1. 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

2. 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

3. Background

4. 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.

5. 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.

6. 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.

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

8. Raising the Age in North Carolina

9. 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

10. 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

11. 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.

12. Cost-Benefit Analysis of Raising the AgeCH

13. Cost-Benefit Analysis of Raising the Age

14. Cost-Benefit Analysis of Raising the AgeCH

15. Cost-Benefit Analysis of Raising the AgeCH

16. Cost-Benefit Analysis of Raising the AgeCH

17. 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

18. 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.

19. 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

20. 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.

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

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

23. 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)

24. 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.

25. 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?

26. 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

27. (per-person, life cycle)
Results:
Costs & Benefits of Evidence-Based Programs
Multidimensional Treatment Foster Care % (3) $96, $30,780
Aggression Repl. Training % (4) $24, $8,940
Multisystemic Therapy % (10) $19, $8,240
Functional Family Therapy % (7) $54, $19,483
Programs
Restorative Justice for Juveniles % (21) $13, $4,961
Family Integrated Transitions % (1) $48, $17,568
Teen Courts % (1) $17, $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).

28. 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?

29. 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

30. 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

31. 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 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

32. 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

33. Lessons Learned

34. 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?

35. 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.

36. 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.

37. 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.

38. Questions and answers