Guest blog post: Aligning fiscal incentives with public safety outcomes

By , November 19, 2012

Earlier this month, the Vera Institute of Justice published a new report by the Center on Sentencing and Corrections (CSC) titled Performance Incentive Funding: Aligning Fiscal and Operational Responsibility to Produce More Safety at Less Cost. As part of our focus on outputs, outcomes, and cost-benefit analysis on the blog this month, we asked Alison Shames, associate director of CSC, to discuss some of the lessons that states have learned about using performance measures to drive fiscal and policy decisions.

A new report from Vera’s Center on Sentencing and Corrections examines performance incentive funding (PIF) programs, a fiscal innovation that seeks to align the interests of a state corrections department and local decision makers by rewarding local agencies with funding when they improve their outcomes and lower their incarceration rates. As the report summarizes, the results emerging from states that have implemented PIF programs are encouraging: communities are sending fewer people to prison for low-level offenses, funding is flowing to community programs to support evidence-based practices, and neighborhoods are growing stronger by keeping families together.

With most PIF programs, a local agency’s success in reducing the number of offenders committed to prison determines its eligibility to receive funding and the amount it receives. Critics of these programs say that focusing exclusively on this narrow outcome may come at the expense of public safety and overlook other measures of success. This concern is not unique to PIF programs; in a discussion about social impact bonds, which are grounded in performance-based payments, economist Jeffrey B. Liebman, a professor of public policy at the Harvard Kennedy School, writes:

[P]erformance-based payment schemes are appropriate only where outcome measures are highly correlated with a program’s comprehensive social net benefits. When measures are only weakly correlated with program success or when only one component of a program’s impact can be measured, performance contracts based on the imperfect measure have the potential to distort performance toward that which can be measured.

Fortunately, as Vera’s report details, jurisdictions that have carefully implemented PIF programs use multiple measures. For instance, although a reduced incarceration rate triggers eligibility to receive funding, many states explicitly restrict or limit the award of incentive funds if the reduction in prison commitments is associated with any increase in local recidivism or crime rates—either of which results in costs to taxpayers, including diminished public safety. Other states require local agencies to achieve other agreed-upon performance measures—benefits such as improved rates of program completion or employment, or increases in victim restitution payments—before incentive funding is awarded. By tying payment to these additional measures, states avoid the “teaching to the test” problem that occurs when an agency focuses disproportionately on a single outcome that may not accurately measure the program’s real success.

We’re focusing on outputs, outcomes, and cost-benefit analysis this month on the blog. We encourage you to leave a comment below or send us your questions and ideas via Twitter or Facebook, or by e-mailing us at cbkb@cbkb.org.

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