Michael Leachman is the director of state fiscal research for the Center on Budget and Policy Priorities (CBPP), which analyzes state tax and budget policy decisions. He is coauthor, along with Inimai M. Chettiar of the ACLU and Benjamin Geare (also of CBPP), of the recent report Improving Budget Analysis of State Criminal Justice Reforms: A Strategy for Better Outcomes and Saving Money. Could you briefly describe the Center on Budget and Policy Priorities and your work there?
CBPP is a research institute that focuses on the intersection between tax and budget issues and the interests of low-income people. Our state team researches state fiscal issues nationwide and focuses specifically on the interests of low-income people. We also coordinate the State Fiscal Analysis Initiative, a network of 41 state-level policy research groups that have a similar focus. My role is director of state fiscal research, helping to coordinate our research agenda. I’m involved on both sides of our work—in producing our own research and in working with the state groups to help them with what they’re doing. It’s a two-way street. We provide technical assistance to the groups in our network, and they deepen our work on the national level by helping us understand what is going on in the states.
In January, CBPP and the ACLU published a report about budget analysis of state criminal justice reforms. How did CBPP get involved—and why?
For many years, the ACLU has been working to improve criminal justice policy in the states. For too long, states have been locking up too many people—despite the evidence that this kind of an approach doesn’t work and is very expensive. In recent years, states have started to understand this and have begun to enact some reforms that are more cost-effective and have a number of other important benefits for communities and for state economies.
The ACLU explained to us that one problem they run into is that states often don’t do a good job of estimating the fiscal impact of these reform bills and that makes it more difficult to get these bills enacted, even when they will save taxpayers money and won’t compromise public safety. They asked for our help in understanding more clearly what things states were doing and which states were doing it well—and what it would take for states to do a better job.
Your report looked at fiscal notes for more than 600 pieces of sentencing and corrections legislation in 49 states. How would you describe fiscal notes briefly—and what do they do?
Legislators who are considering enacting a new law often want to know how much the bill will cost or save the state if it’s implemented. A fiscal note is the official estimate of this cost or savings. Typically, these notes are produced by legislative staff or budget experts within state agencies. Their purpose is to add to the information legislators use to make good decisions about which bills to support.
For the report, what did you set out to do, and what were some of the main findings? What surprised you most?
We found that states did not write fiscal notes for about 40 percent of the bills. For example, Hawaii never writes fiscal notes, and Delaware never writes them for criminal justice bills. Other states rarely write them. That’s a problem because legislators in those states won’t have an official estimate of how much the bill will cost or save.
We also found that most states didn’t look at the fiscal impact for more than a year or two into the future. Fifteen of the 29 states that wrote fiscal notes finding a significant fiscal impact failed to estimate the impact beyond two years. Also, when most states came up with an estimate, they did not describe the method they used to calculate it.
We also found other issues. Some states do very little to ensure the credibility of their fiscal notes. So in some states—Illinois, for example—the executive branch agencies are creating fiscal notes with no review from an independent or nonpartisan analyst. In New York, a bill’s legislative sponsor produces the fiscal note for the bill—and they’re free to use any methodology or sources they want, which they don’t have to disclose. Both approaches create problems for the credibility of the note and diminish their value to the legislative process.
On the positive side, we found a number of states that have a relatively sophisticated process in place for producing useful fiscal notes. Texas and Washington both produce notes that usually meet most of the standards we developed during the course of this project. If the bill is advancing through the legislative process, they will usually produce a note. If the bill is amended, they will produce an amended fiscal note. They will estimate the fiscal impact in future years and describe the methodology they used—and often will at least attempt to describe the impact on local governments.
If there’s a common misunderstanding about this type of analysis, what is it?
One is that I think people probably assume that states are writing these estimates most of the time. It’s a little bit hard to believe that states are passing legislation without knowing what the cost impact of the legislation is, but that’s what’s happening in a sizable number of states. Now, this doesn’t mean that states are overspending, as some have suggested. State and local spending as a share of income has been flat for three decades. And states know how much they appropriate to departments each budget year, which accounts for the vast majority of what states spend. But that said, many states are not doing a very good job of estimating the savings or cost from bills they are enacting into law.
The report also describes best practices for criminal justice fiscal notes and says such analyses should be “consistent, properly researched, detailed, and accessible.” Which factors do you think are most important?
I think they work together. “Consistent” means in part that you’re consistently producing fiscal notes. Doing that and making the notes accessible to the public and to all legislators are pretty basic steps.
The other two criteria are more about the quality of the notes. “Properly researched” just means that notes include a good estimate, that they look out into the future, and that they include a description of their methodology and information sources. And the other criterion—“detailed”—means that fiscal notes should include detailed information such as, what is the breakout of the impact of each major provision of the bill? What’s the breakout of the impact on separate government agencies? Which costs are onetime and which are recurring? What’s the impact on local governments? These details are really important, but you have to take the first steps first.
In states that are doing fiscal notes, do you see promise for justice-related cost-benefit analysis?
The states that prepare good fiscal notes are already heading in the direction of cost-benefit analyses, because they’re producing analyses that look at the longer-term fiscal impacts and beginning to assess the impact on local government. But even these states’ fiscal notes focus only on the direct costs or savings to state and local governments. True cost-benefit analyses go further and attempt to monetize the broader economic and social impact of legislation. The closest thing that’s being done is in Washington State, where, as you know, there’s a process in place to produce cost-benefit analyses and share the results with legislators in time to help inform their decisions.
There is some promise that other states already producing pretty strong fiscal notes could do something similar to what Washington is doing. Most states still need to significantly improve their basic fiscal process. I’d imagine they would need to take that first step before they do broader analyses.
Let’s say I work in a state that doesn’t use fiscal notes at all. How might we start this process?
There are some simple things states can do to start moving in this direction. One is to put their fiscal notes online. States also need to make an investment in the staff necessary to oversee this process and make sure it’s credible. They need to invest in data collection so that analysts have the information they need to prepare good fiscal notes. They need to develop a training process for people in the agencies who are helping the nonpartisan analysts to produce the notes. And there are states that have a good system in place that can be a model. There are training materials other states could use as examples for developing their own. There’s data other states have compiled that could be examples. It’s definitely doable; it just requires a commitment.
Which states’ training materials on fiscal notes would you recommend as resources for other jurisdictions?
Four states produce guides that they post online and that provide details of a consistent process for writing fiscal notes: Maine, Texas, Washington, and Wisconsin.
- Maine: Office of Fiscal and Program Review
- Texas: Legislative Budget Board
- Washington: Office of Financial Management
- Wisconsin: Legislative Reference Bureau
What types of questions do you think need to be examined further?
I think the next steps have to do with understanding more clearly the data needs of fiscal analysts who want to write good criminal justice fiscal notes. Because even in states that have invested in staff to produce fiscal analyses, it can be a problem to write a good fiscal note if you’re not sure where to go for data that will allow you to produce a convincing or high-quality estimate.