How to Use Cost Benefit Analysis to Weigh Policy Options July 27, 2011 Vidhya Ananthakrishnan, Senior Program Associate, Center on Youth Justice Christian Henrichson, Senior Policy Analyst, Cost-Benefit Analysis Unit

Presentation roadmap Background Applying CBA to juvenile justice reform: North Carolina and New York State Lessons learned and implications of CBA for future juvenile justice reform

Background

Purpose of Cost Benefit Analysis (CBA) Compares the costs and benefits over the long run. Measures cost and benefits in monetary terms. Monetizes benefits to illustrate if what works is worth the cost. Analyzes multiple perspectives (taxpayers, victims, etc) to measure the net benefit to society.

Why CBA is important Cost-benefit analysis can help: Move the dialogue beyond costs and cutting costs. Provide a framework for policy debates that requires you to evaluate all perspectives. Outline the long-term consequences of policy decisions. Serve as a tool to model the effect of various policy scenarios. Promote more accountability, as programs focus on results and become data-driven.

Important caveats for using CBA While CBA is a useful framework for policy debates, the “ingredients” can sometimes be more useful than the final result. A cost-benefit analysis is only as good as its inputs. Cost-benefit analysis is only one component of the decision-making process. Despite the aim of measuring the net benefit to society, the focus will often be on the net benefit to taxpayer.

Applying CBA to inform juvenile justice reform: A look at North Carolina and New York

Raising the Age in North Carolina

Background on Raising the Age in NC Several attempts to raise the age. Cost implications cited as one of the key reasons for lack of reform. Previous cost-benefit analysis and fiscal note were received with skepticism. VL

Youth Accountability Planning Task Force Statutorily defined task force divided their tasks into three workgroups Legal Programs Costs January 2011 Recommendation: Handle all misdemeanors and non-violent, low-level (F-I) felonies in the juvenile court Keep violent (A-E) felonies in the adult court

Approach Collaborative Worked with the System Costs Work Group to gather data and make assumptions. Specific to North Carolina Collected and analyzed North Carolina data on costs and justice system case processing. Research-based Drew on national juvenile justice research.

Cost-Benefit Analysis of Raising the Age CH

Cost-Benefit Analysis of Raising the Age

Cost-Benefit Analysis of Raising the Age CH

Cost-Benefit Analysis of Raising the Age CH

Cost-Benefit Analysis of Raising the Age CH

Cost-Benefit Summary Dollars in Millions, per year Perspective Net Present Value Juvenile Justice Taxpayer Costs ($70.9) Adult Justice Taxpayer Benefits $21.7 Victim Benefits $3.6 Youth Benefits $97.9 Total Net Benefit $52.3 CH

Avoided Victimizations Victim Benefits per year Avoided Victimizations Net Present Value Misdemeanors 1,724 $812,700 Felonies 737 $2,779,373 Total 1,561 $3,592,073 Victim cost estimates are based on an expected reduction in recidivism rates and recent research on victimization costs.

Additional Earnings Per Youth Net Present Value of Additional Earnings Youth Benefits per year Number of Youth without a Criminal Record, per Year Additional Earnings Per Youth Net Present Value of Additional Earnings 1,586 $61,691 $97,857,916 Assume that having a criminal record reduces earnings by 13% Additional earnings are calculated over 35 years

How CBA informed the policy process A thorough estimation of the costs. Shed light on the benefits. Use of CBA to delve into the details of the policy with legislators, stakeholders, and senior agency staff.

Governor Paterson’s Task Force on Transforming Juvenile Justice in New York State

Impetus for Reform in New York Over-representation of youth of color Treatment of youth Poor outcomes High cost

Background: Governor’s Task Force on Transforming Juvenile Justice Launched in September 2008 Charge: To develop a set of recommendations for reforming what happens to a youth after he/she is adjudicated in family court and is placed in state custody Task Force was divided into two subcommittees Re-Entry and Community-Based Alternatives to Placement (RCAP) Redefining Residential Care (RRC)

Using CBA within Task Force process RCAP subcommittee focused on options to: Keep youth from entering placement Expand community-based programs Cost-benefit analysis offered a tool to quantify impact of investing in evidence-based community programs Goal: Help identify programs that could reduce institutional placements, lower costs, and improve outcomes for youth, families, and communities over the long term.

Cost-Benefit Method Washington State Institute for Public Policy (WSIPP) approach: What works & what doesn’t? What are the costs and benefits of each option? Statewide, how would alternative “portfolios” affect crime and the costs of crime?

Adopting the WSIPP Model to New York State Vera used data on New York’s justice system to estimate the costs and benefits to people in New York Why use New York’s data? Because justice systems vary across states Justice system costs Charging and sentencing practices

(per-person, life cycle) Results: Costs & Benefits of Evidence-Based Programs Multidimensional Treatment Foster Care -17.9% (3) $96,173 $30,780 Aggression Repl. Training -8.3% (4) $24,990 $8,940 Multisystemic Therapy -7.7% (10) $19,385 $8,240 Functional Family Therapy -18.1% (7) $54,067 $19,483 Programs Restorative Justice for Juveniles -8.0% (21) $13,454 $4,961 Family Integrated Transitions -10.2% (1) $48,653 $17,568 Teen Courts -14.0% (1) $17,374 $6,436 Change In Crime (# of EB Studies) Benefits - Costs (per-person, life cycle) Total Taxpayer only WSIPP located and analyzed 7 rigorous Functional Family Therapy (FFT) outcome evaluations conducted in the United States. On average they reduced recidivism rates 18.1 percent. Without FFT, an offender has a 70% chance of being reconvicted for a new felony or misdemeanor after 13 years; With FFT, the odds drop to about 52%. The reduced recidivism generates a NET gain of $54,067 per FFT participant. FFT costs $2,467 more per person than regular court processing (court costs, treatment); benefits of reduced recidivism total $19,483 to taxpayers (lower criminal justice costs) and $34,584 to crime victims (reduced victimization).

Projected Impact of Program Portfolios Results: Projected Impact of Program Portfolios What if 15% of youth in New York State’s correctional facilities were transferred into evidence-based programs?

15% of youth in facilities Results: Projected Impact of Program Portfolios 15% of youth in facilities Name of Program # of participants Annual Cost ($) Taxpayer Benefits Total Benefits Multisystemic Therapy 105 $475,020 $390,075 $2,035,425 Multidimensional Treatment Foster Care (vs regular care) 45 $323,100 $1,062,000 $4,327,785 Functional Family Therapy 90 $222,030 $1,531,440.00 $4,866,030 Total 240 $1,020,150 $2,983,515 $11,229,240

How CBA informed the Task Force’s work Raised questions about what juvenile justice data is available in New York State Provided better understanding of the state’s alternative-to-placement program landscape Articulated what the potential benefits of investing in alternative programs might be in dollar terms

Update on reform process Office of Children and Family Services developed RFPs to encourage counties with highest placement to invest in alternatives Governor Cuomo’s 2011-2012 budget builds on 2009 recommendations of Task Force on Transforming Juvenile Justice Reduced excess capacity in youth facilities by 30 percent Created a funding stream for the Supervision and Treatment Services for Juveniles Capped local detention spending at $76 million and allows localities to access funding to support community programs

Update on reform process (cont) 2011: CYJ and CBAU are working with state officials to analyze NYS’ juvenile justice fiscal and related governance structures Goal: To identify potential options for redesigning the system that will best support smart, data-driven reforms that are cost-effective for NYS and localities

Lessons Learned

Lessons learned Develop realistic assumptions What needs are driving the analysis? What data are available for the analysis? How can certain costs and benefits be estimated to account for any information gaps? How will the baseline numbers change over time? What other changes need to occur to sustain impacts?

Lessons learned Communicate results carefully Ensure that your audience is aware of the assumptions driving analysis. Non-taxpayer benefits are often misunderstood and can be confused as “savings.” Discussing taxpayer benefits (savings) can be a sensitive issue with government officials.

Key questions to consider when reviewing a CBA When reading a cost-benefit study, consider the following questions: Are marginal costs used? Are the policy effects reasonable? Are they based on research? Can the policy effects be sustained or replicated? Are all the perspectives included? Many “cost-benefit” studies exclude the victims’ or juveniles’ perspective.

Implications for reform Cost-benefit analysis can help move policymakers towards large-scale changes that are in the best interests of children. Realizing savings from policy changes can be difficult.

Questions and answers