Consider a drug treatment program that has been shown to lower recidivism rates among participants. Although a cost-benefit analysis (CBA) would typically include benefits to taxpayers in terms of lower costs for the criminal justice system, should the following benefits also be included?
- Benefits conferred to participants who complete the program successfully, such as increased future earnings and better health;
- Benefits to the children of successful program participants, such as increased well-being and educational attainment; and
- Benefits to businesses and neighborhoods, such as increased commercial activity and property values resulting from reduced crime.
This month we’ll feature a series of blog posts addressing misperceptions about cost-benefit analysis (CBA). On the blog, in the CBA toolkit, and in other materials, we’ve written about some concepts that frequently confuse people or are commonly misunderstood, such as:
- Cost avoidance and cost savings are not the same.
- Taxpayer benefits don’t always result in cost savings.
Today the Vera Institute of Justice released The Price of Prisons: What Incarceration Costs Taxpayers. This report on state prison costs in 2010 is unique in that it captured taxpayer costs paid by state agencies other than departments of corrections—and not just those within corrections budgets. (In some states the other costs include employee benefits, capital costs, and inmate health care.) Additionally, Vera staff calculated the cost of underfunded contributions to pension and retiree health care programs for corrections employees, figures that must be included in a comprehensive accounting of prison costs.
The Center on Budget and Policy Priorities and the American Civil Liberties Union recently released Improving Budget Analysis Of State Criminal Justice Reforms: A Strategy For Better Outcomes And Saving Money. The report analyzes how states prepare fiscal notes of sentencing and corrections legislation. Also known as fiscal impact analyses, fiscal notes report the budgetary impact of pending legislation and, when done well, can add critical information to the policy process.
Consider these scenarios:
A law enforcement agency negotiates a 10 percent decrease in the price of an information technology service contract, resulting in a savings of $100,000 that year.
A different law enforcement agency resists a vendor’s attempt to raise prices by 5 percent, allowing the agency to avoid spending an additional $200,000 that year.
In the September 2011 issue of Harvard Business Review, Robert Kaplan and Michael Porter describe the time-driven activity-based costing (TDABC) system, an approach to measuring costs in complex systems.
TDABC estimates two parameters: the cost of each of the resources (e.g., personnel, facilities, and equipment) used in a process and the amount of time an individual (i.e., a patient, in the health care context) spends with each resource.
This post is part of our “Four questions” guest blog series that highlights the people and organizations in the growing community of practice around cost-benefit analysis (CBA) and justice policymaking. We’re grateful to Dall Forsythe, vice president for finance and operations at The Atlantic Philanthropies. Forsythe joined Atlantic in July 2010 from New York University’s Robert F.
In previous months, CBKB has discussed what taxpayer costs are, how to estimate taxpayer costs generally and, more specifically, how to measure the costs of drug courts. But there’s always more to say about costs.
This month, we gather some thoughts about costs and savings from the perspective of a former state budget official, point you to a cost measurement process from the health sector, and discuss how costs can appear in places where you don’t expect them.
Cost-benefit literature cites two ways of calculating program costs: top-down and bottom-up. Top-down approaches take the total cost of a program and divide by the number of program participants resulting in an average cost per participant. Bottom-up approaches take the price of each resource and multiply by the quantity of resources used, giving you an individual cost per participant.
Cost analysis is an important part of any cost-benefit analysis (CBA) and a fundamental form of economic analysis. Requiring a full accounting of expenses, cost analysis can be complex. Consult these resources from the Bridgespan Group for a primer on cost analysis.
The Nonprofit Cost Analysis Toolkit covers cost analysis in six steps, describing how to gather financial data, allocate costs, and check the accuracy of estimates.
CBKB’s cost-benefit analysis (CBA) toolkit can help you understand and perform cost-benefit studies of criminal justice initiatives. The Taxpayer Costs tool, one of ten tools in the toolkit, describes how to measure the taxpayer costs of criminal justice initiatives when conducting a CBA.
Taxpayer costs, or government costs, are a key consideration in the policymaking process.
When reading or conducting a cost-benefit study, it’s important to keep in mind that “benefits” aren’t necessarily the same as “savings.”
A cost-benefit analysis (CBA) measures the benefits to all parties—not just taxpayers—affected by an initiative. Justice-related cost-benefit studies typically include the benefits to victims, offenders, program participants, and other stakeholders, but since such benefits don’t affect government budgets, they’re not considered cost-savings.
Fiscal impact analysis (FIA) and cost-benefit analysis (CBA) both provide valuable information about the economic impact of programs and policies. But there are a few important differences between the two.
- Taxpayer costs: FIA focuses on taxpayer costs, measuring the impact of a particular initiative on government spending and revenue. CBA goes beyond taxpayer costs to examine public safety and other outcomes and considers the perspectives of additional stakeholders, including victims, offenders, and program participants.
Taxpayers finance the cost of law enforcement, courts, and corrections, as well as a variety of justice-related programs, but taxpayer costs can be difficult to measure. Getting an accurate estimate of how much taxpayers pay for the justice system is critical for developing a reliable cost-benefit analysis (CBA), so we’ve selected five resources that can help you better understand and estimate taxpayer costs.
A cost-benefit analysis must accurately measure taxpayer costs to pass the scrutiny of decision makers. This month we’ll provide resources and methods to help you develop a credible analysis of taxpayer costs—also referred to as government costs—and describe the differences between cost-benefit analysis and fiscal impact analysis. We’ll also cover the finer points of discussing taxpayer costs and benefits when communicating the results of cost-benefit studies.
Taxpayer costs, also known as government costs, are a key consideration in the policymaking process. Decision makers want to know how much it will cost the government to implement criminal justice policies and programs, so it is critical that you estimate these costs accurately in a cost-benefit analysis (CBA). This document outlines the taxpayer costs of the criminal justice system and provides guidance on how to measure these costs.