Bill Text: NJ A3289 | 2012-2013 | Regular Session | Introduced
Bill Title: "The New Jersey Social Innovation Act"; establishes social innovation loan pilot program and study commission within EDA.**
Spectrum: Partisan Bill (Democrat 11-0)
Status: (Enrolled - Dead) 2014-01-21 - Pocket Veto - Bills not Acted on by Governor-end of Session [A3289 Detail]
Download: New_Jersey-2012-A3289-Introduced.html
Sponsored by:
Assemblyman ANGEL FUENTES
District 5 (Camden and Gloucester)
SYNOPSIS
"The New Jersey Social Impact Bond Act"; establishes social impact bond pilot program and study commission within EDA.
CURRENT VERSION OF TEXT
As introduced.
An Act establishing a social impact bond pilot program and study commission, and supplementing Title 34 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. This act shall be known and may be cited as the "New Jersey Social Impact Bond Act."
2. The Legislature finds and declares that:
a. Social impact bonds raise funds from non-government investors to pay for the provision of a service, and if the service improves financial and social outcomes, thereby alleviating financial support from the State, investors receive investment returns from the State. Investors contract with a government agency to purchase social impact bonds, the proceeds from which will be dispersed to a nonprofit organization service provider. The nonprofit organization will then be required to deliver services to the target population. If the results of the services provided by the nonprofit organization meet pre-determined, defined financial and social outcomes, the government agency will repay the bonds with financial returns to the private investors.
b. The New Jersey Economic Development Authority is the appropriate State agency to oversee a social impact bond pilot program and study commission, which will use proceeds from the sale of social impact bonds issued by the New Jersey Economic Development Authority to private investors to fund the services of one nonprofit organization in the State. If the nonprofit organization saves the authority a certain pre-determined amount of money, in addition to other outcomes, such as positive social results, the authority will return the investment. If the outcomes are not met, the authority will not return the investment. It is in the investors' and nonprofit's best interest to see that the outcomes will be met to ensure future funding. The study commission will track and evaluate the progress of the five-year pilot program and present its findings in yearly reports to the Governor and Legislature. The final report will make a recommendation as to whether a social impact bond program should be implemented Statewide.
3. As used in this act:
"Authority" means the New Jersey Economic Development Authority, established pursuant to P.L.1974, c.80 (C.34:1B-1 et seq.).
"Nonprofit organization" means a nonprofit organization that is exempt from federal taxation pursuant to section 501 (c)(3) of the federal Internal Revenue Code, 26 U.S.C. s.501 (c)(3).
"Philanthropic organization" means a nonprofit nongovernmental entity that utilizes donated assets and income to provide social services.
"Social impact bond" or "bond" means a contract between the public and private sectors in which a commitment is made to pay for improved financial and social outcomes that result in public sector savings.
"Social impact bond fund" or "fund" means the fund established pursuant to section 8 of this act.
"Study commission" means the study commission established to aid the authority in the administration of the social impact bond pilot program established by this act.
4. There is established a five-year social impact bond pilot program and study commission within the New Jersey Economic Development Authority. The authority, in cooperation with the Department of Human Services and Department of the Treasury, shall administer and determine the effectiveness of a social impact bond program affecting nonprofit health care services for the purpose of encouraging private investment in preventive and early intervention health care to reduce federal, State, and municipal expenditures related to those services, as well as to assess the feasibility of expanding this program Statewide. The authority shall solicit grants from philanthropic organizations or other private sources for the establishment and administration of the pilot program and study commission.
5. a. The authority shall oversee a study commission, entitled the "New Jersey Social Impact Bond Study Commission," established for the duration of the pilot program, whose membership and size shall be determined by the authority. The authority may consider a variety of professionals, including health care, bond financing, and social impact bond experts, for membership in the study commission. The study commission shall organize as soon as practicable after the appointment of its members, and shall select a chairperson from among its membership. At least one member of the study commission shall be a member of the Department of Human Services. Any vacancy in the membership of the study commission shall be filled in the same manner in which the original appointment was made.
b. The study commission may request the assistance and services of employees of any other State department, board, bureau, commission, task force, or agency as it may require and as may be available. Members of the study commission shall serve without compensation, but shall be entitled to employ stenographic and clerical assistance and incur traveling and other miscellaneous expenses as it may deem necessary in order to perform its duties, within the limits of the funds made available to it for its purposes. The study commission may meet at the call of its chairperson at the times and in the places it may deem appropriate and necessary to fulfill its duties, and may conduct public hearings at such place or places as it shall designate. The study commission shall conduct its meetings in accordance with the "Senator Byron M. Baer Open Public Meetings Act," P.L.1975, c.231 (C.10:4-6 et seq.).
c. It shall be the duty of the study commission to aid the authority in the administration of the social impact bond pilot program and to issue annual reports detailing the progress of the program. Specifically, the study commission, in cooperation with the authority and the Department of Human Services, shall determine the one nonprofit organization that will receive investment funds from bonds issued to private investors. The study commission shall make this determination taking several factors into consideration which include, but are not limited to, the size and identity of the target population that benefits from the nonprofit organization service provider, the projected financial value of the improvements as a result of the social impact bond investments, including projected public sector savings, the projected return to investors, the ease of the measurability of the outcomes, and an analysis of impacts beyond financial savings and returns, such as social outcomes. The study commission and authority shall work together on additional aspects of the pilot program including, but not limited to, soliciting donations from philanthropic organizations and other private sources, determining bond contract terms and conditions, including the pre-defined public sector savings threshold, and developing metrics to project and measure both financial and social outcomes.
6. a. Not later than one year following the effective date of this act and annually every four years thereafter, the study commission shall submit to the Governor and, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), to the Legislature a report containing a study and evaluation of the pilot program. The report shall include, but not be limited to, a description of the project, as described in section 4 of this act, funded by the social impact bonds, State, federal, and municipal financial savings related to the issuance of social impact bonds, including Medicaid savings, the expected return on investment and projected payment schedule, the number of people serviced by the nonprofit organization, a comparison of the population serviced by the nonprofit organization and a similarly situated control group, and any community impact of the pilot program.
b. The study commission shall submit its fifth and final report to the Governor and, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), to the Legislature within 90 days of the expiration date of the pilot program, including any recommendations for legislative action it deems appropriate. The study commission's final report shall include, but not be limited to, an analysis of the feasibility of implementing a permanent social impact bond program Statewide, the estimated costs for the creation and administration of the permanent program, projected State, federal, and municipal savings from administering the permanent program, a calculation of the investment returns realized from the pilot program and a calculation of the State, federal, and municipal savings accrued through the pilot program, and an analysis of non-financial outcomes, such as community impact and preventive results. The study commission shall expire on the 30th day after the date of the issuance of its final report.
7. a. The authority and the State Treasurer, pursuant to section 6 of P.L.2001, c.401 (C.34:1B-4.1), are authorized to enter into one or more contracts to secure, in whole or in part, bonds that shall be issued by the authority for the purposes set forth in this act. The contract or contracts shall commence with the State fiscal year beginning the July 1 following the date of the enactment of this act. The terms and conditions of the contract shall be determined by the parties and the study commission, however, the return on investment shall be subject to and dependent upon surpassing a pre-defined public sector savings threshold resulting from the issuance of the bonds; provided, however, that any obligation of the State incurred under the contract or contracts, including any payments to be made from the General Fund, shall be subject to and dependent upon appropriations being made from time to time by the Legislature.
b. The State Treasurer shall pay from the General Fund to the authority in each State fiscal year, in accordance with a contract or contracts between the State Treasurer and the authority, an amount equivalent to public sector savings as agreed to in the bond agreement. Any additional costs incurred in connection with any agreements entered into by the authority relating to bonds or refunding bonds shall be paid by the authority.
c. The debt obligation of the State shall be limited to the amount of public sector savings realized from the social impact bond program. If additional funds are required to secure the bonds, the authority shall identify additional funding sources, such as those that can be provided by philanthropic organizations.
d. The provisions of any other law, rule, regulation or order to the contrary notwithstanding, the bonds, refunding bonds or other obligations of the authority issued for the purposes set forth in this act shall be special and limited obligations of the authority, payable from and secured by such funds and moneys as determined by the authority in accordance with the provisions of section 8 of this act and shall not be in any way a debt or liability of the State or of any political subdivision thereof, except as otherwise provided in this section, and shall not create or constitute any indebtedness, liability or obligation of the State or of any political subdivision thereof, either legal, moral or otherwise, and nothing contained in the provisions of this act shall be construed to authorize the authority to incur any indebtedness on behalf of or in any way to obligate the State or any political subdivision thereof, and all bonds and refunding bonds issued by the authority in connection therewith shall contain on the face thereof a statement to that effect.
e. The capital appreciation of the social impact bonds shall be entirely dependent on financial and social outcomes to be determined by the Department of Human Services, the study commission, and the authority, which shall include, but not be limited to, a pre-determined public savings threshold that shall be met before repayment can begin, which shall be clearly defined in the bond contract.
8. a. The authority shall establish and maintain a special non-lapsing, revolving fund called the "social impact bond fund" into which shall be deposited funds: (1) as shall be paid to the fund by the State Treasurer pursuant to a contract between the State Treasurer and the authority authorized pursuant to this act; (2) as shall be otherwise appropriated by the State for the purpose of such fund; (3) that shall be received by the authority from the sale of social impact bonds as provided by this act; (4) as shall be received by the authority from any private donations, philanthropic or otherwise, to secure the bonds issued pursuant to section 7 of this act; and (5) any other moneys or funds of the authority which it determines to deposit therein. Monies in the fund may be invested in obligations as the authority and study commission may approve and interest or other earnings on such investments shall be credited to the fund.
b. The amount of bonds issued by the authority pursuant to subsection a. of section 7 of this act shall not exceed $3 million per year or $15 million in the aggregate over 5 years, as determined by the authority.
c. The authority shall create within the social impact bond fund a subaccount consisting of Department of Human Services savings realized from the social impact bond-funded intervention, in addition to any other savings incurred, and shall repay investors using these savings, provided that the pre-defined public sector savings threshold has been met pursuant to the bond contract.
d. The authority shall create within the social impact bond fund a subaccount for the purpose of collecting private donations for the administration of the pilot program, but not for loan repayments.
e. The authority may use the monies in the social impact bond fund to pay the principal of, premium, if any, and interest on social impact bonds as appropriate and for costs related to the administration of the pilot program.
f. The proceeds, or net proceeds, of the sale of bonds, shall, in a manner determined by the authority, and pursuant to this section, be used for the financing of the nonprofit organization's services, pursuant to this act.
g. Savings realized by the Department of Human Services deposited into the social impact bond subaccount pursuant to subsection c. shall be used for the purpose of reinvestment in additional loans or bond payments, however these funds are not to be used to guarantee debt. Notwithstanding the provisions of this subsection, at the conclusion of the pilot program, if the pilot program is not continued on a permanent basis, all funds in the social impact bond fund and any subaccounts shall be transferred to the Property Tax Relief Fund, and the social impact bond fund shall be closed.
9. With respect to the nonprofit organization to be financed by the authority pursuant to this act and with monies from the social impact bond fund, the authority, in cooperation with the study commission and the Department of Human Services, shall determine, pursuant to subsection c. of section 5 of this act, the one nonprofit organization by considering the following factors:
a. The economic feasibility of the project;
b. The degree to which the project will advance Statewide and regional strategies and objectives;
c. The degree to which the project maximizes the leverage of other State funds;
d. The degree to which the project promotes preventative and early intervention services, the improvement of social outcomes, and the stimulation of private sector investment and expansion; and
e. The factors listed in subsection c. of section 5 of this act.
10. The authority shall report six months after the effective date of this act, and annually thereafter not later than September 15, to the Governor and, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), the Legislature concerning the financing of the pilot program, as described in section 4 of this act, undertaken with monies in the social impact bond fund. The initial report and each annual report required under this section shall include a description of the pilot program funded by such loans, guarantees, grants or other forms of financing as may be made available under section 8 of this act and a detailed analysis of the consideration given to the factors set forth in section 8 of this act.
11. This act shall take effect on the first day of the fourth month following the date of enactment.
STATEMENT
This bill, known as the "New Jersey Social Impact Bond Act," directs the New Jersey Economic Development Authority ("EDA"), in cooperation with the Department of Human Services ("DHS") and the State Treasurer, to administer a five-year social impact bond pilot program and study commission. Social impact bonds raise funds from non-government investors to pay for the provision of a service, and if the service improves financial and social outcomes, thereby alleviating financial support from the State, investors receive success payments from the State. Investors will contract with the EDA to purchase social impact bonds, the proceeds from which will be dispersed to a nonprofit organization service provider. The nonprofit organization will deliver services to the target population. If the results of the services provided by the nonprofit organization meet pre-determined, defined financial and social outcomes, the EDA will repay the bonds with financial returns to the private investors.
The pilot program and study commission will determine the effectiveness of a social impact bond program on nonprofit health care organizations for the purpose of encouraging private investment in preventative and early intervention health care to reduce federal, State, and municipal expenditures related to those services, as well as to assess the feasibility of expanding this program Statewide. The EDA will solicit grants from philanthropic organizations or other private sources for the establishment and administration of the pilot program and study commission.
This bill establishes a study commission under the EDA for the duration of the pilot program. The authority may consider a variety of professionals, including health care, bond financing, and social impact bond experts, for membership in the study commission. At least one member of the study commission shall be a member of the Department of Human Services. The study commission may request the assistance and services of employees of any other State department, board, bureau, commission, task force, or agency as it may require. The commission may meet at the call of its chairperson at the times and in the places it may deem appropriate and necessary to fulfill its duties, and may conduct public hearings at such place or places as it shall designate.
It shall be the duty of the study commission to aid the EDA in the administration of the social impact bond pilot program and to issue annual reports detailing the progress of the program. Specifically, the study commission, in cooperation with the EDA and the DHS, shall determine the one non-profit organization that will receive investment funds from bonds issued to private investors. The study commission shall make this determination taking several factors into consideration which include, but are not limited to, the size and identity of the target population that benefits from the service provider, the projected financial value of the improvements as a result of the social impact bond investments, including projected public sector savings, the projected return to investors, the ease of the measurability of the outcomes, and an analysis of impacts beyond financial savings and returns, such as social outcomes. The study commission and EDA will work together in additional areas of pilot program including, but not limited to, determining bond contract terms and conditions, including the pre-defined public sector savings threshold, and developing metrics to measure both financial and social outcomes.
This bill requires the study commission to issue a report containing an evaluation of the pilot program. The report shall include, but not be limited to, a description of the project funded by the social impact bonds, State, federal, and municipal financial savings related to the issuance of social impact bonds, including Medicaid savings, the expected return on investment and projected payment schedule, the number of people serviced by the nonprofit organization, a comparison of the population serviced by the nonprofit organization and a similarly situated control group, and any community impact. The study commission shall submit its final report to the Governor and to the Legislature within 90 days of the expiration date of the pilot program, including any recommendations for legislative action it deems appropriate. The study commission's final report shall include, but not be limited to, an analysis of the feasibility of implementing a permanent social impact bond program Statewide, the estimated costs for the creation and administration of the permanent program, projected State, federal, and municipal savings from administering a permanent social impact bond program, a calculation of the investment returns realized from the pilot program and a calculation of the State, federal, and municipal savings accrued through the pilot program, and an analysis of non-financial outcomes, such as community impact and preventive results. The study commission shall expire on the 30th day after the date of the issuance of its final report.
This bill authorizes the EDA and the State Treasurer to enter into one or more contracts to secure, in whole or in part, bonds that will be issued by the authority for the purposes set forth in the bill. The contract or contracts shall commence with the State fiscal year beginning the July 1 following the date of the enactment of the bill. The terms and conditions of the contract shall be determined by the parties and the study commission, however the return on investment shall be subject to and dependent upon surpassing a pre-defined public sector savings threshold resulting from the issuance of the bonds. The capital appreciation of the social impact bonds will be entirely dependent on the financial and social outcomes to be determined by DHS, the study commission, and the authority.
The bill requires the EDA to establish and maintain a special non-lapsing, revolving fund called the "social impact bond fund" into which shall be deposited funds: (1) as shall be paid to the fund by the State Treasurer pursuant to a contract between the State Treasurer and the authority authorized by this act; (2) as shall be otherwise appropriated by the State for the purpose of such fund; (3) that shall be received by the authority from the sale of social impact bonds as provided by the bill; (4) as shall be received by the authority from any private donations, philanthropic or otherwise, to secure the bonds; and (5) any other moneys or funds of the authority which it determines to deposit therein. Monies in the fund may be invested in such obligations as the EDA and study commission may approve and interest or other earnings on such investments shall be credited to the fund.
The amount of bonds issued by the authority will not exceed $3 million per year or $15 million in the aggregate over five years.
The EDA is required under the bill to create within the social impact bond fund a subaccount made up of DHS savings realized from the social impact bond-funded intervention, in addition to any other savings incurred, and shall repay investors using these savings, provided the pre-defined public sector savings threshold has been met pursuant to the bond contract. The EDA is required to create within the social impact bond fund another subaccount for the collection of private donations for the administration of the pilot program, but not for loan repayments.
The bill provides that savings realized by the DHS deposited into the social impact bond subaccount will be used for the purpose of reinvestment in additional loans, however these funds are not to be used to guarantee debt. Notwithstanding, at the conclusion of the pilot program, if the pilot program is not continued on a permanent basis, all funds in the social impact bond fund and any subaccounts will be transferred to the Property Tax Relief Fund, and the social impact bond fund will be closed.
With respect to the nonprofit organization to be financed by the EDA pursuant to the bill and with monies from the social impact bond fund, the EDA, in cooperation with the study commission and the DHS, shall determine the nonprofit organization by considering the following factors:
a. The economic feasibility of the project;
b. The degree to which the project will advance Statewide and regional strategies and objectives;
c. The degree to which the project maximizes the leverage of other State funds;
d. The degree to which the project promotes preventative and early intervention services, the improvement of social outcomes, and the stimulation of private sector investment and expansion.
e. Various other factors.
This bill requires the EDA to report six months after the effective date of the bill, and annually thereafter not later than September 15, to the Governor and the Legislature concerning the financing of the pilot program undertaken with monies in the social impact bond fund during the preceding fiscal year. The initial report and each annual report required shall include a description of the pilot program funded by such loans, guarantees, grants or other forms of financing as may be made available and a detailed analysis of the consideration given to the various factors used for approval.
