1. Cost-Benefit Analysis and Justice Policy:
An Introduction for Budget and Finance Staff
July 10, 2012
Jonathan Ball, Director, Utah Office of the Legislative Fiscal Analyst
Mike Clark, Chief Economist, Kentucky Legislative Research Commission
Christian Henrichson, Senior Policy Analyst, Vera Institute of Justice
Slide 1

2. This webinar will discuss:
• Differences between cost-benefit and fiscal
impact analyses;
• Questions fiscal personnel should ask when
reviewing cost-benefit studies; and
• Steps that fiscal offices need to take if they add
cost-benefit analysis to their workload.
Slide 2 • July 10, 2012

3. Cost-Benefit Analysis and Justice Policy:
An Introduction for Budget and Finance Staff
Jonathan Ball Mike Clark
Director Chief Economist
Utah Office of the Legislative Kentucky Legislative
Fiscal Analyst Research Commission
Slide 3 • July 10, 2012

4. The Cost-Benefit Knowledge Bank for Criminal Justice (CBKB)
is a project of the Vera Institute of Justice funded by the
U.S. Department of Justice’s Bureau of Justice Assistance.
• Website (cbkb.org)
• Cost-benefit analysis toolkit
• Snapshots of CBA literature
• Podcasts, videocasts, and webinars
• Roundtable discussions
• Community of practice
• Technical assistance
Slide 4

5. Agenda
• CBA and criminal justice
• Cost-benefit methods: Mike Clark
 How CBA differs from fiscal impact analysis
 Moving from fiscal impact to CBA
 Questions to ask when using CBA to inform budget preparation
• Cost-benefit analysis in practice: Jonathan Ball
 How CBA can influence budget decisions
 What to consider when integrating CBA with fiscal analysis
• Questions and answers
Slide 5 • July 10, 2012

6. Housekeeping items
• Use the chat feature to send your questions at any
time during the webinar.
• If you need webinar support or for troubleshooting:
 Type questions into the chat box.
 Call 800-843-9166.
 Send e-mail to help@readytalk.com.
• This webinar is being recorded.
• The recording and PowerPoint slides will be posted
on cbkb.org.
Slide 6 • July 10, 2012

7. Cost-benefit analysis
and criminal justice
Slide 7 • July 10, 2012

8. What is cost-benefit analysis?
A type of economic analysis that
compares the costs and benefits of
policies and programs and that:
• includes the perspectives of
multiple stakeholders;
• presents a long-term picture;
• uses dollars as a common
measurement; and
• allows you to compare
programs and policies that
have different outcomes.
Slide 8 • July 10, 2012

9. CBA in criminal justice
• The Washington State Institute for Public Policy (WSIPP) has
pioneered the use of cost-benefit analysis to provide
policymakers with information on criminal justice programs.
• CBA is commonly used to communicate the results of outcome
evaluations.
 Research tells us “what works”; CBA tells is if what works
is “worth the cost.”
• There is increasing public awareness that the most expensive
options do not always yield the best outcomes.
• Cost-benefit analyses of criminal justice policies have
investigated areas such as incarceration, supervision, drug
courts, and crime prevention.
Slide 9 • July 10, 2012

10. Cost-benefit analysis
methods
Slide 10 • July 10, 2012

11. How CBA differs from
fiscal impact analysis
Slide 11 • July 10, 2012

12. Purposes of fiscal impact analysis
Fiscal impact analysis
• Attempts to show how a policy affects
the budget;
• Estimates changes in expenditures or revenues;
and
• Focuses on the financial position of a
governmental unit.
Slide 12 • July 10, 2012

13. Purposes of cost-benefit analysis
Cost-benefit analysis
• Attempts to show how the benefits generated by a
policy compare to the costs generated by the policy;
• Identifies the various outcomes of a policy;
• Identifies those who are affected;
• Places a value on the outcomes; and
• Compares all benefits to all costs.
Slide 13 • July 10, 2012

14. Different perspectives
 Fiscal impact analysis evaluates policy from the
perspective of the level of government considering
the policy.
 Cost-benefit analysis evaluates policy from the
perspective of society:
• Level of government considering the policy
• Other levels of government
• Victims
• Offenders
• Others
Slide 14 • July 10, 2012

15. Example: Drug treatment program
Fiscal Impact
Potential Costs and Benefits Analysis CBA
Salaries  
Overhead expenses  
Screening and assessment  
Lost wages of participants while in treatment 
Reductions in future drug-related crimes:
• Jail costs ? 
• Court costs ? 
• Victim costs 
Benefits to program participants 
Slide 15 • July 10, 2012

16. Different time perspectives
Training Costs Higher Earnings
$2,000
$1,000
$0
2013 2014 2015 2016 2017 2018 2019 2020
-$1,000
-$2,000
-$3,000
Fiscal impact analysis
may focus only on the
budget cycle.
CBA includes all future benefits and costs attributable to the policy.
Slide 16 • July 10, 2012

17. Different accounting
Fiscal impact analysis
• Costs are calculated based on nominal values.
Cost-benefit analysis
• Benefits received today are typically more highly
valued than similar benefits received 10 years
from now.
• To address this, CBA discounts future benefits and
costs to determine their present values.
Slide 17 • July 10, 2012

18. Different accounting
Cost and benefits of a project ($ millions)
Net Present
Year Benefits Costs Net Calculation* Value
0 - (1.50) (1.50) / (1.06)0 = (1.50)
1 0.75 - 0.75 / (1.06)1 = 0.71
2 0.75 - 0.75 / (1.06)2 = 0.67
3 0.75 - 0.75 / (1.06)3 = 0.63
Total 0.75 0.50
*Discounted at a rate of 6%
Slide 18 • July 10, 2012

19. Marginal costs and benefits
 Marginal costs and benefits reflect only the additional
costs or benefits resulting from the policy.
 Both fiscal impact analysis and CBA should measure
marginal costs and benefits.
Fiscal impact analysis: change to expenditures
or revenues
CBA: change to benefits and costs
Slide 19 • July 10, 2012

20. Moving from
fiscal impact analysis
to cost-benefit analysis
Slide 20 • July 10, 2012

21. Measuring the policy outcomes
• Review the research studies, pilot projects, or other
evaluations of similar policies.
 Criminal justice research often compares recidivism
of individuals who received treatment and those
who did not.
Example: Two years after treatment:
 20% of program participants committed a drug felony.
 25% of nonparticipants committed a drug felony.
Slide 21 • July 10, 2012

22. Measuring the policy outcomes
Research findings must be translated into outcomes in
your justice system.
This requires an understanding of your justice system
and those it serves, such as:
• How many people the program/policy would serve;
• What types of crimes would those served likely have
committed in the absence of the program/policy and
when; and
• How individuals committing these crimes would have
moved through the justice system.
Slide 22 • July 10, 2012

23. Valuing outcomes
How much would residents be willing to pay to avoid or
accept the outcomes?
• Talk with experts.
• Conduct primary research.
 Has potentially greater validity
 Requires time and expertise
• Review secondary research.
 The process is faster and easier.
 Past results might not fit your situation.
Slide 23 • July 10, 2012

24. Valuing outcomes
Examples of past research on victim costs
Crime Miller et al. McCollister et al.
Household burglary $2,145 $6,462
Robbery $18,591 $42,310
Assaults $21,451 $107,020
Rape/sexual assaults $124,419 $240,776
Murder $4,380,559 $8,982,907
Sources :
McCollister, Kathryn, Michael T French, and Hai Fang. “The Cost of Crime to Society: New Crime-
specific Estimates for Policy and Program Evaluation.” Drug and Alcohol Dependence, 108:1 (2010)
98-109.
Miller, Ted R., Mark Cohen, and Brian Wiersema. Victim Costs and Consequences: A New Look. NCJ
155282, National Institute of Justice Washington D.C., 1996
Note: Cost estimates are stated in 2008 U.S. dollars.
Slide 24 • July 10, 2012

25. Questions to ask when
using CBA to inform
budget preparation
Slide 25 • July 10, 2012

26. Scope
Which perspectives does the CBA examine?
 Taxpayers: federal, state, local, other
 Victims
 Other
Slide 26 • July 10, 2012

27. Scope
• Does the CBA clearly detail the impacts attributable
to the policy?
 CBA should show who pays the costs and who receives
the benefits of the program.
 CBA should show when benefits are accrued and costs
are incurred.
Slide 27 • July 10, 2012

28. The research literature
Were the programs studied similar to the program
currently being considered?
• A program might have different effects on different
populations (such as adults vs. juveniles).
• Implementation may differ.
 Funding
 Staffing
 Type of treatment
Slide 28 • July 10, 2012

29. The research literature
What does the research measure?
Studies often measure effects on crime in general
rather than on specific types of crime.
 This is a problem because different crimes have different
avoided costs.
 If a study found a 5% decrease in overall recidivism,
we don’t know whether the program reduces the
incidence of low-cost crimes or high-cost crimes.
Slide 29 • July 10, 2012

30. How robust are the results?
Will there be behavioral responses to the policy that
could affect the outcomes?
A crackdown on drug crimes in one area might simply
shift the location of the crimes.
Slide 30 • July 10, 2012

31. How robust are the results?
Do changes in the assumptions have a substantial
effect on the results?
CBA ($ millions)
Discounted Discounted
Year Benefits Costs at 5% at 4%
1 - (4.00) (4.00) (4.00)
2 - (4.00) (3.81) (3.85)
3 3.00 - 2.72 2.77
4 3.00 - 2.59 2.67
5 3.00 - 2.47 2.56
Net Present
Value (0.03) 0.16
Slide 31 • July 10, 2012

32. Application
To what alternative policy should the CBA be compared?
A program might be compared to:
 Status quo
 Other programs with similar objectives
 Programs that provide different services
• Workforce training
• Health care
Slide 32 • July 10, 2012

33. Cost-benefit analysis
in practice
Slide 33 • July 10, 2012

34. How CBA can influence
budget decisions
Slide 34 • July 10, 2012

35. Fiscal notes are not CBAs
Fiscal notes are a tool used to help balance the budget.
They are NOT:
 An expression of benefits
 A measure of impact
on society
 Intended to influence
passage of a bill
Slide 35 • July 10, 2012

36. Two examples of CBA in budgeting
 “Cost of Crime: A Cost/Benefit Tool for Analyzing
Utah Criminal Justice Program Effectiveness”
(University of Utah, 2005)
 http://ucjc.law.utah.edu/wp-content/uploads/58.pdf
 Indirectly influenced budget priorities
 Policy decision consistent with cost-benefit results
 “Evaluation of the Drug Offender Reform Act:
DORA Pilot” (University of Utah, 2008-2010)
 http://ucjc.law.utah.edu/archives/390
 Directly influenced decision
 Policy decision inconsistent with cost-benefit results
Slide 36 • July 10, 2012

37. “Cost of Crime,” 2005
Slide 37 • July 10, 2012

38. DORA pilot, 2008-2010
Source: “Evaluation of Drug Offender Reform Act:: DORA Pilot,” Utah Criminal Justice Center, November 2010, p. 7.
Slide 38 • July 10, 2012

39. What to consider
when integrating CBA
with fiscal analysis
Slide 39 • July 10, 2012

40. Challenges to CBA in budget process
• Data availability
• Volume/capacity
• Time
• Risk
Slide 40 • July 10, 2012

41. Performance notes:
A first step toward CBA in Utah
Fiscal Notes Performance Notes
All New or expanded
Bills to analyze
(1,000+) programs (~50)
Analysis must be completed
Yes No
to vote on a bill?
Time frame to conduct analysis 3 days 9 days
Office of the
Agency that conducts analysis Legislative Fiscal Recipient state agency
Analyst
Measurements of outcomes
No Yes
included?
State auditor follows up to
No Yes
ensure policy meets objectives?
Slide 41 • July 10, 2012

42. A place to start: performance
Slide 42 • July 10, 2012

43. Questions and answers
Slide 43 • July 10, 2012

44. Questions
Jonathan Ball Mike Clark
Director Chief Economist
Utah Office of the Kentucky Legislative
Legislative Fiscal Analyst Research Commission
Slide 44 • July 10, 2012

45. Follow-up
Before you log out of the webinar, please complete
the evaluation form.
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• Visit the Cost-Benefit Knowledge Bank for Criminal Justice
at cbkb.org.
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• Follow us on Twitter at twitter.com/CBKBank.
Slide 45 • July 10, 2012

46. Contact information
Jonathan Ball Mike Clark
Director Chief Economist
Utah Office of the Kentucky Legislative
Legislative Fiscal Analyst Research Commission
jball@le.utah.gov Mike.Clark@lrc.ky.gov
Slide 46 • July 10, 2012

47. The Cost-Benefit Knowledge Bank for Criminal Justice (CBKB)
is a project of the Vera Institute of Justice funded by the
U.S. Department of Justice’s Bureau of Justice Assistance.
• Website (cbkb.org)
• Cost-benefit analysis toolkit
• Snapshots of CBA literature
• Podcasts, videocasts, and webinars
• Roundtable discussions
• Community of practice
• Technical assistance
Slide 47

48. Thank you!
Slide 48 • July 10, 2012

49. This project is 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, and the Office of Sex Offender
Sentencing, Monitoring, Apprehending, Registering, and
Tracking. 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.
Slide 49