Investing in transformational change, LJAF 2014

Investing in

Transformational Change

2014

ANNUAL REPORT

FOUNDERS’ LETTER

W

e are pleased to present the first Annual Report of the Laura and John Arnold Foundation (LJAF). This year marks a turning point for LJAF. We have achieved significant milestones in our core issue areas, and a critical mass of our projects has now moved from the concept stage to execution.

When we started the foundation in 2008, we knew we wanted to improve society in a substantive, lasting way. Since we were not starting with a particular issue (medical, social, cultural, or otherwise) as a natural focal point, we felt the freedom to select our issue areas with minimal bias. As to geography, we felt strongly from the outset that our work should be focused on the United States as a whole rather than exclusively on pre-decided cities, states, neighborhoods, or groups. And perhaps most importantly, we wished to attack systemic problems at their root, not just address the surface symptoms of underlying dysfunction.

As is true with many philanthropists, our journey began with investments in K-12 education, as we believe education is at the root of every social and economic problem this country faces. As we spent more time in the education field, our focus quickly turned to broader policy questions. We became interested in the consequences of a failing education system and, more broadly, in the government choices and policies that disproportionately affect the communities that are the system’s primary consumers. As we worked systematically through this process, we developed an investment practice that we would eventually apply to each successive issue area on which we would work. First, we survey all existing data and valid research. Second, we seek the most creative thinking and best advice from experts in the field.

Third, we pilot positive disruptive models with concurrent credible testing to measure results. And finally, we make larger investments in larger scale roll-outs of now-proven interventions. This process has become the core of our internal culture and our external practice, and is reflected in every one of our issue areas today.

Our work this past year has fully blossomed in four major core issue areas—criminal justice, public accountability, research integrity, and education. In criminal justice, we have developed a best in class (and first of its kind) non-interview pretrial risk-assessment tool that can dramatically increase efficiency and fairness in the front end of the criminal justice system. In public accountability, we have added transparency to the conversations about fiscal sustainability and have advanced an emphasis on datadriven decision-making and innovative financing and efficacy testing of social impact interventions. In research integrity, we have seeded organizations that promote responsible, transparent, and replicable research. And in education, we continue to prove out the concept of a portfolio model of school governance and support technological advances in the classroom.

In other areas, we have begun to lay the groundwork for disruptive innovations that we are confident will contribute to sustainable and transformative change. Our team continues to pursue initiatives in a range of areas, from health care to investigative reporting, but always with a focus on data, outcomes, and rigorous analysis.

We expect that, in 2015, we will continue to replicate our data-driven approach in both our existing issue areas and in new areas of focus.

Laura and John Arnold

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C R I M I N A L J U ST I C E

L

JAF’s Criminal Justice initiative aims to reduce crime, increase public safety, and ensure the criminal justice system operates as fairly and cost-effectively as possible. In order to achieve these goals, we develop, incubate, and spread innovative approaches to criminal justice challenges.

We assemble teams of experts from both inside and outside the criminal justice field to develop research projects, create tools for practitioners, and partner with local jurisdictions to pilot and test new policies and practices.

Much of our work is focused on using data, analytics, and technology to improve decision-making in the front end of the system—the period that runs from the time a defendant is arrested until case disposition. The decisions made at this stage can have a significant impact on public safety, government spending, and fundamental fairness. Yet, police, prosecutors, and judges typically have little information about the risks a given defendant poses or how best to mitigate those risks. Therefore, key decisions are often made in a subjective manner, without the use of objective, evidence-based tools. As a result, many defendants who we would expect to be detained while awaiting trial—the highest-risk individuals and those charged with violent crimes—are released.

Meanwhile, low-risk, non-violent defendants often spend extended periods behind bars. This puts our communities at tremendous risk.

LJAF is working to dramatically improve the way the system operates by developing research and tools that judges, prosecutors, and law enforcement officials can use—in concert with their professional discretion—to arrive at more effective and evidence-based decisions.

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PSA-COURT: AN EVIDENCE-BASED APPROACH TO ASSESSING AND MITIGATING RISK One of our first major initiatives was the development of the Public Safety Assessment-Court (PSA-Court), a cutting-edge risk-assessment tool to help judges determine which defendants should be jailed prior to trial and which can be safely released. The tool was developed using a database of over 1.5 million cases drawn from more than 300 U.S. jurisdictions. We analyzed the data to identify and isolate the factors that are the best predictors of whether a defendant will commit a new crime, a new violent crime, or will fail to return to court. These factors are related to a defendant’s criminal history and current charge. They do not include factors

that could be discriminatory such as the individual’s race, gender, level of education, socioeconomic status, and neighborhood.

The PSA-Court is more objective, far less expensive, and requires fewer resources to administer than previous techniques.

It is now being used in seven cities and counties across the United States as well as throughout the state of Kentucky.

Data from the first six months of use in that state show that crime in the pretrial period has dropped 15 percent, while the state has, at the same time, detained fewer defendants. Equally important, data show that the tool accurately assesses

risk level regardless of a defendant’s race or gender. Dozens of other jurisdictions from across the country have expressed strong interest in adopting the PSACourt, and we ultimately anticipate making the instrument available to any jurisdiction that is able to implement it. We are developing similar risk assessments for prosecutors and law enforcement officials to help inform the many important decisions they make during the early stages of a criminal proceeding. We are also commissioning extensive third-party research studies on the PSA-Court and its offshoots so that we may fully understand its impact and effectiveness.

PRETRIAL DEFENDANTS WITH HIGHER RISK SCORES HAVE A GREATER LIKELIHOOD OF COMMITTING A NEW CRIME, COMMITTING A NEW VIOLENT CRIME, OR FAILING TO RETURN TO COURT

55%

50%

48%

40% 30%

30% 23%

20% 10%

15% 10%

0% 1

2

3

4

5

New Criminal Activity Risk Scale

6

12%

60%

11.1%

10% 8% 6.1%

6% 3.9%

4% 2%

Failure to Appear

Failure to Appear Rate

New Criminal Activity Rate

60%

New Violent Criminal Activity New Violent Criminal Activity Rate

New Criminal Activity

4.3%

2.5% 1.3%

50% 40%

40%

35% 31%

30% 20%

20% 10%

15% 10%

0%

0% 1

2

3

4

5

New Violent Criminal Activity Risk Scale

6

1

2

3

4

5

6

Failure to Appear Risk Scale

The PSA-Court’s three six-point scales—one each for new crime, new violent crime, and failure to appear—accurately distinguish among defendants of different risk levels. As the charts demonstrate, the likelihood of a negative pretrial outcome increases with each successive point on the scale. The scales begin with the lowest level of risk, identified by the number one, and increase point-by-point until reaching the highest level of risk, identified by the number six.

LJAF believes that our approach can help reduce crime, improve public safety, and promote the equal treatment of all those who come through the criminal justice system.

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CRIMINAL JUSTICE INNOVATIONS AND INTERVENTIONS LJAF funds a number of studies and pilot projects to help answer fundamental questions about how the criminal justice system currently works, what leads to existing failures, and how we might address those shortcomings through data, analytics, technology, and research. For instance, we are funding an evaluation of Seattle’s Law Enforcement Assisted Diversion (LEAD) program that diverts certain drug and prostitution offenders to community-based services, rather than subject them to arrest and prosecution. We are also supporting a pretrial pilot of Hawaii’s Opportunity Probation with Enforcement (HOPE) program, which involves the use of swift and certain sanctions for defendants who violate their conditions of release.

CRIME PREVENTION Crime prevention is a critical component of our Criminal Justice strategy. We support the rigorous evaluation of interventions that target at-risk populations and then work to scale the best strategies nationwide. One such initiative pertains to the role that increased access to health care coverage may play in preventing crime. LJAF is funding researchers from Johns Hopkins Bloomberg School of Public Health and Harvard Medical School to examine new programs that provide formerly incarcerated individuals with access to medical, behavioral health, and social services under the Affordable Care Act, with the goal of determining whether these efforts decrease recidivism. Another initiative focuses on cognitive behavioral therapy programs that might reduce the likelihood of individuals becoming involved in the criminal justice system.

LJAF’s largest grant in this area supports the University of Chicago Crime Lab and the creation of its New York City hub. Building on the Lab’s successful work in Chicago, the new center will develop, test, and implement data-driven approaches to reduce crime and violence in New York City and identify successful programs that can be scaled nationally.

FORENSIC SCIENCE Forensic evidence is one of the most powerful tools in the investigation and prosecution of crime. Yet, there are serious concerns about the way this information is gathered in the field, analyzed in labs, and used in criminal proceedings. We fund research and analysis, create tools and techniques to facilitate the adoption of best practices, and support enhanced education and training for judges, attorneys, and lab personnel. One significant recent project was LJAF’s funding of the National Academy of Sciences to conduct a critical review of the state of the science of eyewitness identification (ID). The report included a series of recommendations for enhancing the reliability of eyewitness IDs, and we are using that information to develop a software application that will assist police in administering these identifications.

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K - 1 2 E D U C AT I O N

I

n order to transform our schools, we must change the landscape in which they are governed. Most districts today have a top-down configuration, where the school board and superintendent establish policies that all district schools, school leaders, and teachers must follow. This one-sizefits-all approach impedes innovation and often hinders educators’ ability to address the unique needs of their students. Moreover, by vesting within districts the dual responsibilities of operating and regulating schools, the existing system disincentivizes the very policies that are most likely to lead to systemic improvement—decentralization, school choice, and strict accountability.

LJAF’s investments in K-12 education seek to promote and establish the portfolio model of governance, an alternative structure that separates school oversight from campus operations.

Under the portfolio model, traditional district schools are but one of many categories of education providers, competing with specialized district schools, charter schools, and private schools in an open marketplace for education services. School operators are empowered to create excellent schools by managing every aspect of school operations from choosing the curriculum to determining the makeup of school staff and deciding how to allocate funds. These operators are evaluated by independent school NEW ORLEANS GRANT authorizers whose sole responsibility is to hold schools accountable for COMMITMENTS BY student performance. The authorizers are entirely removed from the dayFOCUS AREA to-day operations. They oversee the system, identify schools that are highly effective, and replicate and expand successful models.

The portfolio structure is being used to address systemic inequities and improve educational outcomes in New Orleans, a city that was long known as having one of the lowest-performing districts in the nation. In 2005, 65 percent of the city’s children attended a failing school. Community stakeholders implemented the portfolio model as part of a comprehensive school turnaround plan. The first 10 years of that effort have yielded promising results. Today, just 5.4 percent of children attend a school that has been categorized as underperforming.

LJAF has invested heavily in New Orleans. In addition to our commitment in that city, we support a variety of initiatives to advance the portfolio model across the United States. These include efforts to improve transparency on school performance, expand and scale successful education models, and promote policies that prioritize accountability, best practices, and decentralization.

n Human capital n Community engagement/policy n Creation of high-quality schools

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RESEARCH INTEGRITY

P

ublished scientific research serves to guide many of our most important personal and public policy decisions. When that research is accurate, thorough, and accessible, it can have tremendously beneficial consequences for individuals and society as a whole. However, when research is flawed, incomplete, or hidden from public view, there is potential for great harm.

We have a tendency to believe that if research is published in an academic journal, it is scientifically sound. Unfortunately, a substantial portion of published research does not adhere to rigorous standards for quality and transparency. Reporting requirements within the scientific community are often weak and lack enforceability. Furthermore, scientific journals frequently show a strong bias for provocative findings and statistically significant results over “boring” replication studies and null results.

This exacerbates the “publish or perish” mentality within the research community and makes many scientific disciplines untrustworthy.

LJAF’s Research Integrity division is working with scholars and evaluators to improve the reliability and validity of scientific research.

As part of this effort, LJAF provides policy support to the government and key stakeholders. In 2014, we submitted recommendations to the White House Office of Science and Technology Policy and the U.S. Senate Committee on Finance. The measures would ensure that all federally funded research meets the highest standards of quality and transparency. They include expanding pre-registration requirements in an effort to identify instances when a finding occurred by chance or because researchers with a stake in the outcome changed the parameters; making all data, statistical code, and final results widely available for other researchers to review; and directly funding more replication studies.

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OPEN SCIENCE LJAF is the primary funder of the Center for Open Science (COS). This organization aims to improve the way scientific research is conducted and communicated. It has created resources to improve the scientific process and promote accurate and transparent findings. These free, open-source tools allow scientists to easily share and save their data, collaborate with other scientists, and pre-register their studies. In addition, COS sponsors

initiatives to replicate landmark studies in an effort to verify their accuracy and improve publication opportunities for replications.

MEDICAL RESEARCH We are also the lead funder of the Meta-Research Innovation Center at Stanford (METRICS), an academic entity that is focused on strengthening the quality of medical research in order to improve patient health. METRICS, which launched in April 2014, is

bringing researchers together from diverse disciplines, including medicine, statistics, epidemiology, economics, history, ethics, and sociology, to improve the way scientists conduct, report, and share their research. Through these partnerships, METRICS is uncovering weaknesses in scientific investigation, identifying ways to improve efficiency and reliability, and working to reduce bias in study design and outcomes reporting.

NUTRITION SCIENCE INITIATIVE: THE METABOLIC MANHATTAN PROJECT One area where rigorous research is urgently needed is nutrition science.

Currently, one-third of adults are obese, and more than 4,000 people die every day from obesity and related diseases including diabetes, heart disease, stroke, cancer, and Alzheimer’s disease. These diseases are costing the U.S. health care system more than a billion dollars a day.

Despite the many nutrition studies that have been conducted over the past several decades, we still do not have clear evidence about what is causing the obesity epidemic. The common perception is that obesity is the result of overeating—that is, of consuming more calories than we burn. Competing theories focus on the types of calories consumed, as opposed to total calories eaten.

LJAF’s Research Integrity division conducted an in-depth analysis of nutrition science studies dating back to the 1940s and interviewed leading scientists in the field. Our conclusion was that the existing nutrition studies are incapable of giving any credible guidance on the causes of obesity. These studies failed to satisfy the most basic elements of research integrity, with

problems ranging from inadequate record-keeping to exceedingly small sample sizes and treatment periods. In short, the field is in dire need of more well-controlled, higher-quality studies.

To address this issue, LJAF committed approximately $40 million, our largest funding commitment ever, to launch the Nutrition Science Initiative (NuSI).

Founded by investigative journalist Gary Taubes and physician Peter Attia, NuSI has set out to do in less than 10 years what the National Institutes of Health has been unable to do in more

than 60 years. It is working to answer one critical question: What should we eat to be healthy?

Known as the metabolic Manhattan Project, NuSI began conducting groundbreaking pilot studies in 2014. Its ambitious research agenda includes well-designed, highly controlled studies that will be more reliable than all those conducted before.

NuSI is poised to create transformational change in our lifetime and aims to drive a 50 percent reduction in the prevalence of obesity in the next 15 years.

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P U B L I C A C C O U N TA B I L I T Y

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he Public Accountability team is focused on improving the efficiency and efficacy of the public sector. Currently, too many governments are failing to fulfill their obligations to their citizens. This is due to a confluence of factors, including insufficient information about the impact of proposed policies, a lack of transparency, and politically expedient decision-making that disproportionately benefits select interest groups.

LJAF seeks to disrupt these forces in an effort to maximize government performance and advance sound public policies. We support initiatives that help governments make decisions based on research and evaluation as well as projects that promote fiscal sustainability and the effective oversight of public funds.

EVIDENCE-BASED POLICYMAKING LJAF funds entities that are using data and evidence to assist governments in producing concrete, measurable, and lasting improvements to society. This process involves developing, piloting, and rigorously testing promising programs to determine what works and then identifying ways to replicate and scale those that are proven to make a difference. Our portfolio of investments in evidence-based policymaking targets a variety of outcomes including ending poverty, promoting economic mobility, and improving patient care.

One of the primary tools that we use to enable evidence-based policymaking is Pay for Success (PFS) financing (also known as social impact bonds). This funding mechanism allows governments to make risk-free investments in an effort to maximize opportunities and ensure that tax dollars are allocated in the smartest, most efficient way. State and local governments identify an issue area in which they seek outcomes that are superior to the status quo. They then find service providers and programs that have the potential to achieve the most favorable results. The PFS model incentivizes governments to adopt more effective programs by creating a structure in which the government only pays if a program succeeds.

LJAF has invested in several PFS projects, including the New York State Workforce Reentry Program and the Massachusetts Juvenile Justice Initiative, both of which are designed to improve public safety and reduce recidivism, thereby generating significant public savings. The programs target formerly incarcerated individuals and provide intensive services and community support to help them develop life skills and obtain steady employment. LJAF’s investments in this area also include the Social Impact Bond Technical Assistance Lab at Harvard University’s John F. Kennedy School of Government and a partnership with the Nonprofit Finance Fund and the White House Office of Social Innovation and Civic Participation to host a series of regional summits to advance PFS projects throughout the United States.

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SUSTAINABLE PUBLIC FINANCE LJAF works with cities and states to help them achieve fiscal sustainability by ensuring their long-term obligations do not exceed their ability to pay for them. We fund projects that are analyzing the impact of tax policies designed to spur economic development as well as efforts to evaluate local budgeting and financial reporting standards. In addition, we help governments address one of their most pressing fiscal challenges— the unsustainable state of their public employee retirement systems.

Public pension debt across the United States is now larger than it has ever been. These rising legacy costs are consuming a growing share of state and local budgets and are forcing localities to direct money away from critical services. In the most extreme cases, cities have been forced into bankruptcy. However, in many instances, a crisis can be avoided and minor changes can place all workers on a path to a secure retirement.

LJAF has provided nonpartisan policy support and technical assistance to approximately 50 jurisdictions.

We help governments establish a fair, workable plan to pay down the accumulated pension debt as quickly as possible, pay their pension bill in full every year, and create a retirement savings system that is affordable, lasting, and fair.

A variety of pension plan designs, including Defined Benefit, Hybrid, and Defined Contribution, can be tailored to provide important protections for workers including adequate accrual rates; professionally managed, low-fee, and appropriately allocated investments; and limited lump sums and annuities upon retirement.

Public pension reform: There is no one-size-fits-all solution

Those who have dedicated their lives to public service deserve to be part of a system that places them on a path to a secure retirement.

LJAF helps jurisdictions understand the true magnitude of their pension problems and adopt structural reforms that protect all workers, ensure fiscal sustainability, and emphasize transparency and accountability. We commission research, conduct transparency initiatives, and work with governments to analyze proposed reforms.

In 2014, we provided support to help improve the fiscal health of pension systems in a number of localities including Oklahoma, Pennsylvania, and Colorado.

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V E N T U R E D E V E LO P M E N T

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JAF’s Venture Development team is pursuing new, high-leverage philanthropic opportunities that fall outside of our existing programmatic areas. While our other divisions are comprised of policy experts in specific fields, members of the Venture Development group specialize in analyzing processes. They work to identify new ways to target multiple layers of complex, dysfunctional systems in an effort to address the underlying inefficiencies. In 2014, the Venture Development team was actively involved in several issue areas including health care, education technology, and information transparency.

HEALTH CARE LJAF is working to increase value in the U.S. health care system by making aggressive investments in organizations that are focused on reducing costs and improving the quality of patient care. The United States spends more on health care than any other nation. However, due to misaligned incentives within the system, it does not produce the best results. The Venture Development group is targeting three key areas in order to motivate all actors to create positive change. These include changing the fee-for-service model that incents providers to deliver services regardless of whether they are necessary or will have the greatest impact on patient health; providing tools and incentives that empower patients to effectively manage their own health by making decisions based on the quality of care and how much it costs; and leveraging data to identify processes that can be replicated to improve services.

LJAF is funding a number of organizations to advance this strategy, including the Harvard Health Care Markets and Regulation Lab, which is evaluating reforms across the country. We also support the Health Care Cost Institute, a group that is analyzing the ways states are implementing the Affordable Care Act. This research will identify the reform initiatives that deliver the best results.

In addition, we fund the Center for Healthcare Transparency (CHT), which is establishing common protocols that will help regional data centers integrate various types of health care data— such as medical claims, clinical data, and patient surveys—that are almost impossible to combine today. By organizing the information and making it possible to easily access and compare data about quality and cost, CHT will drive better decision-making in every layer of the system. Our work in health care also supports nonpartisan efforts to educate federal and state policymakers and assist them in developing practical reforms.

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PERSONALIZED LEARNING WITH STUDENT PROGRESS MONITORED IN REAL TIME The Venture Development group invests in creating an ecosystem that supports the development and use of digital resources that will help to ensure that all students, regardless of where they live or attend school, can obtain a highquality education.

OPENSTAX WILL DRAMATICALLY IMPROVE THE WAY STUDENTS LEARN

We provide anchor funding for Rice University-based nonprofit publisher OpenStax to develop digital textbooks that are capable of delivering customized instruction to high school students. The textbooks will track students’ progress in real time and adapt to their individual learning styles. The books will assess what a student understands, pinpoint areas where he or she needs more help, and react with personalized, interactive lessons.

LJAF also funds other organizations that are part of the new ecosystem, including edX and Davidson College. edX offers interactive online classes and MOOCs from the world’s best universities. Our support is facilitating the development of analytics that will provide insight into the most effective ways to improve student learning. LJAF funds will also

INFORMATION TRANSPARENCY LJAF supports organizations that are working to ensure that nonpartisan, unbiased, and accurate information is broadly disseminated in order to inform effective decision-making and increase accountability. We are particularly interested in the need for greater

allow edX to expand its platform and the number of rigorous courses for college and high school students. In a related effort, Davidson College is creating free, online materials for some of the most challenging Advanced Placement

courses. This ecosystem of professionally developed, open-access materials is designed to transcend some of the most contentious issues in the education debate and promote widespread academic achievement.

government transparency at the state and local level. Our grantees include groups that are providing high-quality investigative journalism and those that are working to expand access to government data. Among our grantees in this area are ProPublica, the Center for Public Integrity, and The Texas Tribune.

In addition, we work with jurisdictions and nonprofit organizations, including the Council of the District of Columbia and Cal Poly Corporation, that are developing technology and resources that will make government more open, efficient, and accountable.

LJAF’s Venture Development team is open to exploring any area where our methodology can generate a significant, long-term impact.

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GRANTS This section includes an overview of grant commitments made between January 1, 2011, and November 30, 2014. A complete list of LJAF grants is available on our website at www.arnoldfoundation.org.

6%

Criminal Justice

17%

Venture Development

ALL GRANTS 19%

Research Integrity

$319.9M

22%

Public Accountability

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36%

Education

8% Forensic Science

33% Front End

22% Other

CRIMINAL JUSTICE

$19.6M

37% Crime Prevention

2% Teacher Evaluations 1% Research and Evaluation

15% Community Engagement 6% 43% Portfolio Models

EDUCATION

3%

$116M

8%

Education Technology Research Creation of High-quality Schools Human Capital

80% Health/ Medical Research

RESEARCH INTEGRITY

$61.8M

13%

6%

Scientific Reproducibility and Quality

Education Policy Research

22% Policy and Research

12% Information Transparency

21% Public Sector Innovation

57% Evidencebased Policy

PUBLIC ACCOUNTABILITY

$71.2M

37% Health Care

VENTURE DEVELOPMENT

$51.2M

22% Sustainable Public Finance

49% Education Technology

2% Emerging Areas of Interest

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P.O. Box 460809 Houston, Texas 77056-8809 (713) 554-1349 www.arnoldfoundation.org @LJA_Foundation