Revision: March 8, 2016, midnight
\t \t\tSB 503-FN-A - AS AMENDED BY THE SENATE
03/03/2016 0561s
2016 SESSION
\t16-2735
\t04/03
SENATE BILL\t503-FN-A
AN ACT\trelative to pre-kindergarten education using "pay for success" financing.
SPONSORS:\tSen. Watters, Dist 4; Sen. Bradley, Dist 3; Sen. Kelly, Dist 10; Sen. Soucy, Dist 18; Sen. Woodburn, Dist 1; Sen. Lasky, Dist 13; Sen. Feltes, Dist 15; Sen. Fuller Clark, Dist 21; Rep. Ladd, Graf. 4; Rep. Gile, Merr. 27; Rep. Heath, Hills. 14; Rep. Mangipudi, Hills. 35; Rep. Grenier, Sull. 7
COMMITTEE:\tEducation
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ANALYSIS
\tThis bill establishes a commission to extend a request for proposals to provide pre-kindergarten education services to 4 year olds in New Hampshire by creating a "pay for success" partnership between providers of pre-kindergarten education services, investors, independent evaluators of the effectiveness of the education services, and payers who agree to repay the investors if the pre-kindergarten education services resulted in improved third grade reading or reduced need for special education remediation services, or both. The bill authorizes the commissioner of the department of administrative services to enter into pay for success contracts, make payments to the investors, and to issue bonds for such payments.
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Explanation:\tMatter added to current law appears in bold italics.
\t\tMatter removed from current law appears [in brackets and struckthrough.]
\t\tMatter which is either (a) all new or (b) repealed and reenacted appears in regular type.
03/03/2016 0561s\t16-2735
\t04/03
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Sixteen
AN ACT\trelative to pre-kindergarten education using "pay for success" financing.
Be it Enacted by the Senate and House of Representatives in General Court convened:
\t1 New Chapter; Pre-kindergarten Education Using Pay-for-Success Financing. Amend RSA by inserting after chapter 195-J the following new chapter:
CHAPTER 195-K
Pre-kindergarten Education Using Pay-for-Success Financing
\t195-K:1 Pre-kindergarten Education Using Pay for Success Financing; Commission Established.
\t\tI.(a) The general court aims to improve third grade reading proficiency and reduce the need for special education remediation. The general court intends to accomplish these goals by creating or expanding proven and effective pre-kindergarten services through "pay for success" financing. A pay for success commission is hereby established to engage in a pay for success contract on behalf of the state of New Hampshire. The commission shall be comprised of the following members:
\t\t\t\t(1) One senator, appointed by the president of the senate.
\t\t\t\t(2) Three members of the house of representatives, one of whom shall be from the education committee, one of whom shall be from the finance committee, and one of whom shall be from the health, human services and elderly affairs committee, appointed by the speaker of the house of representatives.\t
\t\t\t\t(3) The governor, or designee.
\t\t\t\t(4) The state treasurer, or designee.
\t\t\t\t(5) The commissioner of the department of education, or designee.
\t\t\t\t(6) The commissioner of the department of health and human services, or designee.
\t\t\t\t(7) One member from the New Hampshire Bankers Association, appointed by the association.
\t\t\t\t(8) One member from spark NH, appointed by the organization.
\t\t\t\t(9) One expert in early childhood education from the university of New Hampshire, appointed by the president of the university of New Hampshire.
\t\t\t\t(10) One expert in early childhood education from the community college system of New Hampshire, appointed by the chancellor of the community college system of New Hampshire.
\t\t\t\t(11) Two parents of pre-kindergarten age children, appointed by the governor.
\t\t\t(b) Legislative members of the commission shall receive mileage at the legislative rate while attending to the duties of the commission.
\t\t\t(c) No person who has a direct or indirect financial interest in any pay for success contract shall be a member of the commission.
\t\tII. The commission shall:
\t\t\t(a) Be authorized to issue a request for proposals (RFP) for pay for success contracts, select from among the submitted proposals, enter into contract negotiations with the selected parties, and recommend acceptance of the negotiated contract.
\t\t\t(b) With assistance from the pay for success governance council established in this chapter, oversee compliance with any pay for success contract entered into.
\t\t\t(c) Upon the recommendation of the pay for success governance council established in RSA 195-K:4, the commissioner of the department of education, the fiscal committee of the general court, the attorney general, and the state treasurer, submit the selected pay for success contract proposal to the governor and executive council for final approval and execution.
\t\t\t(d) Recommend activities for the pay for success governance council.
\t\tIII. The commission shall be called to its first meeting by the first-named senator and shall elect a chairperson from its members.
\t\tIV. The commission shall keep written records of all its proceedings.
\t\tV. The commission shall issue an annual report beginning November 1, 2016 to the speaker of the house of representatives, the president of the senate, the house clerk, the senate clerk, the governor, and the state library.
\t195-K:2 Criteria for Pay for Success Contracts.
\t\tI. The parties in a pay for success contract shall consist of:
\t\t\t(a) One or more providers of pre-kindergarten services, who will provide pre-kindergarten services to 4-year olds in New Hampshire.
\t\t\t(b) Investors, who will provide the capital to expand and deliver pre-kindergarten services. These investors may include, but are not limited to, investors seeking a return of both principal and interest, philanthropic investors seeking a full or partial return of principal, and federal agencies that are not seeking a financial return.
\t\t\t(c) An independent evaluator, who will examine whether the pre-kindergarten services provided resulted in improved third grade reading, or reduced need for special education remediation services, or both.
\t\t\t(d) One or more outcomes payers who will agree to repay the investors only if the independent evaluator determines that the pre-kindergarten services did improve the third grade reading, or reduce the need for special education remediation services. Outcome payers may also include any governmental or private entity who agrees to commit to repaying investors for outcomes achieved. The state may agree to repay the investors for the principal and interest invested, but the total payment from the state shall not exceed the state's budgetary value for the outcomes.
\t\tII. The commission shall evaluate pay for success contract proposals based on the following criteria:
\t\t\t(a) Expected outcomes shall be budget-neutral or better, after accounting for projected cost-reductions from improved third grade reading and reduced demand for special education remediation services.
\t\t\t(b) Payment shall be conditioned on the achievement of specific outcomes based on defined performance targets.
\t\t\t(c) An objective process by which an independent evaluator will determine whether the performance targets have been achieved.
\t\t\t(d) A calculation of the amount and timing of payments that would be earned by the service provider if performance targets are achieved as determined by the independent evaluator.
\t\t\t(e) A determination by the commissioner of the department of administrative services, upon recommendation of the pay for success commission, that the contract proposal will result in significant performance improvements and budgetary savings across all affected agencies if the performance targets are achieved, and that the savings will exceed the debt service requirements of any social impact bonds that might become obligations of the state.
\t\t\t(f) In addition to the criteria set forth in subparagraphs (a)-(e), the commission may assign additional weight to contract proposals:
\t\t\t\t(1) From service providers which meet nationally-recognized standards for effectiveness, such as the National Institute for Early Education Research, National Association for the Education of Young Children, or New Hampshire department of health and human services' quality rating and improvement system.
\t\t\t\t(2) From service providers that demonstrate a strong commitment to ongoing professional development.
\t\t\t\t(3) Demonstrating a mix of public and private service providers.
\t\t\t\t(4) Demonstrating the use of new and enhanced services for children.
\t\t\t\t(5) From cities or towns with a higher percentage of families whose family income is at or below 250 percent of the federal poverty level.
\t\t\t\t(6) From cities or towns with a higher percentage of new American families.
\t\t\t\t(7) Demonstrating a plan to combine funding streams to bolster the project.
\t\t\t\t(8) Demonstrating strategies to improve early math skills and early literacy skills, including English speakers of other languages.
\t\t\t\t(9) Demonstrating strategies to increase family engagement and connect families to other community resources.
\t\tIII. A pay for success contract proposal shall also contain provisions requiring a service provider to submit a biannual report to the house and senate finance committees detailing the progress of the project, and an annual interim report from the independent evaluator detailing any outcomes data available as the project progresses.
\t195-K:3 Requests for Proposals for Pay for Success Contracts.
\t\tI. No later than one year after the effective date of this section, the commission shall issue a request for proposals for pay for success contracts.
\t\tII. No later than 2 years after the issuance of the request for proposals, the commission shall recommend approval of a pay for success contract to the fiscal committee of the general court.
\t195-K:4 Pay for Success Governance Council Established.
\t\tI. There is hereby established a pay for success governance council which shall assist the pay for success commission to oversee and monitor any approved pay for success project after the contract is executed. The council shall be composed of the following members:
\t\t\t(a) One member representing the department of education, bureau of accountability and assessment, appointed by the commissioner of the department of education.
\t\t\t(b) One member representing the department of education, bureau of integrated programs, appointed by the commissioner of the department of education
\t\t\t(c) One member representing the department of education, bureau of special education, appointed by the commissioner of the department of education.
\t\t\t(d) One member representing the department of health and human services, appointed by the commissioner of the department of health and human services.
\t\t\t(e) One member representing the department of health and human services, child development bureau, appointed by the commissioner of the department of health and human services.
\t\tII. The council shall report every 6 months to the pay for success commission established in RSA 195-K:1 and may make recommendations concerning the effectiveness or termination of a pay for success contract.
\t2 New Subdivision; Department of Administrative Services; Pay For Success Contract and Financing. Amend RSA 21-I by inserting after section 95 the following new subdivision:
Pay For Success Financing
\t21-I:96 Pay For Success Contracts and Financing.
\t\tI. The commissioner of the department of administrative services may enter into a pay for success contract, upon the recommendation of the pay for success commission established in RSA 195-K:1 and the fiscal committee of the general court.
\t\tII. The commissioner may make payments pursuant to a pay for success contract which meets the criteria established in RSA 195-K:2. To provide funds for the payments, the state treasurer is herby authorized upon the request of the commissioner to borrow upon the credit of the state not exceeding the sum of $10,000,000 and for said purpose may issue bonds and notes in the name of and on behalf of the state of New Hampshire in accordance with RSA 6-A. Payments of principal and interest on the bonds and notes shall be made from the general fund of the state, or from any grants or federal funds received to fund the pay for success contract.
\t\tIII. The commissioner shall provide an annual status report on all contracts to the chairpersons of the house and senate finance committees not later than February 12.
\t3 Effective Date. This act shall take effect July 1, 2016.
\t\t\t\t\t\t\t\t\t\t\t16-2735
\t\t\t\t\t\t\t\t\t\t\t1/7/16
SB 503-FN-A- FISCAL NOTE
AN ACT\trelative to pre-kindergarten education using "pay for success" financing.
FISCAL IMPACT:
The Treasury Department, Department of Administrative Services, and Department of Education state this bill, as introduced, will have an indeterminable impact on state and local expenditures and revenue in FY 2017 and each year thereafter. There will be no fiscal impact on county expenditures and revenue.
METHODOLOGY:
The Treasury Department states this bill establishes a commission to issue a request for proposals to provide pre-kindergarten education services to four year olds in New Hampshire by creating a pay for success partnership. This partnership will be between providers of pre-kindergarten education services, investors, independent evaluators of the effectiveness of the education services, and payers who agree to repay the investors if the pre-kindergarten education services result in improved third grade reading performance or reduced need for special education remediation services, or both. This bill authorizes the Department of Administrative Services to, upon the determination that agreed-upon outcomes have been achieved, enter into pay for success contracts upon recommendation of the commission. The Department of Administrative Services may make payments to pay for a success contract by requesting the Treasury Department to issue general obligation bonds and notes in accordance with RSA 6-A not to exceed $10,000,000. Payments of principle and interest on the bonds and notes are to be made from the general fund. The Treasury Department cannot anticipate when a pay for success contract would be executed or when payments under such contracts would begin. However, the issuance of $10,000,000 in general obligations bonds, assuming a fixed coupon of 5 percent, would result in annual debt service payments of approximately $1,000,000 under a customary twenty-year term. During the first ten years of an issuance, the State generally repays approximately sixty percent of the obligation which results in principal payments of $600,000 and interest payments of about $400,000 per year.
The Department of Administrative Services states it is unable to determine when and if any payments will be made relative to the pay for success contracts. Consequently, it cannot estimate the fiscal impact to state expenditures.
The Department of Education states this bill will have an indeterminable impact on state and local revenue and expenditures.