Greetings, Chair and members of Parliament.
Let me begin by thanking you for the opportunity to speak to you today about Saskatchewan's interest in and movement toward social finance. I will provide my thoughts and will advise you on some of the initiatives we are working on in our ministry, as well as in the Government of Saskatchewan, and give input on some of the areas where I think our federal government can help us on this journey. I will not speak of the Sweet Dreams project, as my colleague from Saskatchewan, Mr. Meikle, is in attendance and can speak directly to the project and its progress.
I will start by speaking about the opportunity or the reason that we started to explore social finance, or what we call “pay for success”.
Social finance is a way for the Government of Saskatchewan to ensure that we are focused on outcomes-based performance. In essence, we are trying to slow down and eventually stop funding projects and/or programs without knowing what will be achieved. A successful business would not operate in this environment, thus our government is in the process of transforming itself based on competing demands to focus on similar methodologies.
In the process of transformation, I firmly believe that social innovation will be the next competitive advantage. Social innovation is the means to connect the domestic economy with social expenditures. In turn, social expenditures are the mechanism to create another product for investors to realize a financial return in a collapsed market and to pay for success, being a way for governments to ensure that public moneys are going toward proven concepts that deliver results. The challenge is the metrics, or the ability to ensure that this value remains constant.
We have a window afforded to us by the financial market. In my field of expertise, which is the justice system, there is a long-standing relationship between policing, or the evolution of policing, and the financial markets. This relationship dates back to the premise of why traditional policing was created, which was to protect the financial market.
Two years ago, our ministry recognized the opportunity created by the current state of the financial market and the increasing need for government to create a mechanism to address social ills. In response, we formed a social finance division in the ministry. At the time, we took the first steps to research the existence of where the expertise was, what was being done, and what it could look like in Saskatchewan.
The due diligence that we undertook included phone calls with experts in the United Kingdom and Australia that were facilitated by KPMG; a trip to Ottawa to meet with our federal colleagues to determine what they were researching and to avoid redundancy; discussions with the MARS Group and an understanding of their work; and, significantly, we hosted meetings in Saskatchewan for a third-party provider in the United States of their largest social finance model. That provider is the Roca Foundation, and their project is in the range of $20 million, with a multitude of financial investors and partners. The model comprises highly detailed metrics that determine success. Roca possesses dynamic leadership, which quickly stood out for us as the model that most resembled what we were trying to work on in Saskatchewan.
From Roca we learned that leadership is the first step and that a secondary investment market is important to financiers; that metrics are critical to success and that they need to be identified from the start and must show value or savings to government.
We found that there is more than one way or one process to fund these initiatives, which made it clear to us that we were going to broaden our initiatives to pay for success that includes social impact bonds and investing for impact. This followed our thinking, in that we had to move from trying to fit people into programs and move toward creating flexible programs with metrics to meet the needs of individuals to create success. It also showed us how to take government out of the position of being an evaluator, or mired in day-to-day business, to a higher level that could drive strategic alignment and focused outcomes.
As a byproduct, with the right planning and strategy, we saw the opportunity for CBOs and NGOs to be funded on outcomes rather than inputs, and equally as important, with the right strategic investment, CBOs and NGOs might just become self-sufficient.
If we follow the premise that there is one taxpayer, we will recognize that there is an opportunity for the federal and provincial governments to work with the private sector and third parties to multiply savings. Government has responsibility for support and social programs, and equally we have the responsibility to facilitate economic growth. When we look at them in the same context, through innovation, many of the same mechanisms can be used to focus on net gains. This emulates the same type of innovative thinking we use to establish our models of community mobilization. Some of you have heard of Hub and COR, which have broken down silos and allowed us to address issues from a multi-sectoral perspective to meet targeted outcomes.
From hockey country in the middle of the Stanley Cup playoffs I offer the following, that Gretzky was a great hockey player because he knew where the puck was going. If we apply the same concept to social finance, it will now move from the 30,000-foot level that has been the focus of my statement thus far and operationalize what we are working on. We are focused on four key areas that undoubtedly have a direct impact on what is driving our work.
In the area of absenteeism in school, we have completed a mapping exercise that articulates a relationship between absenteeism and criminal activity. We have mined into the data of our troubled and complex families and are looking at options to inform how we utilize a third-party pay-for-success model to address this at the front line. Graduation rates will not increase without attendance. We are optimistic that this area of focus will have value and significant returns. We also know there's significant data supporting how we could mine for value.
If we look at bail and remand, particular to our ministry, we have undertaken significant economic analysis in this area. Saskatchewan statistics since 1998 show custody remand populations have grown by 89.1% and sentenced custody populations have grown by 2.1%. The analysis shows that, for every 100 clients who we take off remand, there's an $8.2 million savings. And further, we have evidence to support where to better target spending to ensure a return on investment. Right now, that particular part has very little return. We have almost completed the due diligence on what this could look like on the ground, while ensuring that public safety is protected in the process.
In the area of mental health and addictions in community programming, we are examining programming that takes high-needs mental health and addictions clients out of an expensive system that is not meeting their needs, and establishing a system that meets their clinical needs and presents higher opportunities for success. Statistics show that mental health clients are two times more likely to have contact with police, and are the most vulnerable population to reoffend. As well, mental health calls drive up to 40% of calls in some police services, and they are the most vulnerable population to go from non-criminal offences to criminal offences in one distinct act if not treated, cared for, or medicated. There are ample metrics in this area that could help us focus in on creating success for this client base and showing value and savings for government with better services.
The initiative of skills training connected to real jobs is targeted for those serving time in custody and reintegrating back into the community. By meeting clients’ needs for housing and skills training and putting them in the position of connecting to real jobs that are in demand in our economy, we can leverage their success. In essence, we are taking offenders and/or clients out of the system and turning them into taxpayers, which has a compounding effect in the relationship between jobs and social expenditure. We believe this will prove to be a strong business case for social finance.
The Saskatchewan government appointed current MLA and former cabinet minister June Draude as social finance legislative secretary to the premier to focus on what and where we might have the best opportunities for success. We are committed to moving these initiatives forward if they make sense for the citizens of Saskatchewan and meet the set outcomes.
As an idea for innovation, as I close, I pose the following question to the parliamentary committee: could we create a fund through legislation that is similar to a venture capital fund that expands the investment pool through incentives to drive results? If social expenditures grow faster than the domestic economy, the relationship will always be a negative number—thus, not enough money. If the relationship is studied and connected, as it can be, the number becomes net growth, which shows enhanced value. A mechanism that blends philanthropy with return in difficult financial times could leverage opportunities on new markets going forward. A fund for innovative thinking in this area could be a way to advance a relationship that focuses on balanced solutions and maximizes on investment for impact.
Economics is dictated by supply and demand. We have spent the majority of our time solely focused on supply. When we balance the focus by reducing demand, the system functions as it was designed and delivers much better results.
I thank you for the opportunity to speak with you today, and certainly, I look forward to any questions you may have after the presentations.