A National Imperative: Joining Forces to Strengthen Human Services in America (Jan 2018)

industry associations, and universities and think tanks – can pursue to unlock the transformative potential of human services ecosystem as a whole.

Two of these “North Star’ initiatives – regulatory reform, and introduction of improved financial policies and practices at CBOs – will have the long-term impact of reducing CBO expenses and/or increasing CBOs financial reserves, creating more financial stability, improved capacities and necessary flexibility for CBOs. Other “North Stars”, such as development of the ability to measure and analyze outcomes more rigorously and the development of new partnership-based operating models will require significant investment. Not all such efforts will succeed. Willingness to experiment – and in some cases, fail – will be required. We have not attempted to estimate the dollar investment required to achieve these North Stars but it will be considerable. Just building financial reserves equivalent to three months of cash expenses – a relatively modest target – for all human services CBOs that do not currently have that level of reserves would require a capital infusion in excess of $30 billion. Private sector firms embarking on similar transformations of their technical and information infrastructures frequently have investment budgets in excess of 10% of their operating costs. In the case of human services CBOs, this would equate to another $20 billion. Even if regulatory modernization and introduction of new financial policies and practices at CBOs are able to free up some funding for investment, it seems clear that our “North Star” initiatives will not be self‑funding in aggregate. They will require substantial new investment and changes. The business case in favor of this investment is strong – the long-term impacts on health care, criminal justice and corrections have the potential to be multiples of the investment required in CBOs and human services spending. The societal and economic cost of failing to make this investment will be large. But in a constrained funding environment, what is the path forward? In the for-profit capital markets, investors provide capital to companies, assume some level of risk with regards to whether the company will make productive use of that capital, and then, if the companies do succeed, receive returns in exchange. Investors aren’t the only beneficiaries of a company’s success; employees and customers also receive benefits in different forms. But the financial investment “circle” is relatively clear. Investors provide capital and assume risk; companies succeed or fail in measurable ways; and returns flow back to investors. In the CBO world, the investment cycle will never function in as straightforward a fashion. Funders, both private and public, provide financial support to the CBOs, but the benefits are often highly uncertain and difficult to measure or attribute back to specific human services.

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