers around the world, will allow Goldman Sachs to invest nearly $10 million in a jail program, with the pledge that the financial services giant would profit if the program succeeded in significantly reducing recidivism rates.

The city will be the first in the United States to test “social impact bonds,” also called pay-for-success bonds, which are an effort to find new ways to finance initiatives that might save governments money over the long term.

First used in Britain and now being explored in Australia, the bonds are rapidly capturing the imagination of some public officials in the United States: on Wednesday, Massachusetts announced that it was completing negotiations with two nonprofit groups to finance juvenile justice and homelessness programs, with the promise of repayment only if the programs work.

The federal government, Connecticut, New York State and Cuyahoga County, Ohio, among others, are at various stages of considering using the bonds to harness new funds for human-services programs.

In New York City, Mayor Michael R. Bloomberg plans to announce on Thursday that Goldman Sachs will provide a $9.6 million loan to pay for a new four-year program intended to reduce the rate at which adolescent men incarcerated at Rikers Island reoffend after their release.

The money is not a huge amount for Goldman, which last month reported over $900 million in second-quarter profit, and the investment promises a public-relations benefit for the Wall Street bank. For the city, the money allows the Bloomberg administration to demonstrate, and test, several of its priorities: enlisting private sector help in financing public needs, and tying program money to rigorous outcome evaluations.

The Goldman money will be used to pay MDRC, a social services provider, to design and oversee the program. If the program reduces recidivism by 10 percent, Goldman would be repaid the full $9.6 million; if recidivism drops more, Goldman could make as much as $2.1 million in profit; if recidivism does not drop by at least 10 percent, Goldman would lose as much as $2.4 million.

“This promising financing model has potential to transform the way governments around the country fund social programs, and as first in the nation to launch it, we are anxious to see how this bold road map for innovation works,” Mr. Bloomberg said in a statement.

“Social impact bonds have potential upside for investors,” he added, “but citizens and taxpayers stand to be the biggest beneficiaries.”

In a twist that differentiates New York’s plan from other governments’ experiments with social impact bonds, Mr. Bloomberg’s personal foundation, Bloomberg Philanthropies, will provide a $7.2 million loan guarantee to MDRC.

If the jail program does not succeed, MDRC can use the Bloomberg money to repay Goldman a portion of its loan; if the program does succeed, Goldman will be paid by the city’s Department of Correction, and MDRC may use the Bloomberg money for other social impact bonds, said James Anderson, director of the foundation’s government innovation program.

Jeffrey B. Liebman, a professor of public policy at Harvard University who has written about social impact bonds, said the New York contract would be widely scrutinized.

“This will get attention as perhaps the most interesting government contract written anywhere in the world this year,” Dr. Liebman said. “People will study the contract terms, and the New York City deal will become a model for other jurisdictions.”

But social impact bonds have also worried some people in the nonprofit and philanthropy field, who say monetary incentives could distort the programs or their evaluations.

“I’m not saying that the market is evil,” said Mark Rosenman, a professor emeritus at Union Institute and University in Cincinnati, “but I am saying when we get into a situation where we are encouraging investment in order to generate private profit as a substitute for government responsibility, we’re making a big mistake.”

Goldman approached the city after hearing that New York officials and MDRC were interested in social impact bonds. In an interview, Alicia Glen, the head of Goldman Sachs’s Urban Investment Group, said the company was confident that the program would work.

“This is a new approach — no city has ever done something exactly like this before — and we were able to get comfortable with the risks, which other financial institutions may not have been,” Ms. Glen said. “But we are confident that the city will identify enough savings that we’ll get a reasonable return on the investment.”

The Goldman money will finance a program called Adolescent Behavioral Learning Experience, or ABLE, as a part of the Bloomberg administration’s year-old Young Men’s Initiative, which seeks to improve prospects for black and Latino adolescents. The jail program, which will offer counseling and education for an estimated 3,400 incarcerated adolescent men each year, will be run by two nonprofit organizations, the Osborne Association and Friends of Island Academy, and overseen by MDRC.

Currently, nearly 50 percent of young men released from Rikers reoffend within a year.

City officials said they hoped the concept of social impact bonds could also be used to finance programs on homelessness, foster care, special education or health care. By using the mechanism to pay for prevention programs that are often too expensive for government to afford, the officials say they believe that they could save taxpayers money over the long term.

“Government is paying for outcomes that the government wants to achieve,” Deputy Mayor Linda I. Gibbs, the program’s chief architect, said. “This is designed to provide a template for other initiatives so we can do more.”

New York’s program is modeled, in part, after one in Peterborough, a London suburb, that began in September 2010 and is still years from being fully evaluated.

In Massachusetts, Jay Gonzalez, the secretary of administration and finance, is a proponent of social impact bonds. “We’ve got to change from the idea of, ‘We just pay for stuff and hopefully get the results,’ ” Mr. Gonzalez said in an interview. “The beauty of this is if they perform to get the results, then we pay. If they don’t, we don’t pay.”

You all are doing the important work, God’s work, to bring the empowering resources of education, loving guidance, and support to young people so ready to make a better future for themselves. Thank you, Friends of Island Academy, for all you do.

With great love all things are possible,

Russell Simmons

Also at Rikers Island, our staff visits the Eric M. Taylor Center (EMTC) and the Rose M. Singer Center each week to conduct outreach. Prior to their release from jail, young people participate in workshops and individualized meetings through which we get to know them and their circumstances.  Youth work with us pre-release to determine the right combination of supports and opportunities to prepare for returning home, including housing, health care, academic advancement, and leveraging family and neighborhood supports.

These early contacts help to ease their transition back to the community and strengthen the ties for a continuing relationship with Friends.

The concept to develop Friends developed in the late 1980’s at the alternative high school – known at that time as Island Academy – located at EMTC.  For 22 years, every week, our staff has been a constant presence there, extending a hand and providing a mobile safety net on the way home.

Friends supports youth on an individualized basis to reach their goals through a model of neighborhood-based availability and service, extending its reach into the communities most impacted by disproportionate justice system involvement and crucial to sustaining long-term, positive youth development.

Friends provides services along five domains to promote positive youth development: health and well-being, education, employment, community engagement/participation, and arts and recreation.  Youth advocacy staff support young people in preparing for the GED, reenrolling in high school, or applying for and enrolling into college or vocational trades.  We coach job-interested youth members through building a resume, developing interview and soft skills, and securing and retaining employment.  Through individual counseling and group workshops, we support healthy emotional development and overall well-being.  We meet young people in their own neighborhood in order to connect with their lives, families and friends and to leverage relevant local services on their behalf.

Developing youth leaders evolves out of Friends’ work with our current youth members.  Youth involved in the criminal justice system are overlooked as a source of peer and community leadership, yet no on can be a more persuasive role model for at-risk adolescents than their peers, by demonstrating the value and acknowledging the implications of making positive choices.

The voices of our youth are also markedly absent from local and state decision-making.  We train young people to share their own voices and perspectives at community board meetings, with elected officials, and in other arenas.  When youth leaders speak in schools, their personal stories inspire young people to avoid similar pitfalls and choose wisely from the beginning.  When addressing policy makers, they give human voice to the statistics on the page.

If you would like to set up a presentation by our Youth Leaders in your neighborhood, school or other place of business, please contact Andre Obasogie at 212-760-0755 or aobasogie@friendsny.org.

Our partnership with the International Center of Photography provides our youth members with hands-on photography and writing instruction integrated with activities that develop life skills and build self-esteem.  This program offers photography and digital media education to teens who have had little or no access to the photographic medium. The curriculum is collaboratively designed by staff from both organizations, and is tailored to meet the needs of the students. Themes identified by the students and staff have included health and wellness, overcoming obstacles, literacy, and self-expression. The program culminates in a celebration of the students’ work that combines photography and writing.

We partner with Richard R. Green High School through our youth leadership program.  Our youth leaders make regular presentations to the students of Richard Green, discussing their own experiences and the power of positive choices.