S328

An Act concerning early childhood services, supplementing Title 18A of the Revised Statutes, and making an appropriation.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. 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.).

“Early childhood program” a program administered by a private-sector, non-profit, or community-based organization which provides early childhood services to at-risk children and their families, including, but not limited to, preschool education, child nutrition, health, early intervention, home visitation, and other services.

“Independent evaluator” means a qualified person or entity selected by a State agency to provide independent evaluation services to determine whether the short-term and long-term outcomes and cost-saving as outlined in a pay-for-success contract have been achieved within a stated period of time.

“Pay-for-success contract” means a written agreement which establishes a legally binding relationship between a State agency and a private sector, non-profit, or community-based organization under which the organization administers a program or provides a service for or on behalf of the State, and under which the parties agree to an amount that the organization shall be paid if certain performance measures and outcomes outlined in the contract are met within a stated period of time.

“Performance measures and outcomes” means specific, measurable, time-based goals, the completion of which predicates payment under a pay-for-success contract.

“State agency” means the Department of Children and Families, the Department of Education, the Department of Health, or the Department of Human Services.

“Success payment” means money paid to a private sector, non-profit, or community-based organization when pay-for-success contract performance measures and outcomes are met.

2. a. The New Jersey Economic Development Authority, on behalf of a State agency, may enter into a pay-for-success contract with a private sector, non-profit, or community-based organization to establish and administer an early childhood program providing preschool education, child nutrition, health, early intervention, home visitation, and other services to improve short-term and long-term outcomes for at-risk children and their families and to generate public sector cost savings.

Prior to entering into a pay-for-success contract pursuant to this subsection, the authority shall require the head of the State agency to provide, in writing, an explanation of how the contract will produce a quantifiable public benefit or financial savings for the State by achieving short-term and long-term outcomes that will improve opportunities for at-risk children and their families and reduce long-term public sector costs.

b. Each pay-for-success contract entered into with a private sector, non-profit, or community-based organization pursuant to subsection a. of this section shall contain the following:

(1) a description of the objectives of the contract;

(2) a description of the early childhood program, the services that will be provided by the program, and the specific responsibilities of the private sector, non-profit, or community-based organization in administering the program;

(3) a statement outlining the short-term and long-term outcomes the early childhood program seeks to achieve, the anticipated cost savings to be generated by the program, and the time frame under which the outcomes and cost savings must be achieved;

(4) an agreement to use an independent evaluator to monitor the effectiveness of the early childhood program and the success of the program in achieving the short-term and long-term outcomes and cost savings in the timeframe outlined in the contract, the name of the independent evaluator selected for the contract, and a statement describing the performance measures and outcomes to be utilized by the independent evaluator to monitor the effectiveness of the early childhood program and the success of the program in achieving the short-term and long-term outcomes and cost savings in the timeframe outlined in the contract;

(5) an outline of the requirements that will be used by the private sector, non-profit, or community-based organization to report to the State agency on its progress in meeting the performance measures and outcomes and cost savings outlined in the contract;

(6) a requirement that the receipt of a success payment by the private sector, non-profit, or community-based organization is contingent upon the organization achieving the performance measures and outcomes and cost savings outlined in the contract;

(7) a requirement that the State agency will hold funds in reserve in the “New Jersey Early Childhood Pay-for-Success Program Trust Fund,” established pursuant to section 3 of this act, to cover success payments as established by a pay-for-success contract;

(8) a description of the methodology to be used to calculate the amount of success payments, and the distribution schedule of such payments, to the private sector, non-profit, or community-based organization as part of a pay-for-success contract, if the independent evaluator selected pursuant to paragraph (4) of this subsection determines that the organization has achieved the performance measures, outcomes, and cost savings outlined in the contract; and

(9) the terms under which a pay-for-success contract may be terminated.

3. a. There is established in the State Treasury a separate, non-lapsing fund to be known as the “New Jersey Early Childhood Pay-for-Success Program Trust Fund.” The fund shall be the repository for monies:

(1) appropriated by the State for the purpose of funding success payments made by State agencies to private sector, non-profit, or community-based organizations under the terms of pay-for-success contracts pursuant to section 2 of this act;

(2) received by the authority from any State agency pursuant to paragraph (7) of subsection b. of section 2 of this act to fund success payments;

(3) as may be available to the authority from public or private donations, grants, or other forms of assistance established to support early childhood programs by the federal government or by any State department or agency; and

(4) otherwise appropriated or directed to be remitted to the fund.

b. All monies expended in the administration of pay-for-success contracts shall be paid from the fund.

c. All interest earned on the monies that have been deposited into the fund shall be retained in the fund and used for purposes consistent with the provisions of this act.

4. a. Each private sector, non-profit, and community-based organization that enters into a pay-for-success contract with a State agency shall provide the State agency with an annual report outlining the status of the contract, including the organization’s progress in meeting the performance measures and outcomes and cost savings outlined in the contract. Annual reports submitted to a State agency pursuant to this subsection shall be transmitted by the State agency to the authority and made available on the State agency’s Internet website.

b. The authority shall issue a report no later than 18 months after the effective date of this act, and annually thereafter, to the Governor, and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), which report shall, at a minimum:

(1) contain a summary of the annual reports provided to the authority by State agencies concerning the progress of private sector, non-profit, and community-based organizations in meeting the performance measures, outcomes, and cost savings established in pay-for-success contracts entered into pursuant to this act;

(2) provide information on the effectiveness of the early childhood services performed, the short-term and long-term outcomes achieved, and the cost-savings realized by an early childhood program that is the subject of a pay-for-success contract;

(3) include the sources of public and private donations, grant monies, and other monies deposited into the “New Jersey Early Childhood Pay-for-Success Program Trust Fund” pursuant to subsection a. of section 3 of this act;

(4) provide the number of success payments made to private sector, non-profit, and community-based organizations pursuant to pay-for-performance contracts entered into pursuant to this act and the amounts of such payments; and

(5) provide the number of pay-for-success contracts that were terminated by each State agency and the reasons for the termination.

c. The annual reports issued by the authority pursuant to subsection b. of this section shall be made available on the Internet websites of the authority, the Department of Children and Families, the Department of Education, the Department of Health, and the Department of Human Services.

5. The New Jersey Economic Development Authority shall adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations necessary for the implementation of this act.

6. a. The Economic Development Authority shall determine the amount necessary to implement the provisions of this act and fund success payments made by State agencies to private sector, non-profit, and community-based organizations under the terms of pay-for-success contracts entered into pursuant to the provisions of this act, which amount shall be subject to approval and certification by the Director of the Division of Budget and Accounting.

b. There is appropriated from the General Fund to the Economic Development Authority such sum as shall be necessary to implement the provisions of this act and fund success payments made by State agencies to private sector, non-profit, and community-based organizations under the terms of pay-for-success contracts entered into pursuant to the provisions of this act, as certified by the Director of the Division of Budget and Accounting and less any monies deposited into the “New Jersey Early Childhood Pay-for-Success Program Trust Fund” pursuant to subsection a. of section 3 of this act. In no case shall a sum in excess of $25,000,000 be appropriated pursuant to this act; provided that nothing in this section shall be construed to prohibit the appropriation of additional funds to implement the provisions of this act.

7. This act shall take effect on the first day of the fourth month next following the date of enactment, but the Economic Development Authority shall take such anticipatory administrative action in advance thereof as shall be necessary for the implementation of this act.

STATEMENT

This bill authorizes the New Jersey Economic Development Authority, on behalf of certain State agencies, to enter into a pay-for-success contracts with private sector, non-profit, and community-based organizations to establish and administer early childhood programs providing preschool education, child nutrition, health, early intervention, home visitation, and other services to improve short-term and long-term outcomes for at-risk children and their families and to generate public sector cost savings. The State agencies participating in the program would include the Department of Children and Families, the Department of Education, the Department of Health, and the Department of Human Services.

The bill provides that a pay-for-success contract is a written agreement establishing a legally binding relationship between a State agency and a private sector, non-profit, or community-based organization under which the organization will administer a program or provide a service for or on behalf of the State. A pay-for-success contract would set forth the amount that will be paid by the State to the contracted organization if certain performance measures and outcomes and public sector cost-savings, as outlined in the contract, are met.

The bill stipulates that, prior to entering into a pay-for-success contract, the head of the State agency entering into the pay-for-success contract is to provide the authority with a written explanation of how the contract will produce a quantifiable public benefit or financial savings for the State by achieving short-term and long-term outcomes that will improve opportunities for at-risk children and their families and reduce long-term costs.

Each pay-for-success contract is to contain the following: 1) a description of the objectives of the contract; 2) a description of the early childhood program, the services that will be provided by the program, and the specific responsibilities of the contracting organization in administering the program; 3) a statement outlining the short-term and long-term outcomes the early childhood program seeks to achieve, the anticipated cost savings to be generated by the program, and the time frame under which the outcomes and cost savings are to be achieved; 4) an agreement to use an independent evaluator to monitor the effectiveness of the early childhood program and the success of the program in achieving the short-term and long-term outcomes and cost savings outlined in the contract, the name of the evaluator selected, and a statement describing the performance measures and outcomes to be utilized by the evaluator; 5) an outline of the requirements that will be used by the contracted organization to report to the State agency on its progress in meeting the performance measures, outcomes, and cost savings outlined in the contract; 6) a requirement that the receipt of a success payment by the contracted organization will be contingent upon the organization achieving the performance measures, outcomes, and cost savings outlined in the contract; 7) a requirement that the State agency hold funds in reserve in the “New Jersey Early Childhood Pay-for-Success Program Trust Fund” established under the bill to cover success payments under the contract; 8) a description of the methodology used to calculate the amount of success payments and the distribution schedule of such payments to the contracted organization under the contract; and 9) the terms under which a pay-for-success contract may be terminated.

The bill establishes in the State Treasury a separate, non-lapsing fund to be known as the “New Jersey Early Childhood Pay-for-Success Program Trust Fund.” The fund is to be the repository for monies: 1) appropriated by the State for the purpose of funding success payments; 2) received by the authority from any State agency to fund success payments; 3) made available to the authority from public or private donations, grants, or other forms of assistance established to support early childhood programs by the federal government or by any State department or agency; and 4) otherwise appropriated or directed to be remitted to the fund.

All monies expended in the administration of pay-for-success contracts are to be paid from the fund, and all interest earned on the monies that have been deposited into the fund is to be retained in the fund and used for purposes consistent with the requirements of the bill.

The bill requires each organization that enters into a pay-for-success contract with a State agency to provide the State agency with an annual report outlining the status of the contract, including the organization’s progress in meeting the performance measures, outcomes, and cost savings outlined in the contract. The annual reports are to be transmitted by the State agency to the authority and made available on the State agency’s Internet website.

Additionally, commencing 18 months after the effective date of the bill, the authority will be required to issue an annual report to the Governor and the Legislature that is to include, at a minimum: 1) a summary of the annual reports provided to the authority by State agencies concerning the progress of contracted organizations in meeting the performance measures, outcomes, and cost savings outlined in pay-for-success contracts; 2) information on the effectiveness of the early childhood services performed, the short-term and long-term outcomes achieved, and the cost-savings realized by early childhood programs as outlined in pay-for-success contracts; 3) the sources of public or private donations, grant monies, or other monies deposited into the fund; 4) the number of success payments made to contracted organizations and the amount of such payments; and 5) the number of pay-for-success contracts that were terminated by each State agency and the reasons for the termination.

The authority’s annual reports are to be made available on the Internet websites of the authority, the Department of Children and Families, the Department of Education, the Department of Health, and the Department of Human Services.

The bill requires the authority to determine the amount necessary to implement the provisions of the bill and fund success payments made by State agencies to private sector, non-profit, and community-based organizations under the terms of pay-for-success contracts, which amount will be subject to approval and certification by the Director of the Division of Budget and Accounting. The bill appropriates to the authority from the General Fund such amounts as are necessary to implement the pay-for-service contract program, as certified by the Director of the Division of Budget and Accounting, less any amounts otherwise deposited in the fund. In no case will more than $25 million be appropriated under the bill.