The Maryland Opportunity Compact

In so many areas of policy, the boundary between the public and the private is fading. And this is especially true in the delivery of social services, where enthusiasm is growing for the promise of harnessing private funds to public ends.

One approach that has drawn particular attention is the social impact bond—a financial instrument in which private investors loan money to finance new social programs, and then receive a return on their investment if an evaluator finds that the program was successful in meeting certain performance outcomes. In the face of entrenched social problems and stretched public resources, governments and service providers have been attracted to the vast possibilities of tapping even a small portion of the $80 trillion of assets under private management for important new evidence-based programs.

But lost in all of the enthusiasm for social impact bonds is a different public-private arrangement born in Maryland that quietly has produced strong, early results. This instrument, known as the Maryland Opportunity Compact, also finances alternative, evidence-based approaches to costly social programs. But rather than rely on private investment capital, the Compact uses a one-time philanthropic investment to kick-start the intervention. And rather than provide investors with their initial capital and a financial return on their investment if the program is successful, the Compact allocates savings to continue the program in question, and then splits any additional savings between the government and new investments to further improve outcomes for vulnerable populations.

In this Abell Report, Phil Spector examines the Compact framework and how it has been applied to new programs in foster care, juvenile justice, and addiction treatment and recovery across the Baltimore metropolitan area. These programs already have touched thousands of lives while saving millions of public dollars. And in the process, one can see the early signs of a provocative new approach to social policy, where philanthropy catalyzes a virtuous cycle that eases people—and then money—out of overwhelmed and often ineffective institutions and into alternative, cost-effective services for those that need them most.

Each Compact has followed its own, distinct path. There have been successes and disappointments. But the experience to date has revealed the Compacts to be a promising new option, one that merits consideration alongside social impact bonds and other emergent financing tools that aim to blend private and public action to deliver much-needed change to programs that serve vulnerable populations.