Social impact bonds could cost taxpayers more, keep kids who need help out of care: experts
'I don't like the idea. I don't,' says economics prof
Economic experts warn the province's social impact bond program designed to keep babies with their mothers will cost Manitobans more than if the province simply funded the program itself.
The two-year pilot project, Restoring the Sacred Bond, would match Indigenous doulas up with up to 200 at-risk expectant mothers to support them through pregnancy and following childbirth.
The province wants $3 million from private investors to pay for it, a sum it says it's budgeted for if the program successfully reduces the number of children in care by a set target.
Investors get a return of 4.1 percent if the project is successful, and if it exceeds its goals, can get back up to 5.5%. If it fails, they will lose their money.
"I don't like the idea. I don't. There is a lot of problems," said Louis-Philippe Rochon, professor of economics at Laurentian University in Ontario.
"Why is the government essentially privatizing these services? Why aren't they just funding the program itself?"
He said the cost of the program represents a fraction of the province's entire expenditures, so the government could theoretically pay for the project itself at a much lower rate.
"Essentially it's costing the taxpayers of Manitoba more money to deliver these services. And so what the government is doing, is that they aren't sure whether this program will be successful or not," he said.
The province will repay investors if the project reduces the average number of days in care for children in the program by 25, compared to similar children outside the program.
"My reaction to that is, why 25?" asked Rochon. "I'd like to see the methodology."
"Social impact bonds are a great way to enhance existing government programs and offer a new option. Unlike traditional programs that are funded without measuring how well they work, social impact bonds will focus on results," said Families Minister Heather Stefanson at a press conference Monday.
Rochon countered nothing is stopping the government from focusing on results themselves.
Neil McArthur, director at the Centre for Applied Ethics at the University of Manitoba, called the government's move "interesting and risky."
"I do also think that it's something that we as citizens have to be very vigilant about," he said.
While he said people should be open to services being offered in the province in new ways, there is also the worry that some things, like children in care, can't be commodified.
He said he has concerns about having quantifiable targets set for situations that are very complex. There's a worry that providers could be incentivized to discourage parents from seeking or retaining care "even when they need it," he said.
"We should worry a lot about a two-tier system developing anytime you're talking about privatized health care of any kind or privatized services of any kind. That's always going to be a big concern."
A University of Manitoba lecturer who has researched social impact bonds said while the project doesn't come as a surprise, he still has concerns with the financial aspect.
"I think the most important question that has yet to be answered about social impact bonds is whether they provide any sort of value for money for government," said Jesse Hajer, with the faculty of economics and labour studies.
Hajer added social impact bonds are still a relatively new funding mechanism for social programs, with 120 projects worldwide. He said the programs aren't so different from what governments have been funding for many years, which are aimed working with non-profit organizations to solve social programs.
"I frankly don't see convincing data to show that this is the right way to go about funding these programs. What we know for sure is that social impact bonds are more expensive," he said.
Compared to direct funding, there are are more costs associated with social interest bonds beyond the interest, he said, including the creation of a financing structure, hiring the consultant company Mars to develop the social impact bond and legal costs.
He said from his research, he's seen that social impact bonds don't need to be shown on the government budget until they're paid out, and can also provide a political advantage to governments focused on reining in costs. Proponents of the bonds argue that preventative social programs save governments money in the long term, he added.
Manitoba has the highest rate of children in care in the country, at a cost of $500 million annually. In 2016-17, there were over 11,300 children in care, almost 90 per cent of whom are Indigenous.
"My hope would be the investors they take on in this project are going to be charitable funders and local stakeholders who understand the Winnipeg context," he said.
Hajer suggests the province run a conventionally funded model alongside the project.
"I think they owe it to the public, if they're going to go ahead with this more expensive model, to demonstrate that it's actually adding some value."
With files from Erin Brohman, Sam Samson