Cost-Benefit Analysis for Criminal JusticePolicy and Planning2011 National Criminal Justice Association National Forum, Au...
Questions for decision makingHow much will a program cost?Can I get the same result for less?Would another type of program...
PreviewTypes of economic analysisApplication of economic analysis to decision makingEconomic analysis & your practice     ...
Types of economicanalysis            Slide 4
Range of economic analysesCost analysisCost-effectiveness analysisCost-benefit analysis                         Slide 5
Cost analysisHow much will aprogram cost?                  Slide 6
Cost analysisDirect costs, like equipment and fringe benefits, inaddition to staff salaries;Indirect costs or overhead, su...
Cost-effectiveness analysisCan I get the sameresult for less?                     Slide 8
Cost-effectiveness analysisCalculate costsSelect an outcome of interest(e.g., jobs, number of crimes avoided, etc.)Divide ...
Cost-benefit analysisWill another type ofprogram get me morefor my money?A program iseffective, but do thebenefits outweig...
Cost-benefit analysis1. Determine the impact of the initiative2. Determine whose perspectives matter3. Measure costs4. Mea...
Application of economicanalysis to decision making             Slide 12
Application of economic analysis todecision makingCost analysis   How much will a program cost?Cost-effectiveness analysis...
Example of cost analysis: True Cost of Prisons        This cost analysis can inform decision making by:               • Pr...
Example of cost analysis: True Cost of Prisons        The costs of operating prisons are paid by various        entities w...
Example of cost analysis: True Cost of Prisons        Include expenses at state corrections departments plus        expens...
Example of cost-effectiveness analysis:Jail and jail alternativesCost-effectiveness analysis can inform decision makingby ...
Example of cost-effectiveness analysis:            Jail and jail alternatives                                             ...
Example of cost-benefit analysis:Evidence-based programs in Washington StateCost-benefit analysis can inform decision maki...
Example of cost-benefit analysis:             Evidence-based programs in Washington State             Legislature confront...
Example of cost-benefit analysis:             Evidence-based programs in Washington State                                 ...
Example of cost-benefit analysis:Transitional jobs program for ex-prisonersCost-benefit analysis informs the decision maki...
Example of cost-benefit analysis:             Transitional jobs program for ex-prisoners             The Center for Employ...
Example of cost-benefit analysis:             Transitional jobs program for ex-prisoners                                  ...
Economic analysis & yourpractice             Slide 25
Three key economic analysis conceptsMarginal costs: accurately measure the costsof a change in workload in a system or pro...
Marginal versus average costsAverage costs include both marginal and fixed costs.Fixed costs do not change as workload cha...
Marginal costs and policy decisionsAt present, it costs an average of $46,000 per year tohouse an inmate in the MA DOC [Ma...
Victim costsMeasure the benefits of public safety to individuals andcommunitiesMeasure the costs of crime incurred by vict...
Measuring victim costsJury awardsWillingness to pay surveys                        Slide 30
Tangible and intangible victim costs                       Tangible and Intangible Victim Costs by Type of Offense        ...
Sensitivity analysisSensitivity analysis provides information aboutthe degree to which cost-benefit analysis resultsare se...
Types of sensitivity analysisBest and worst case scenariosBreak-even analysis                           Slide 33
ClosingThe type of analysis you select depends on thequestion you need to answer.Conducting a rigorous analysis requires t...
Cost-benefit toolkitForms of economic analysisTaxpayer costsVictim costsMarginal costsPerspectivesMonetizing benefitsDisco...
Cost-Benefit Knowledge Bank for Criminal Justice(CBKB)Visit CBKB at http://www.cbkb.orgFollow us on Twitter athttp://www.t...
Contact informationChristian Henrichson(212) 376-3161chenrichson@vera.orgLora Krsulich(212) 376-5201lkrsulich@vera.orgSara...
This project is supported by Grant No. 2009-MU-BX K029 awarded by the Bureau ofJustice Assistance. The Bureau of Justice A...
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  • Reasons that you should listen— -One of the few cost-benefit studies performed by the federal government on PREA -Asks tricky questions– how do you put a dollar value on the benefits of avoiding something like prison rape and other forms of sexual assault? Should you do it, ethically? Total cost of operating prisons:
  • Use if you are evaluating, making grants, deciding which program to fund
  • How many work for SAAs? How many use economic analysis in your jobs?
  • Cost analysis , fiscal impact analysis , cost-effectiveness analysis , and cost-benefit analysis are among the most commonly used forms of economic analysis. I’ll describe these four types of economic analysis, comparing, contrasting, and explaining which circumstances warrant their use.
  • A cost analysis sounds simple, but it requires effort to carry out a thorough cost analysis. It’s not enough to identify obvious costs, like the salaries of program staff. A complete cost analysis should consider direct costs--like salaries, benefits, and equipment--that are directly attributable to program operations. It also considers start-up costs, such as hiring and training; indirect costs, like the cost of human services, IT, or fiscal departments; and capital costs, including debt service. A cost analysis should also consider future costs, such as wage increases, anticipated contributions to pension and insurance plans, and other escalating costs.
  • A cost analysis sounds simple, but it requires effort to carry out a thorough cost analysis. It’s not enough to identify obvious costs, like the salaries of program staff. A complete cost analysis should consider direct costs--like salaries, benefits, and equipment--that are directly attributable to program operations. It also considers start-up costs, such as hiring and training; indirect costs, like the cost of human services, IT, or fiscal departments; and capital costs, including debt service. A cost analysis should also consider future costs, such as wage increases, anticipated contributions to pension and insurance plans, and other escalating costs.
  • A cost analysis sounds simple, but it requires effort to carry out a thorough cost analysis. It’s not enough to identify obvious costs, like the salaries of program staff. A complete cost analysis should consider direct costs--like salaries, benefits, and equipment--that are directly attributable to program operations. It also considers start-up costs, such as hiring and training; indirect costs, like the cost of human services, IT, or fiscal departments; and capital costs, including debt service. A cost analysis should also consider future costs, such as wage increases, anticipated contributions to pension and insurance plans, and other escalating costs.
  • Make sure to touch on advantages: Uses evidence, provides common denominator - $, incorporates intangibles, considers multiple perspectives, and adjusts for future costs
  • Let’s take an example of cost-effectiveness analysis from the justice field. Suppose that you’re comparing two job-training programs, both of which serve 1,000 ex-offenders per year. After doing a comprehensive cost analysis, you find that Program A costs $10 million and Program B $7.5 million. Program A, which costs $10,000 per client, is more expensive than Program B, which costs $7,500 per client. Program A, however, places more of its clients in permanent employment than Program B. The appropriate measure of the programs’ cost-effectiveness is the total program cost divided by the desired outcome, in this case, the total number of job placements. The results show that Program A is more cost-effective, i.e., a better use of resources, because its cost per placement is lower than Program B’s.
  • also it is a term borrowed from economists
  • also it is a term borrowed from economists
  • Best and worst: just what it sounds like: apply the best and worst assumptions that you can to your CBA and examine the results Break even: can be used to determine what needs to happen for the initiative to be economically neutral. If the requirements are feasible, then the initiative will have a chance at least to pay for itself. If not, then the program is unlikely to be cost-effective. Example in Washington state
  • Best and worst: just what it sounds like: apply the best and worst assumptions that you can to your CBA and examine the results Break even: can be used to determine what needs to happen for the initiative to be economically neutral. If the requirements are feasible, then the initiative will have a chance at least to pay for itself. If not, then the program is unlikely to be cost-effective. Example in Washington state
  • Best and worst: just what it sounds like: apply the best and worst assumptions that you can to your CBA and examine the results Break even: can be used to determine what needs to happen for the initiative to be economically neutral. If the requirements are feasible, then the initiative will have a chance at least to pay for itself. If not, then the program is unlikely to be cost-effective. Example in Washington state
  • Outro slide
  • 2011 NCJA presentation

    1. 1. Cost-Benefit Analysis for Criminal JusticePolicy and Planning2011 National Criminal Justice Association National Forum, August 2, 2011Lora Krsulich, Christian Henrichson, and Sarah FajardoVera Institute of Justice, Cost-Benefit Analysis Unit Slide 1
    2. 2. Questions for decision makingHow much will a program cost?Can I get the same result for less?Would another type of program get me more for mymoney?A program is effective, but do the benefits outweigh thecosts? Slide 2
    3. 3. PreviewTypes of economic analysisApplication of economic analysis to decision makingEconomic analysis & your practice Slide 3
    4. 4. Types of economicanalysis Slide 4
    5. 5. Range of economic analysesCost analysisCost-effectiveness analysisCost-benefit analysis Slide 5
    6. 6. Cost analysisHow much will aprogram cost? Slide 6
    7. 7. Cost analysisDirect costs, like equipment and fringe benefits, inaddition to staff salaries;Indirect costs or overhead, such as central supportservices;For new programs or policies, start-up expendituresand one-time costs, including hiring and training;Future costs, including wage increases, contributionsfor increasing pension and insurance expenses, andother escalating costs; andCapital costs, including debt service. Slide 7
    8. 8. Cost-effectiveness analysisCan I get the sameresult for less? Slide 8
    9. 9. Cost-effectiveness analysisCalculate costsSelect an outcome of interest(e.g., jobs, number of crimes avoided, etc.)Divide costs by outcomesResult: cost-effectiveness ratio Slide 9
    10. 10. Cost-benefit analysisWill another type ofprogram get me morefor my money?A program iseffective, but do thebenefits outweigh thecosts? Slide 10
    11. 11. Cost-benefit analysis1. Determine the impact of the initiative2. Determine whose perspectives matter3. Measure costs4. Measure benefits (in dollars)5. Compare costs and benefits Slide 11
    12. 12. Application of economicanalysis to decision making Slide 12
    13. 13. Application of economic analysis todecision makingCost analysis How much will a program cost?Cost-effectiveness analysis Can I get the same results for less?Cost-benefit analysis Would another program get me more for my money? A program is effective, but do the benefits outweigh the costs? Slide 13
    14. 14. Example of cost analysis: True Cost of Prisons This cost analysis can inform decision making by: • Providing an accurate accounting of the costs to improve public transparency and accountability. • Providing a more accurate means of comparing different prison systems. • Improving fiscal forecasts related to changes in the prison population (i.e., there are potential costs and savings in areas outside the corrections department).The True Cost of Prisons is a project of the Vera Institute of Justice andPew’s Public Safety Performance Project Slide 14
    15. 15. Example of cost analysis: True Cost of Prisons The costs of operating prisons are paid by various entities within state governments. The expenses incurred by state corrections departments underestimate the total cost of prisons. A cost analysis provides a complete accounting of expenses to better inform decision making.The True Cost of Prisons is a project of the Vera Institute of Justice andPew’s Public Safety Performance Project Slide 15
    16. 16. Example of cost analysis: True Cost of Prisons Include expenses at state corrections departments plus expenses which are sometimes paid outside the corrections department: • Pension and retiree health care benefits • Hospital care for inmates • Capital costs • Indirect costs (state centrally administered services)The True Cost of Prisons is a project of the Vera Institute of Justice andPew’s Public Safety Performance Project Slide 16
    17. 17. Example of cost-effectiveness analysis:Jail and jail alternativesCost-effectiveness analysis can inform decision makingby illustrating the comparative costs for each option.Example: Which is the least costly option? • Jail • Drug court • Pretrial services • Probation Slide 17
    18. 18. Example of cost-effectiveness analysis: Jail and jail alternatives Total cost Average daily Cost per day Program (millions) population per client Jail $171 4,337 $107.71 Drug court $3.1 823 $10.33 Pretrial services $5.6 2,802 $1.48 Probation $.8 6,397 $0.33Piquero, Alex. Cost-Benefit Analysis for JailAlternatives and Jail. October 2010. Slide 18
    19. 19. Example of cost-benefit analysis:Evidence-based programs in Washington StateCost-benefit analysis can inform decision making by: • Considering the costs relative to the benefits. • Standardizing outcomes in dollar terms, providing a better means of comparing different types of programsExample: Which evidence-based programs yield thegreatest net benefit to society? Slide 19
    20. 20. Example of cost-benefit analysis: Evidence-based programs in Washington State Legislature confronted with limited resources and a variety of programming needs. Washington State Institute for Public Policy, at the legislature’s direction, produces: a comprehensive list of programs and policies that improve . . . outcomes for children and adults in Washington and result in more cost-efficient use of public resources.Aos, S., et al. (2011). Return on investment: Evidence-based options to improve statewide outcomes (DocumentNo. 11-07-1201). Washington State Institute for Public Slide 20Policy.
    21. 21. Example of cost-benefit analysis: Evidence-based programs in Washington State Total Total Net Benefit/ Program benefits costs benefits cost ratio Drug treatment in the community $15,419 $2,102 $13,317 7.35 Mental health court $14,230 $2,878 $11,352 4.95 Employment training/job assistance $4,641 $132 $4,509 35Aos, S., et al. (2011). Return on investment: Evidence-based options to improve statewide outcomes (DocumentNo. 11-07-1201). Washington State Institute for Public Slide 21Policy.
    22. 22. Example of cost-benefit analysis:Transitional jobs program for ex-prisonersCost-benefit analysis informs the decision makingprocess by: • Illustrating whether the monetary and non-monetary costs are outweighed by the benefits. • Providing the costs and benefits over the long term. • Illustrating what benefits and costs are incurred by taxpayers, victims, and offenders.Example: A re-entry program works, but is it worth thecost? Slide 22
    23. 23. Example of cost-benefit analysis: Transitional jobs program for ex-prisoners The Center for Employment Opportunities (CEO) uses a transitional jobs model to prepare ex-offenders for employment. Random assignment evaluation finds that CEO reduces 3- year recidivism rates (arrest, conviction, incarceration) by 8 percent. • Program group: 64.9 percent • Control group: 70.6 percent Cost-benefit analysis can inform whether the outcome is worth the cost.C. Redcross, M. Millenky, and V. Levshin. Final Reporton the Center for Employment Opportunities (CEO).MDRC. Forthcoming 2011. Slide 23
    24. 24. Example of cost-benefit analysis: Transitional jobs program for ex-prisoners Benefits and Costs per CEO participant Taxpayer Victim Participant Total Criminal justice benefits 4,971 882 0 5,852 Employment benefits 4,708 0 1,043 5,751 CEO program cost -3,603 0 0 -3,603 Net benefits 6,076 882 1,043 8,001 Benefit/cost ratio 2.69 n/a n/a 3.22 Benefits and costs in 2009 dollars for the recently released subgroup.C. Redcross, M. Millenky, and V. Levshin. Final Reporton the Center for Employment Opportunities (CEO).MDRC. Forthcoming 2011. Slide 24
    25. 25. Economic analysis & yourpractice Slide 25
    26. 26. Three key economic analysis conceptsMarginal costs: accurately measure the costsof a change in workload in a system or program;Victim costs: monetize the benefits of publicsafety and the costs of crime to victims andcommunities;Sensitivity analysis: incorporates uncertaintyin an analysis to inform decisions. Slide 26
    27. 27. Marginal versus average costsAverage costs include both marginal and fixed costs.Fixed costs do not change as workload changes.Marginal costs describe how the cost of an operationchanges when workload changes by a small amount. When policies have a small effect on agency operations, using average costs, instead of marginal costs, will overstate your costs and savings. Slide 27
    28. 28. Marginal costs and policy decisionsAt present, it costs an average of $46,000 per year tohouse an inmate in the MA DOC [MassachusettsDepartment of Corrections]. But there is more to thisfigure than one might realize. This cost changes with theinmate’s security level, medical needs and other factors.What is less known is that, on average, the costassociated with one inmate’s specific needs is about$9K per year – this covers stuff like food, clothing, andother incidentals that we pay for on an inmate-by-inmatebasis.Taunton Daily Gazette, Addressing the prison’s budgetand population. Paul Heroux, Feb. 17, 2011 Slide 28
    29. 29. Victim costsMeasure the benefits of public safety to individuals andcommunitiesMeasure the costs of crime incurred by victimsMonetize tangible and intangible costs Slide 29
    30. 30. Measuring victim costsJury awardsWillingness to pay surveys Slide 30
    31. 31. Tangible and intangible victim costs Tangible and Intangible Victim Costs by Type of Offense Type of Offense Tangible Intangible Total Murder $1,285,146 $8,442,000 $8,982,907 Rape/sexual assault $41,252 $199,642 $240,776 Robbery $21,373 $22,575 $42,310 Motor vehicle theft $10,534 $262 $10,772Kathryn E. McCollister, et al., “The Cost of Crime toSociety: New crime-specific estimates for policy andprogram evaluation.” Drug and Alcohol Dependence Slide 31(2010): 98-109.
    32. 32. Sensitivity analysisSensitivity analysis provides information aboutthe degree to which cost-benefit analysis resultsare sensitive to changes in the estimates ofcosts or policy effects, as well as the underlyingassumptions. Slide 32
    33. 33. Types of sensitivity analysisBest and worst case scenariosBreak-even analysis Slide 33
    34. 34. ClosingThe type of analysis you select depends on thequestion you need to answer.Conducting a rigorous analysis requires theright tools. Slide 34
    35. 35. Cost-benefit toolkitForms of economic analysisTaxpayer costsVictim costsMarginal costsPerspectivesMonetizing benefitsDiscount ratesTime periodsSensitivity analysisCommunicating results Slide 35
    36. 36. Cost-Benefit Knowledge Bank for Criminal Justice(CBKB)Visit CBKB at http://www.cbkb.orgFollow us on Twitter athttp://www.twitter.com/CBKBankFriend us on Facebook athttp://www.facebook.com/costbenefit Slide 36
    37. 37. Contact informationChristian Henrichson(212) 376-3161chenrichson@vera.orgLora Krsulich(212) 376-5201lkrsulich@vera.orgSarah Fajardo(212) 376-3042sfajardo@vera.orgcbkb@cbkb.orghttp://www.cbkb.org Slide 37
    38. 38. This project is supported by Grant No. 2009-MU-BX K029 awarded by the Bureau ofJustice Assistance. The Bureau of Justice Assistance is a component of the Office ofJustice Programs, which also includes the Bureau of Justice Statistics, the NationalInstitute of Justice, the Office of Juvenile Justice and Delinquency Prevention, andthe Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering, andTracking. Points of view or opinions in this document are those of the author and donot represent the official position or policies of the United States Department ofJustice. Slide 38

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