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Cost-Benefit Analysis: What Can We Learn About Criminal Justice Programs?

July 28, 2010

Michael Jacobson, President & Director, Vera Institute of Justice Dall Forsythe, former Director, New York Division of the Budget

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Outline of presentation

• Vera Institute of Justice.

• Why Cost-Benefit Analysis (CBA) at Vera?

• Examples of CBA conducted by the Washington State Institute of Public Policy and the Vera Institute.

• Similarities and differences between CBA and budget analysis.

• What budget staff can get out of good CBA.

• Questions and answers.

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Vera Institute of Justice Making justice systems fairer and more effective through research and innovation.

• Vera combines expertise in research, demonstration projects, and technical assistance to help leaders in government and civil society improve the systems people rely on for justice and safety.

• Vera was founded in 1961 and has permanent offices in New York City and Washington, DC. Projects and reform initiatives are typically

conducted in partnership with local, state, or national officials, and are located across the United States and around the world.

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What is Cost-Benefit Analysis?

• A tool for comparing costs and benefits in order to identify programs that offer the greatest value to society. Analysis conducted over a long-term period. In addition to tangible (financial) costs and benefits,

intangible costs and benefits (to victims, society, etc.) are also calculated.

• Cost-benefit analysis connects evidence from research to public expenditures in order to evaluate the policy options that yield the greatest net-benefit to society.

• In addition to budget costs and benefits (savings), CBA incorporates the effectiveness of outcomes from the perspective of taxpayers, victims, and society.

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Why Cost-Benefit Analysis at Vera? Bridging the Gap

• Empirical research and evaluations of demonstration programs have provided evidence of the most effective criminal justice policies.

• However, major policy and budget decisions are often driven by conventional wisdom and political considerations.

• Cost-benefit analysis (CBA) can help bridge the gap between research and practice so that justice goals are met with maximum efficiency. However, much of the CBA is in academic literature and provides little value to budget offices. Vera’s Cost-Benefit Analysis Unit (CBAU) breaks-out costs

and benefits for taxpayers (budget) and society to provide relevant information to government.

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Why use Cost-Benefit Analysis to evaluate criminal justice?

• Without guidance from evidence, criminal justice spending is usually driven by politics, history, and court mandates.

• Consequently, justice spending is allocated inefficiently: Too much for prisons and jails. Not enough community programming, drug treatment,

and evidence-based policing.

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CBA at the Washington State Institute of Public Policy (WSIPP)

• Focuses on criminal justice and other social interventions.

• Uses meta-analysis of evaluation studies to identify “what works,” and discounts weaker methodologies.

• Uses net program costs, offset by savings from reduced use of other government resources.

• Disaggregates taxpayer savings from other social benefits.

• Bases those savings estimates on new data about criminal justice costs and recidivism specific to Washington State.

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Example of CBA: WSIPP Cost and Benefits of Vocational education in prison

• 9 percent reduction in recidivism per a meta-analysis that included 4 studies.

• Benefits reported for both taxpayers and victims (usually combined in traditional CBA).

Evidence-based Public Policy Options to Reduce Future Prison Construction, Criminal Justice Costs, and Crime Rates. WSIPP. October 2006. http://www.wsipp.wa.gov/rptfiles/06-10-1201.pdf

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Application of CBA: Portfolio Analysis

• A cost-benefit analysis of alternative-to-prison programs provides policy makers with a menu of options and the associated cost-effectiveness.

• Given this information and a forecast of the prison “baseline,” states can weigh the impacts that various service portfolios will have on prison caseloads and expenses.

• The impact of each portfolio on the prison population (from moderate to aggressive expansion of evidence-based programs) is then calculated over a long-term planning period to assess the returns on evidence-based alternatives.

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Multidimensional Treatment Foster Care -17.9% (3) $96,173 $23,600 Aggression Repl. Training -8.3% (4) $24,990 $7,988

Multisystemic Therapy (MST) -7.7% (10) $19,385 $3,715 Functional Family Therapy (FFT) -18.1% (7) $54,067 $17,016

Programs

Restorative Justice for Juveniles -8.0% (21) $13,454 $4,020 Family Integrated Transitions -10.2% (1) $48,653 $7,232 Teen Courts -14.0% (1) $17,374 $5,465

Change In Crime (# of EB Studies) (per-person, life cycle)

Net Total Net Taxpayer Benefits Benefits

Example of CBA: Vera Institute and the New York State Youth Justice Taskforce

Charting a new course: a blueprint for transforming juvenile justice in New York State. New York State Task Force on Transforming Juvenile Justice. December 2009. http://www.vera.org/paterson-task-force-juvenile-justic-report

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Name of Program # of

participants

Program Cost ($)

Net Taxpayer Benefits

($)

Net Total Benefits

($)

Multisystemic Therapy (MST) 105 $475,020 $390,075 $2,035,425 Multidimensional Treatment Foster Care 45 $323,100 $1,062,000 $4,327,785

Functional Family Therapy (FFT) 90 $222,030 $1,531,440 $4,866,030

Total 240 $1,020,150 $2,983,515 $11,229,240

Application of CBA: Vera Institute and the New York State Youth Justice Taskforce What if 15% of youth in New York State’s correctional facilities were transferred into evidence-based programs?

Charting a new course: a blueprint for transforming juvenile justice in New York State. New York State Task Force on Transforming Juvenile Justice. December 2009. http://www.vera.org/paterson-task-force-juvenile-justic-report

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Differing Goals: Budget Analysis

• For a budget office, developing a balanced budget is the overriding goal.

• Savings can only be realized if they are budget savings (i.e., discounted savings or avoidance of unbudgeted costs are not typically considered savings)

• Funding decisions are often driven by statute and court decisions. Discretionary programs face a higher burden of proof in budget

requests.

• “Social benefit” is not an operational concept for most budget examiners.

• Decisions are generally based on history and experience rather than findings from research.

• “In any choice situation, select the least costly policy alternative,” within the limits of political reality.

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Differing Goals: Cost-Benefit Analysis

• CBA is most successful when ranking similar projects or programs, often focusing on capital projects.

• Maximizing social welfare is the theoretical goal.

• Metric for ranking is social benefits.

• A project is acceptable if “the benefits to whomsoever they may accrue (are) in excess of the estimated costs.”

• Benefits are measured in discounted dollars, and the time horizon for recognizing benefits is often many years.

• “In any choice situation, select the policy alternative that produces the greatest net benefit.”

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What can budget staff get out of CBA?

• A good CBA will provide all the information a budget office needs: Anticipated program and policy impacts based on

empirical research, and an indication of the strength of the evidence. Estimates of program costs. Estimates of offsetting program savings. Benefits and costs from varying perspectives (i.e.,

taxpayer, budget, society, victim). Commensurability of the relative “weight” of impacts

by expressing all costs and benefits in dollar terms.

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A new resource for you and your staff

• The Vera Knowledge Bank for Cost-Benefit Analysis in Criminal Justice aims to broaden and deepen the knowledge base of cost-benefit analysis in criminal justice and support practitioners in building their capacity to promote, use, and interpret cost-benefit analysis in criminal justice. cbkb.org will be launched fall 2010. Funded by the Bureau of Justice Assistance.

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Questions and Answers

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CBA: Annual Perspective

Functional Family Therapy (FFT) in New York State Taxpayer benefits and costs per participant

Year 1 Year 2 Year 3 Year 4Years 5 -10

Years 11-25

25 Year Total

NPV @ 3% discount rate

Taxpayer (Benefits)

(1,501)$ (684)$ (2,168)$ (1,057)$ (9,506)$ (10,164)$ (25,080)$ (19,483)$

Program Cost

2,467$ -$ -$ -$ -$ -$ 2,467$ 2,467$

Cost/(Benefit)

966$ (684)$ (2,168)$ (1,057)$ (9,506)$ (10,164)$ (22,613)$ (17,016)$

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CBA: Annual Perspective

Functional Family Therapy (FFT) in New York State Victim benefits and costs per participant

Year 1 Year 2 Year 3 Year 4Years 5 -10

Years 11-25

25 Year Total

NPV @ 3% discount rate

Victim(Benefits)

(4,212)$ (1,919)$ (5,090)$ (2,513)$ (17,801)$ (14,727)$ (46,262)$ (37,051)$

Cost -$ -$ -$ -$ -$ -$ -$ -$

Cost/(Benefit)

(4,212)$ (1,919)$ (5,090)$ (2,513)$ (17,801)$ (14,727)$ (46,262)$ (37,051)$

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CBA: Annual Perspective

Functional Family Therapy (FFT) in New York State TOTAL benefits and costs per participant

Year 1 Year 2 Year 3 Year 4Years 5 -10

Years 11-25

25 Year Total

NPV @ 3% discount rate

Total (Benefits)

(5,713)$ (2,603)$ (7,258)$ (3,570)$ (27,307)$ (24,891)$ (71,342)$ (56,534)$

Total Cost

2,467$ -$ -$ -$ -$ -$ 2,467$ 2,467$

Cost/(Benefit)

(3,246)$ (2,603)$ (7,258)$ (3,570)$ (27,307)$ (24,891)$ (68,875)$ (54,067)$

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Resources and references

• You can obtain additional information about WSIPP’s work in CBA at http://www.wsipp.wa.gov/

• You can obtain additional information on the Knowledge Bank for Cost-Benefit Analysis in Criminal Justice and Cost-Benefit Analysis at the Vera Institute of Justice through http://www.vera.org/cba

Michael Jacobson mjacobson@vera.org Dall Forsythe dall.forsythe@gmail.com Christian Henrichson chenrichson@vera.org

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This project was supported by Grant No. 2009-MU-BX K029 awarded by the Bureau of Justice Assistance. The Bureau of Justice Assistance is a component of the Office of Justice Programs, which also includes the Bureau of Justice Statistics, the National Institute of Justice, the Office of Juvenile Justice and Delinquency Prevention, the SMART Office, and the Office for Victims of Crime. Points of view or opinions in this document are those of the author and do not represent the official position or policies of the United States Department of Justice.