Myths and Realities in Correctional Cost-Benefit Analysis

By Austin, James | Corrections Today, February 2010 | Go to article overview

Myths and Realities in Correctional Cost-Benefit Analysis


Austin, James, Corrections Today


Rarely does a day pass when a politician or agency official does not make a dramatic claim that by adopting a particular policy or law, huge sums of taxpayer funds will either be expended or saved. The goal seems to be to convince the public and fellow policymakers that unless a particular action is adopted or rejected, the fiscal well-being of the state will be shaken or enhanced. This is referred to as cost-benefit analysis (CBA), and policymakers and the public are becoming increasingly dependent on--and cynical about--the science of CBA. The recent national debate on alternative public health plans highlights the uncertainty and politicalization of CBA, as dramatically different points are being presented by various interest groups regarding the same proposal.

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In corrections we see a similar pattern. Advocates of efforts to reduce the nation's prison and jail populations often claim that their reforms will produce a windfall of savings that can be used to "reinvest" in more progressive and effective reforms. Others warn that if such actions are taken and that hordes of people are released from prison, crime rates will escalate to record levels, as well as the costs of crimes. These competing claims take on greater importance given the current fiscal crisis being faced by state and local governments where correctional and criminal agencies are being targeted for significant cuts. Perhaps the most dramatic example is California, where the state prison budget must be reduced by more than $1 billion in the current 2010 fiscal year.

The need to demonstrate CBA is underscored by the recent creation of CBA centers. In October, The National Conference of State Legislators (NCSL) sponsored a webinar on determining CBA for effective sentencing and corrections policy. (1) The Vera Institute was awarded a U.S. Department of Justice grant to create a Cost-Benefit Analysis Unit (CBAU) for correctional agencies. (2) Not to be outdone, the Evans School of Public Affairs, at the University of Washington, has created a Benefit Cost Analysis Center (or BCA). (3) Its definition of BCA (or CBA) is as follows:

  Benefit-cost analysis (BCA), also known as cost-benefit analysis,
  aims to inform the decision-making process with specific types of
  information, namely measures in monetary terms of willingness to pay
  for a change by those who will benefit from it, and the willingness
  to accept the change by those who will lose from it. The use of
  monetary terms provides a common metric. Its purpose is not to price
  everything, but rather to order choices in a way that is informative
  about social choices for decision makers.

Whether it is a BCA or CBA, there is much confusion and debate about the science or perhaps more accurately the "art" of CBA. And the current fiscal crisis for state and local government has elevated the need to have more accurate CBA. This article tries to address the common methodological weaknesses and common misuses of CBA claims.

The Ambiguous Relationship Between Population Size and Costs

A major weakness in CBA is the assumption that correctional budgets change directly in relation to the number of people being supervised or incarcerated. This assumption allows the advocates of a particular program, policy or law to claim potential savings when in fact such savings or averted costs will not occur.

Between 1999 and 2004, New York state's prison population declined by about 13 percent but spending on prisons declined by just 4 percent. (4) In the city jail system, even though the jail population declined from 21,500 in 1992 to 14,000 in 2002, New York City's Independent Budget Office reported that spending on the jail system had actually increased by 16 percent.

Similarly, the budget for the Texas Department of Criminal Justice has continued to rise (see Table 1). What is particularly interesting is the projected budget for 2010 is more than $170 million greater than the 2009 budget, despite a projected decline in the prisoner population. …

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