Social Impact Bonds: Defending the Value of the Community Services Block Grant
Essential Program for Low-Income Americans Faces Budget Cuts
SOURCE: AP/Julie Jacobson
Ninety-nine percent of U.S. counties contain at least one local agency funded in part by the federal Community Services Block Grant, which supports a wide range of community-based activities helping people transition out of poverty. In fiscal year 2012 the Community Services Block Grant received $677 million in federal funding to deliver coordinated, comprehensive services in communities across the United States. These federal funds are used in local communities to tackle the complex set of challenges and barriers that keep people from achieving economic security. Strategies include income and credit counseling, reducing debt, domestic violence crisis intervention, access to food pantries for families who have lost their jobs, and summer and afterschool programs for youth, to name a few.
But the Community Services Block Grant is in real danger of budget cuts in the near future. The White House’s fiscal year 2013 budget request proposes halving federal funding for the grant to $350 million. The Obama administration characterizes the proposed reduction as one of several “tough cuts to worthy programs” and made a similar recommendation in this past year’s budget. Congress rejected the proposed cuts in fiscal year 2012, but with many lawmakers on Capitol Hill feeling the pressure to cut social programs, the Community Services Block Grant is under enormous strain.
How should the Community Services Block Grant-funded network of state governments and local Community Action Agencies mount a defense of its programs? There is a real opportunity to start making a concerted effort to better measure the real, quantifiable outcomes of services made possible through Community Services Block Grant funds.
Let’s consider an example. The Center for Employment Training, a CSBG-funded local agency with locations throughout California, seeks to provide low-income Americans who face significant barriers to employment a path to economic self-sufficiency through job training and supportive services. Thirty-seven percent of Center for Employment Training students in the 2010–2011 cohort had dropped out of either elementary or high school, and 47 percent received some kind of public assistance. The Center for Employment Training’s employment training programs are designed to prepare participants for high-demand and emerging occupations.
During the peak of the recession, the Center for Employment Training trained more than 6,500 Americans for careers in more than 25 high-demand occupations such as medical assistant positions and green construction. Of the participants who exited training, 78 percent (2,322 people) graduated and received a certificate of completion, and 73 percent (2,178 people) obtained employment at an average wage of $10.74 per hour. Before training, the average annual income for students in the 2010–2011 cohort was just $6,300. After training, program graduates’ average annual income rose to $27,500.
None of this would have been possible without funds from the Community Services Block Grant.
The Community Services Block Grant funds allowed the Center for Employment Training to provide supportive services such as housing, transportation, and nutrition assistance to students so they could attend full-time training. These funds significantly improved students’ chances of completing training.
But this isn’t just a story about a successful job-training program for low-income Americans. This could be a story about day care services or nutrition assistance, about fair housing counseling or community health clinics. That’s because in the past year alone, some 19 million Americans benefited from services funded through the Community Services Block Grant that were designed to increase their self-sufficiency.
Part of a strategy for defending the Community Services Block Grant from budget cuts is building a strong constituency of support among powerful political figures. But the network also needs to demonstrate more clearly the tremendous value it provides. In particular, the Community Services Block Grant network should:
- Capitalize on its impact data by focusing more on outcomes than outputs
- Choose between 5 and 10 national performance indicators that enable all federal agencies funded through this program to track the same outcomes
- Consider experimenting with innovative new financing tools such as Social Impact Bonds
Let’s briefly examine each of these recommendations.
All federal programs struggle to demonstrate the outcomes they achieve, and the Community Services Block Grant is no different. There is good data available on the number of people served and on general performance measurement. And while the program has some information on more robust outcomes such as jobs, education, income management, and community capacity building, program data can only go so far in proving cause and effect. This is why the focus needs to be on demonstrable outcomes, rather than just on program outputs. While states and Community Action Agencies that receive Community Services Block Grant funds have been working to achieve six national performance goals, these are very broad and difficult to quantify—for instance, “The conditions in which low-income people live are improved.”
In an effort to ensure the Community Services Block Grant-funded network presents the most robust data possible, we recommend scaling back reporting to between 5 and 10 performance indicators that can be tracked nationally. The network should draw more attention to impact data such as the outcome data they collect around number of persons who successfully find jobs or the number of persons who receive federal and state tax credits as a result of the network’s intervention. By streamlining the collection of common, comprehensive, outcome-driven data, advocates will be able to show policymakers poised to slash budgets what’s really at stake and how it directly affects the people in their communities.
There may also be an opportunity for the Community Services Block Grant network to experiment with Social Impact Bonds. Under this innovative financing vehicle, governments agree to release money to external partners only when agreed-upon outcomes are achieved. In other words, government would pay only for performance. Imagine a state or local government promising to fund a local administrator for boosting the school readiness of poor children in a community or for increasing the number of people who set up successful small businesses with the help of Community Services Block Grant-funded initiatives. The grant funds would only be distributed to those who deliver the outcomes.
Given their proven strategy and confidence in their ability to achieve outcomes, the Community Services Block Grant network would be a good candidate to undertake work in return for a promised payment for success. They would need to turn to foundations or other funders to help pay for the necessary work to achieve the outcomes—and they would need to ensure that government’s promised payments were large enough to compensate for the risk they carry. This would be a significant change in the way the network operates, but it would also demonstrate to those who wish to slash funding for social programs how confident the network is in the impact of the program.
The Community Services Block Grant is small, and many large federal programs have even less data on hand to demonstrate their effectiveness. But those programs are so large that they often have powerful proponents lobbying on their behalf. Unfortunately for the Community Services Block Grant, the low-income people who benefit most from their programs don’t have the deep pockets that others have to make their case.
In a perfect world we would be able to defend the program by sharing some of the many thousands of stories of the way the program impacts people’s lives every day. But with tight budgets, poverty initiatives at local levels such as this one face a rough ride over the coming decade.
We believe that the best form of defense will be to demonstrate the extraordinary impact these community-based programs have on the American people through rigorous data collection, so that anyone asking for further cuts will have to explain why they want to cut such a valuable program. Increased data collection won’t be easy and will require a great deal of culture change for those who administer the program, but it is essential if the Community Services Block Grant is going to continue to flourish.
Kristina Costa is a Research Assistant with the Economic Policy team at the Center for American Progress. Timothy R. Warfield is writing from his position as the Executive Director of the National Alliance for Sustainable Communities.
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