Abram Olmstead  | February 24, 2014

Rikers Island Tackles Rearrest Rate With Social Impact Bond—a U.S. First

Jafar Abbas has noticed a distinct change in attitude among his students. No more yelling out the window, fewer obscenities, and much less negativity in general.

The more positive tone is a good sign not just for the class, put potentially for society. Abbas isn’t an instructor in just any classroom — he’s teaching teenage inmates at New York’s Rikers Island.

“I see a lot of kids thinking differently,” said Abbas, an instructor in the city’s new Adolescent Behavioral Learning Experience (ABLE) program, aimed at reducing the risk of reincarceration among youth under 18 — the cutoff for being tried as an adult.

“It’s not just fully about everything negative. You start to talk about stuff that’s positive.  And that’s something that you weren’t hearing too much when we first started this program,” he said.

This type of program isn’t new. ABLE is a 12-step cognitive-behavioral intervention, also known as Moral Reconation Therapy, that has had an impressive track record since first developed more than two decades ago.

What is different is the way the program is being funded — through the country’s first social impact bond. With the innovative financing option, Goldman Sachs’ [Urban Investment Group] is lending the city $9.6 million to fund the program for four years. The bank would only get repaid — plus interest —if the program succeeds in reducing recidivism.

New York City hopes to get a return on the investment, as well. While it has become one of the world’s safest large cities, this achievement comes at a cost — not just financial.

The city operates the most expensive jail system in the country, costing over $1 billion a year. Mostly housed on Rikers Island, more than 80,000 detainees are processed after arrest each year as they await their turn in an overloaded court system.

Like most cities, New York allocates most of its corrections budget toward operational expenses, with precious little left over for preventive measures — much less experimental ones.

“This is always a good deal for the city,” said David Butler, a senior advisor at MDRC, a leading social policy research organization that is overseeing the program. If the program succeeds, he says, the savings for taxpayers from a lower incarceration rate would exceed what the city must pay Goldman.

For example, if the program is able to reduce recidivism rate by 20%, Goldman would earn $2.1 million, but the city would realize $20.5 million in savings. The bank’s potential earnings for the bank are capped at level, close to the $2.4 million it risked on the program after Bloomberg Philanthropies guaranteed $7.2 million of the loan.

Recidivism rates are high in New York, with nearly half of youth released from corrections facilities readmitted within a year. About 70% are rearrested within three years.

Until recently, there was precious little effort to straighten out wayward teens at Rikers — mostly just some art and music classes, or the occasional session with the Horticultural Society of New York, says Susan Gottesfeld, associate executive director of the Osborne Association, a Bronx-based organization that is conducting the ABLE classes.

The ABLE program encourages better decision-making skills — by emphasizing personal responsibility — to give teens a better chance of steering clear of prison and leading a normal life.

“We are very happy to be involved in this wonderful experiment,” said Gottesfeld. “We really like that people are willing to give this a go and we like the energy that it is spurring in private business and government in thinking about different ways to use dollars for the betterment of people.”

At the same time, she says, jail can be particularly traumatizing for kids who are not as resilient as adults. The longer they are separated from love and nurturance found in their families, communities, family, and schools, “the tougher it is for them to recover or just the more barriers they face when they come out.”

New York program’s is the largest ABLE program in the country, with about 1,500 youth participating in ABLE last year. That’s because it is mandatory — one 51-minute class among the regular school schedule teens must also attend even as they await trial or sentencing.

“I do think doing this in New York at this the size and scale that we are is tougher than other programs that have been done with other cognitive behavioral therapy. I don’t think it’s a slam dunk by any means,” said Butler. Still, he adds, “It’s promising.”

The size and unique funding model have brought attention to New York’s program.

More social impact bond deals are in the process of being implemented by not just New York, but other states and the federal government. Several focus on the social goal of reducing recidivism in part because the metrics are clearly measureable, as well as the fact that the potential savings are also significant.

Dr. Kenneth Robinson, president of Correctional Counseling Inc. — the developer of Moral Reconation Therapy — laments that as a country we spend just 10% of what is needed for rehabilitative efforts on the more than 2 million inmates held around the country.

“We don’t invest many dollars, although we are getting ready to invest more because it appears the public is tired of incarcerating,” said Robinson.