La Follette School of Public Affairs

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1 Robert M. La Follette School of Public Affairs at the University of Wisconsin-Madison Working Paper Series La Follette School Working Paper No Statewide Expansion of Treatment Alternatives to Incarceration in Wisconsin: A Cost Benefit Analysis Anne Chapman MPA Candidate, La Follette School of Public Affairs Colin Christopher MIPA Candidate, La Follette School of Public Affairs Tim Nardine, MD MPH Candidate, Department of Population Health Sciences Karen Parkinson MIPA Candidate, La Follette School of Public Affairs Justin Rabbach MIPA Candidate, La Follette School of Public Affairs Nicole Thiher MIPA Candidate, La Follette School of Public Affairs April Observatory Drive, Madison, Wisconsin / The La Follette School takes no stand on policy issues; opinions expressed in this paper reflect the views of individual researchers and authors.

2 Statewide Expansion of Treatment Alternatives to Incarceration in Wisconsin: A Cost Benefit Analysis Prepared by: Anne Chapman, MPA Candidate, La Follette School of Public Affairs Colin Christopher, MIPA Candidate, La Follette School of Public Affairs Tim Nardine, MD, MPH Candidate, Department of Population Health Sciences Karen Parkinson, MIPA Candidate, La Follette School of Public Affairs Justin Rabbach, MIPA Candidate, La Follette School of Public Affairs Nicole Thiher, MIPA Candidate, La Follette School of Public Affairs Public Affairs Course 881: Cost-Benefit Analysis April 2012 Prepared for: Community Advocates Public Policy Institute 728 N. James Lovell St., 3rd Floor Milwaukee, WI 53233

3 Table of Contents Acknowledgments... iv Executive Summary... v Introduction... 7 Corrections in Wisconsin... 8 Treatment Alternatives and Diversion in Wisconsin... 9 Key Features of TAD Programs TAD Eligibility TAD Program Components TAD Results to Date Our Task The Washington State Institute for Public Policy Model Calculating the and Analysis Determining Levels of Financial Investment Allocation of Program Slots Analysis of Selected Portfolios using the WSIPP Model Results Conclusion References Appendix A: Wisconsin Counties Operating TAD Programs Appendix B: Wisconsin Drug Courts Appendix C: Wisconsin Diversion Programs Appendix D: History of the WSIPP Sentencing Tool Model Appendix E: Program Start-Up Appendix F: Calculation of Marginal Cost Police Court and Prosecutor Adult Local Jail Adult Local Supervision Adult State Prison ii

4 Adult Post-Prison Supervision Appendix G: Additional Wisconsin data that would further refine the WSIPP model Appendix H: WSIPP Comparison Programs Used in Analysis Drug Offender Sentencing Alternative (Proxy for TAD Diversion) Program Comparison between DOSA and TAD Diversion Programs Drug Court for Adult Offenders (proxy for TAD Drug Treatment Court) Program Comparison between WSIPP Drug Court and TAD Drug Court Programs Appendix I: Non-violent arrests in Wisconsin in Appendix J: Monte Carlo Analysis Appendix K: Victim Tangible and Intangible from Various Types of Non-Violent Offenses Appendix L: County Level Results for each Program Portfolio at different funding levels iii

5 Acknowledgments This analysis has benefited from the guidance and support of many individuals and organizations dedicated to serving the best interests of the public. Debra Kraft, Nick Sayner, and Marilyn Walczak from Community Advocates Public Policy Institute and Ray Luick from Office of Justice Assistance have been committed toward sound policy analysis of the criminal justice system for years and were invaluable to our group throughout the process. We are also grateful to Steve Aos and his team at the Washington State Institute for Public Policy for directing us and for allowing us the use of their cost-benefit model. We would also like to thank Dane County Deferred Prosecution Program Director Pat Hrubesky and Dane County Circuit Court Judge John Markson for their insight on corrections programming statewide. Kit Van Stelle, Janae Goodrich, and Jason Paltzer from the University of Wisconsin Madison Population Health Institute provided valuable insight and information regarding Treatment Alternatives and Diversion programs, for which we are grateful. Finally, this project would not have been possible without the interest and support of Professor David L. Weimer. His passion for analysis and dedication to our group provided us with invaluable clarity and direction throughout the project. iv

6 Executive Summary Correctional facilities in Wisconsin are overcrowded, housing more than 4,000 inmates above the design capacity of 17,354. Wisconsin Department of Corrections projects an increase in costs to maintain operations while facing a seven percent cut in funding in the state budget cycle. Wisconsin must respond to this challenge with costsaving measures. This process often requires a tradeoff between reducing the number of individuals incarcerated and protecting public safety. One approach to address this challenge is Wisconsin s Treatment Alternatives and Diversion (TAD) programs. This analysis predicts the costs and benefits of expanding TAD programs from seven sites to a statewide implementation. Using an economic model developed by the Washington State Institute for Public Policy, we used proxy programs to estimate the return to Wisconsin taxpayers and crime victims from an investment by the state of Wisconsin to expand TAD programs statewide. Based on the results of this analysis, we recommend that the state of Wisconsin invest $20 million annually in TAD programs, allocating 75 percent of that funding to diversion programs and 25 percent to drug courts. This investment generates a net present value (NPV) of benefits of $86 million after the first year or $83 million in benefits after subtracting $3 million in program start-up costs. Since 2007, Wisconsin has been operating seven TAD sites through a combination of state and local funding. These TAD sites implement a set of evidence-based corrections practices, primarily diversion from prosecution and drug treatment court. Although diversion and drug court serve different populations, both target non-violent offenders who demonstrate a need for substance abuse treatment. Both approaches offer an array of drug and alcohol treatment alongside community-based alternatives to incarceration. v

7 Using these practices, Wisconsin s TAD programs have demonstrated progress leading to a decrease in the number of individuals incarcerated, thus cutting corrections costs, while at the same time reducing recidivism and improving public safety. We used the Washington State Institute for Public Policy model to conduct a costbenefit analysis of three TAD program investment portfolios at three funding levels, calculating the NPV of each. The portfolios of TAD programs included the following: exclusive implementation of diversion, exclusive implementation of drug court, and a mixed portfolio of both approaches in which 75 percent of funding is allocated to diversion and 25 percent is allocated to drug court. We calculated the annual NPV as the following: benefits to taxpayers from crime reduction and avoided criminal justice costs; plus benefits to crime victims from crime reduction; minus program implementation and operation costs. We also include a separate first-year calculation of the NPV for each portfolio that includes the start-up costs for the program. Investment in drug courts alone, diversion alone, or a diversion/drug court combination provides a positive annual NPV at $5 million, $10 million, and $20 million. Although annually investing $20 million exclusively in diversion gives the largest NPV, we recommend splitting the investment between diversion and drug court as Wisconsin already has several well-functioning drug court programs. Because diversion and drug court programs serve different populations, communities could benefit from having both programs. Thus, we recommend investing in a portfolio that expands drug court capacity and recognizes the need to maintain programs that serve an offender population that requires more intensive treatment and monitoring services than diversion programs typically offer. vi

8 Introduction Current corrections policy in Wisconsin is unsustainable. Whether measured in terms of growth in prison population, corrections expenditures, or recidivism, Wisconsin faces a confluence of fiscal and logistical challenges. The state s prison population grew by 14 percent between 2000 and 2007 and is projected to expand by another 25 percent by As a result, the Wisconsin Department of Corrections projects $2.5 billion will be needed to reduce overcrowding in the prison system and accommodate the projected growth in the prison population. Moreover, trends in recidivism point to continued acceleration in the growth of both prison populations and corrections expenditures. Indeed, [f]orty percent of people released from prison in 2005 [in Wisconsin] were reincarcerated in state prison within two years. This represents an 11 percent jump above the two-year re-incarceration rate in 2000 (Council of State Governments Justice Center 2009, 4). Community Advocates Public Policy Institute is a Milwaukee-based advocacy organization addressing these trends. One of the organization s major advocacy initiatives is its Community Justice Project whose aim is to educate the public and other key stakeholders in Wisconsin about the value and importance of implementing comprehensive, evidence-based policy change within the statewide criminal justice system (Community Advocates Public Policy Institute 2012). To further this aim, the organization s Justice 2000 division administers one of seven state-funded pilot programs called Treatment Alternatives and Diversion (TAD). Statewide, TAD programs offer community-based alternatives to incarceration, including diversion, deferred prosecution, and drug treatment court. Preliminary program evaluations of Wisconsin s current TAD 7

9 sites suggest that public investments in TAD programs have the potential to reduce recidivism, incarceration, and overall corrections costs statewide. In an effort to quantify these outcomes, the organization requested that students at the University of Wisconsin- Madison La Follette School of Public Affairs conduct a cost-benefit analysis to estimate the impact of an expansion of TAD programs statewide. Corrections in Wisconsin Wisconsin operates 20 adult correctional facilities and 16 correctional centers. The state also administers educational programming, treatment programs, support groups, and vocational training. The design capacity of these facilities, defined by industry standards as the original capacity of the institution plus any expansions or modifications, is 17,354 inmates (Wisconsin Department of Corrections 2011b). The average daily prison population is approximately 22,000, representing an incarcerated population of more than 4,000 inmates above the design capacity of correctional facilities. The Wisconsin Department of Corrections fiscal year 2011 budget was $1.3 billion. Adult correctional services accounted for more than 85 percent, or $1.1 billion, of the 2011 budgeted expenditures. During fiscal year 2011, less than one percent, or $9.9 million, of the corrections budget was allocated for programs to increase public safety and reduce recidivism rates for adults. The department projects that maintaining the current level of operations will constitute a two and a half percent increase in total corrections costs over the next two years (Wisconsin Department of Corrections 2011a). By comparison, Minnesota had a 2011 corrections budget of $470 million, with an incarcerated population of 9,650 adult inmates (Minnesota Department of Corrections 2010). Wisconsin and Minnesota s geographic proximity and comparable ethnic, racial, and 8

10 socio-economic demographics allow for initial baseline comparisons. A comparison of 2009 data reveal respective Wisconsin and Minnesota median household incomes of $49,994 and $55,621, rates of individuals below the poverty line of 12.4 percent and 10.9 percent, and state populations of 5.7 million and 5.3 million, respectively (U.S. Census 2010a; 2010b). Given the similarities in their demographic and economic characteristics, the substantial difference in corrections expenditures between Wisconsin and Minnesota demonstrates a real prospect of significant cost savings for Wisconsin. Further, legislation enacted in 2011, Wisconsin Act 38, cancels previous legislation allowing prisoner early release, negating any potential relief for the corrections budget that would have been realized from early release. Additionally, Wisconsin is considering sending portions of its current and future overflowing inmate population to neighboring states. Outsourcing the incarceration of Wisconsin prisoners to out-of-state facilities incurs higher per-capita expenditures than incarcerating them in state. This further demonstrates the growing need for alternative corrections policies. Finally, the rising costs of maintaining facilities and programs and a seven percent reduction for corrections funding in the governor's budget require changes to bring corrections costs in line with funding levels (State of Wisconsin 2011). Treatment Alternatives and Diversion in Wisconsin In recognition of increasing corrections costs, legislators enacted 2005 Wisconsin Act 25 (Wisconsin Court System 2005) and authorized funding for grants to counties to operate TAD programs (Legislative Fiscal Bureau 2011) to reduce crime and maintain or enhance public safety, while simultaneously reducing public expenditures, especially on incarceration (Wisconsin Court System 2005). 9

11 Wisconsin's TAD programs primarily consist of two types of programs, drug treatment courts and diversion models. Grant funding by the Office of Justice Assistance since January 2007 has supported the operation of these programs in seven counties across Wisconsin. Burnett and Washburn (operating under a shared funding model), Rock, Wood, and Dane (partial funding) counties operate drug treatment courts. (A map of the counties implementing TAD programs appears in Appendix A.) Drug courts aim to provide treatment rather than mandatory incarceration to offenders who need substance abuse treatment. In general, the treatment and case management services that characterize drug treatment courts last 12 to 18 months (Van Stelle et al. 2011). (See Appendix B for a detailed explanation of drug treatment court.) Dane, Milwaukee, and Washington counties employ diversion models. Diversion consists of pretrial agreements that divert eligible offenders from the criminal justice system by offering them the opportunity to participate in treatment in lieu of criminal charges and incarceration. In contrast to TAD drug courts, which share a common approach based on standard National Drug Court Institute components, the TAD diversion models vary in several dimensions such as target population and program length. For example, Dane County offers a pre-trial bail diversion program for offenders with low to moderate substance abuse risk. Milwaukee s program serves a similar population with pre-charge diversion or deferred prosecution agreement options. However, Washington County serves a different population in terms of substance abuse treatment needs, offenders charged with second or third offenses of operating a motor vehicle while intoxicated, and offers them alternatives to revocation of probation or parole supervision (Van Stelle et al. 2011). Hence, although these three models share a common goal of diversion of offenders from 10

12 the criminal justice system, they vary in their approach. (See Appendix C for a detailed explanation of diversion programs.) When the TAD initiative was first announced in 2006, Wisconsin TAD programs collectively received $1.02 million for their first year (Wisconsin Office of Justice Assistance 2006). For the upcoming 2012 allocations, $968,400 will be available for all current programs and at least one additional program (Wisconsin Office of Justice Assistance 2011b). Key Features of TAD Programs The following section outlines TAD programs in Wisconsin, including eligibility of offenders, program components, and the results of TAD programs to date. TAD Eligibility Wisconsin s seven TAD sites follow similar criteria for determining offender eligibility for enrollment. By Wisconsin state law [2005 Wisconsin Act 25, 90m (12)], eligible participants cannot be violent offenders (i.e., a person charged with or convicted of having carried, possessed, or used a dangerous weapon; used force; or been involved in a crime that caused death or serious bodily harm). This standard allows offenders to remain TAD-eligible for these offenses: drug crimes, property crimes, and operating while intoxicated. In addition to eligibility based on crime, TAD participants have demonstrated a need for substance-abuse treatment, a necessary requirement given that the TAD programs focus is heavily weighted toward treating substance abuse problems. Beyond these baseline criteria, TAD sites employ site-specific and district attorney discretion-based criteria related to a variety of factors such as the severity of treatment needs, likelihood of pretrial failure or rearrest, or county of residence (Dane County, 11

13 Milwaukee County, Rock County, Washburn and Burnett counties, Washington County, Wood County). TAD Program Components Although each site s program design and target population vary slightly, the unifying hallmark of all TAD projects in Wisconsin is the use of evidence-based practices that provide alternatives to prosecution, parole revocation, conviction, and incarceration for non-violent offenders with substance abuse and possible mental health treatment needs. As described previously, these alternatives take two interconnected approaches to community-based, rather than incarceration-centered, criminal justice: diversion (including deferred prosecution and related models) and drug treatment courts. TAD Results to Date Since the inception of the TAD grants, the University of Wisconsin Madison Population Health Institute has conducted ongoing performance evaluations of the TAD sites. Its statistical findings relate to criminal justice outcomes such as the number of diversions from prosecution, incidents of recidivism (e.g. new Wisconsin incarcerations, and new Wisconsin convictions), and avoided days of incarceration. Results from a 2011 institute study suggest that TAD programs, as implemented in the seven current sites, hold considerable promise as models for reducing incarceration rates while improving public safety. Collectively, the seven TAD sites can serve an annual capacity of 426 to 545 participants. In the four years since TAD began, the Population Health Institute found that the programs admitted 2,061 participants with an overall graduation rate of 64 percent. Drug court participants graduated at a rate of 55 percent, which exceeds the estimated average national drug court graduation rate of 50 percent. The TAD diversion graduation 12

14 rate of 66 percent is lower than an estimated national median rate of 85 percent (where the majority of programs had completion rates above 70 percent). Overall, TAD programs in Wisconsin resulted in an estimated 135,118 avoided days of incarceration between 2007 and In addition, offenders who completed TAD programs were significantly less likely to be convicted of a new criminal offense or sentenced to more incarceration than those who did not complete the program (Van Stelle et al. 2011). Our Task The apparent success that Wisconsin TAD programs have demonstrated in achieving favorable criminal justice and public safety outcomes suggests that a statewide expansion could provide substantial social and economic benefits to the state. One way policymakers could expand the reach of TAD is by diverting public funds for adult corrections from incarceration to these community-based strategies. A significant obstacle to this type of reform lies in the perception that alternatives to incarceration such as TAD programs constitute a soft-on-crime approach to public safety. Preliminary evidence, however, shows that evidence-based programs like TAD reduce recidivism while lowering criminal justice system costs by avoiding costs associated with policing, arrest processing, courts, and incarceration. Our task is to consider these results in the context of Wisconsin corrections to answer the following question: Would a statewide implementation of TAD programs provide a positive return on investment for Wisconsin residents by reducing crime and the cost of corrections? 13

15 The Washington State Institute for Public Policy Model Ideally, we would have conducted a cost-benefit analysis of expanding TAD programs throughout Wisconsin by estimating TAD s specific programmatic outcomes; predicting the net benefits of TAD programs in the state; and extrapolating such findings for statewide expansion. In the absence of available data to do this directly, we employed an economic model developed by the Washington State Institute for Public Policy (WSIPP) to project statewide impacts of proxy programs for TAD in Wisconsin. Based on findings from this model, the Washington legislature changed several crime-related policies. In 2007, it allocated $48 million in the biennial budget for the expanded use of evidencebased programs (Drake et al. 2009). (See Appendix D for background information regarding the WSIPP sentencing tool model.) This model has since become nationally recognized. The Pew Foundation is providing funding to begin tailoring the model to reflect the specific situations of each state. Our use of the WSIPP model did not include changing all figures to reflect exact Wisconsin specifications. Before the implementation of programs in Washington, WSIPP used national averages to approximate the predicted effects within the state. As Washington continued to fund these programs, and more state specific data became available, WSIPP has continued to refine the model. We acknowledge that the proxy programs used from the selection available in the WSIPP model are not perfect comparisons, but rather our best approximations of Wisconsin s TAD programs. For drug court, the model employs a meta analysis of more than 50 studies nationwide between 1997 and For the Drug Offender Sentencing Alternative (DOSA), the model uses a 2006 study from the Washington DOSA program. 14

16 Figure 1 lays out the basic framework of the WSIPP model. In this study, we did not change sentencing policies, and therefore did not directly alter the number of people in prison. Instead, we looked only at the costs and benefits of implementing drug courts or diversion programs for adults who commit non-violent crimes in Wisconsin. The WSIPP model calculates the benefits of starting or expanding these evidence-based programs as the avoided costs to the criminal justice system and the avoided costs of victimization that result from a reduction in crime and recidivism. As a result, the outcomes reflect the costs and benefits of reducing crime through drug courts and diversion programs, the impact the programs have on victimization rates and government spending, and the estimated return on public investments for various policy options (Aos et al. 2011b). The WSIPP model monetized values of these impacts, which determine, from a societal efficiency perspective, whether the total benefits of the programs are greater than their cost of implementation. Figure 1: WSIPP Model Flow Chart Decide investment level Invest in a portfolio of evidencebased programs Model calculates the change in crime rate Model calculates the change in taxpayer spending Model determines total net benefits of the portfolio of evidencebased programs Source: Authors Calculating the and To estimate the costs of the evidence-based drug court and diversion programs and their effectiveness in reducing crime, WSIPP conducted detailed meta-analyses of highquality evaluations of these types of programs already being administered. The institute 15

17 calculated weighted average effects to predict the efficacy of each program in reducing crime. The costs of these evidence-based programs in the model are based on the marginal cost of one additional person going through an existing program. Although capital costs have been included through annualizing, these costs do not include the start-up costs of beginning a new program (Drake et al. 2009). As a result, these costs and benefits may not fully reflect the net impact of starting a new program. In our analysis we present the annual net present value (NPV) of the benefits of each of our portfolios at three funding levels. We then also include an estimation of first-year benefits that include start-up costs. The specifics of the calculation of start-up costs appear in Appendix E. We consider the following two types of benefits in this model: 1) the financial benefits to the government from avoided criminal justice system costs resulting from reductions in crime and recidivism; and 2) the social and financial benefits to potential crime victims of avoided victimizations (Aos et al. 2011b). For example, if an evidencebased program reduces crime rates in Wisconsin, then the government would save money due to reduced costs throughout the criminal justice system. Similarly, if fewer crimes are committed, then fewer victims will suffer both the tangible and intangible costs that result from crime. With a more comprehensive data source, we could have considered benefits to the offenders who participate in these programs. Future versions of the WSIPP model will incorporate the impact of these benefits (including impacts on education, child welfare, health, substance abuse, income, and welfare) and will provide policymakers with a more comprehensive set of benefits to consider (Aos et al. 2011b). 16

18 The WSIPP model accounts for all of the criminal justice per-unit costs leading up to and including incarceration, as well as costs incurred by crime victims. Table 1 shows all of the sources of costs included in the model. Resource costs and victim costs avoided as a result of a reduction in crime count as program benefits, while all program operations costs count as program costs. Table 1: Per-unit cost categories Resource Marginal Operating Capital Victim Program Police Police Tangible Drug Court Courts and Prosecutors Courts and Drug Offender Intangible Prosecutors Sentencing Alternative Adult Jail Adult Jail Adult Local Supervision Adult State Prison Adult State Prison Adult Post-Prison Supervision Source: (Aos and Drake, 2010b) Marginal operating costs are the added costs to the government for every additional person going through each part of the criminal justice system. These added costs would include employee wages, administrative costs, and supplies. Capital costs include the purchase of buildings, vehicles, equipment, and other large, long-term purchases. Capital costs do not necessarily increase as more participants enroll in a given program. Changes in capital cost inputs occur only after a program reaches a given capacity threshold. These costs accrue directly to the government, funded through tax dollars. Hence, a reduction in corrections costs counts as taxpayer benefits. The model's calculations of costs also consider the impact of the marginal excess tax burden, the amount of money lost to society from raising an additional tax, estimated to be 17 cents for each dollar of taxes raised (Boardman et al. 2011). 17

19 In addition to taxpayer-borne costs, victims incur some of the costs of crime. The model includes both tangible and intangible costs that victims bear. Tangible costs are the real financial losses that victims incur, including medical and mental health care expenses, property damage and losses, and the reduction of the victim s future earnings. Intangible costs place a dollar value on the pain and suffering experienced by the victims. In this model, WSIPP estimates intangible victim costs by using jury awards for pain, suffering, and loss of quality of life (Aos et al. 2011b). The WSIPP model analyzes policies specific to Washington State. Therefore, we adapted the data and inputs for Wisconsin. For example, we changed the average daily prison population data input from 18,400 to 22,212 to mirror the average daily prison population of Wisconsin in 2009 (Mize 2009). The largest change we made was to adjust the per-unit cost estimates for each of the seven parts of the criminal justice system listed in Table 1 for seven different categories of crimes. We used the cost estimates calculated for Wisconsin in Fredericks et al. (2010), where they calculated the Wisconsin-specific perunit cost inputs necessary for this model (see Appendix F). Ideally, we would have also adjusted the annual costs of participation along with average effectiveness of these programs to reflect Wisconsin results, but we could not due to data constraints. (See Appendix G for a listing of additional refinement options for incorporation in future analysis.) Analysis To produce an estimated impact of TAD programs when scaled up to various statewide capacities, we used WSIPP s findings from similar programs nationwide as a proxy. In choosing comparison programs from the WSIPP catalog, we sought to identify the 18

20 programs that most closely aligned with the two primary TAD intervention models: diversion and drug court. Selection of a companion program for TAD s drug court was relatively straightforward. Although drug courts differ somewhat in design details and administrative context (Hrubesky 2011; Markson 2011; Sayner 2011a; Van Stelle et al. 2011), they are relatively standardized in that they all are based on ten specific program components developed by the National Drug Court Institute (Van Stelle et al. 2011). Therefore, we selected WSIPP s Drug Court for Adult Offenders program to provide a proxy for TAD s drug treatment court programs in our analysis (Aos et al. 2011a). Because TAD diversion models vary in approach and context more than TAD drug courts do, finding a WSIPP program to represent TAD diversion programs is more difficult than selection of a TAD drug court proxy. In addition, the WSIPP catalog does not contain a program that perfectly matches TAD diversion programs. However, we selected DOSA, the program that matches closest, to simulate the estimated impact of diversion programs if expanded throughout Wisconsin. Both DOSA and TAD diversion programs offer substance abuse treatment to nonviolent offenders with substance abuse treatment needs. The main limitation to this comparison is that, whereas diversion projects concern diversion from courts and jail, DOSA offers reduced prison sentences for offenders sentenced to prison and residential community-based treatment for offenders not sentenced to prison. As the WSIPP model does not contain a program that employs diversion from jail, we determined DOSA to be the best available comparison program, given its similar intent to reduce incarceration in favor of providing evidence-based substance abuse treatment to those who 19

21 could benefit most. Appendix H provides more details on the similarities and differences between TAD programs and WSIPP programs. After matching TAD programs to the WSIPP programs, we determined the feasible capacity estimates required to assess the overall monetary impact of a given portfolio of programs. This process included determining the levels of financial investment in selected programs, calculating the number of slots funded at the state level, allocating the slots at the county level while accounting for size constraints and feasibility, running the various county level portfolios through the WSIPP model, and aggregating these county level estimates to obtain state-level estimates. Determining Levels of Financial Investment To determine appropriate levels of financial investment in our selected programs, we used program capacity estimates based on 2010 operating levels of TAD programs in Wisconsin. For 2010, Wisconsin TAD participants across all programs represented approximately one percent of the annual number of non-violent arrests in counties operating TAD programs. We determined that statewide implementation of the selected programs at the level of one percent of annual statewide arrests would require funding approximately 3,500 program slots. See Appendix I for statewide non-violent arrest figures for Wisconsin. Looking at the marginal costs of program participants in, the selected WSIPP DOSA and Drug Court programs, we determined that funding a statewide expansion of 3,500 slots in only diversion programs would cost approximately $5 million dollars, while funding 3,500 drug court slots would cost approximately $14 million. With both programs active in Wisconsin, we determined that funding the 3,500 program slots necessary to attain a capacity equal to one percent of annual non-violent arrests statewide could be 20

22 attained with $10 million, allowing for some flexibility in division of funding between the two programs. The $10 million figure represents less than one percent of the Wisconsin Department of Corrections 2011 fiscal year budget of $1.3 billion (Wisconsin Department of Corrections 2011a). Although multiple factors such as participant willingness to volunteer and referral sources may affect the number of participants in a program, an important factor in determining the level of participation at a TAD site is the amount of available funding. Taking this fact into consideration, to demonstrate the possible range of results that could be achieved from differing funding levels for a portfolio of programs, we analyzed each portfolio for each county at statewide funding levels of $5 million, $10 million, and $20 million. These figures provide a cushioned estimate around the initial $10 million allocation described above, which allows us to better gauge a range of NPV of benefits for a given change in the funding of programs. Using these three expenditure levels, we determined the number of funded slots for drug courts and diversion programs across the state. The constant marginal cost estimates of an additional program participant from the WSIPP model for drug court and diversion were used with a specific funding level to determine the total number of slots that could be funded with a statewide implementation of only a drug court program or only a diversion program. For example, the marginal cost estimate of an additional program participant for drug court in the WSIPP model is $4,095. With $10 million in funding, if all of the funds went to drug court, 2,442 participant slots would be funded. Using the same formula produces the number of slots for both drug court and diversion at $5 million, $10 million, and $20 million levels. We present the results of these calculations in Table 2. 21

23 In addition to portfolios consisting entirely of drug court or diversion, we analyzed a portfolio that allocated 75 percent of the funding at a given level to diversion and the remaining 25 percent to drug court. We chose these percentages because diversion produces comparable reductions in recidivism rates to drug court, but at a substantially lower expense (Aos et al. 2011a; Sayner 2011a). We also allocated funds to drug court, as this program is already in place in several Wisconsin counties and specifically addresses the more serious, high-risk cases that require intensive supervision and treatment. Investing in diversion allows the state to avoid expending additional resources by addressing problems early, increasing the likelihood that offenders never end up in drug court or prison. This relationship suggests potential benefits to having both programs operate in the same county. We list the number of program slots funded statewide under this portfolio in Table 2. Table 2: Number of program slots funded statewide at a given investment level Program Marginal Cost $5 Million $10 Million $20 Million Diversion $1,509 3,315 6,629 13,253 Drug Court $4,095 1,221 2,442 4,884 75%/25% Split (Diversion + See marginal costs above 2, = 2,792 4, = 5,582 9, ,218 = 11,161 Drug Court) Source: Authors The number of slots represents an annual investment in a program at a specific funding level. These figures are annual costs and do not include start-up costs. The start-up costs we include in our analysis are a one-time investment separate from these annual investment figures. 22

24 Allocation of Program Slots While the aggregate statewide impacts of the program are useful for comparison and policy decisions, the program effect at the county level is important to consider. Additionally, WSIPP director Steve Aos suggested to us that analysis of a selected program was best completed on the margins when using the WSIPP model. His recommendation stemmed from our use of the model to simulate grant funding rather than funding through a reduction in the average daily prison population. Trying to run the model for a full statewide implementation would have caused irregularities in the calculated values. At such high program slot numbers, the total cost would be much higher than the budget allotted by the model because we did not allow the model to fund the programs through a reduction in the average daily prison population. Consequently, our analysis first allocated program slots to each county for each of the three portfolios at our three given funding levels. We then ran the model separately for every county for each of the nine portfoliofunding level combinations. To determine a county s allocation of slots at a given funding level, we took the annual number of non-violent crime arrests in that county and divided by the total number of non-violent crime arrests in the state. Each county was given an assigned proportion of the non-violent crime arrests that occurred in the state. Taking these proportions and multiplying them by the number of available slots statewide gave each county its allocation of slots for a specific program under a given funding plan. Using this method, however, yielded such small allocations to some counties that taking on the start-up and ongoing administrative costs of the program would not be advisable. For example, some counties have such a relatively low proportion of non-violent 23

25 crime arrests that they would only receive enough funding for one program slot. Setting up a county-level program with only one annual participant would not be practical. In terms of a statewide implementation strategy, we suggest several options. One option, a dual-county administration of programs, would allow neighboring counties to share operations and costs and thus bring the number of allocated program slots up to some minimum number. This coordination could lead to the availability of programs to residents of all counties throughout the state. We refrained from defining specific dual-county administrative partnerships in this report as they would change depending on the level of statewide funding and require collaboration and logistical decisions on the part of local county governments. We believe that arbitrary partner assignments in this report would fail to properly assess all details needed for consideration before the forming of a partnership. Proof of the viability of this option does exist, however, as a set of TAD programs are implemented under the dual administration of Washburn and Burnett counties. For this analysis, we selected a second option, focusing on the implementation of programs in counties with a relatively higher number of non-violent arrests. Under this option, programs are not offered in all counties. Holding the funding level constant, the slots that would have been assigned to counties below a designated minimum we reallocated proportionally to those counties above the minimum. This process is explained below. We determined eight annual participants for drug court or diversion as the minimum needed to justify the start-up and continued administration of that program in a specific county. This minimum threshold was chosen as a reflection of the current 24

26 operation of TAD programs in Wisconsin. The lowest annual program participation rate was eight participants in each type of program for either drug court or diversion. This means that no program in operation served fewer than eight participants in a given year. Using eight annual participants as the cutoff for both programs, we proportionally reassigned program slots from counties that did not reach the required minimum to the remaining counties. For the portfolios consisting exclusively of drug court or diversion, any county that was below the minimum eight slots was excluded from having that program in that county (i.e. if only drug court or diversion were to be implemented, and a county was below eight slots, it would not be allocated any funding and likely would not implement a program). Under the split portfolio of 75 percent diversion funding and 25 percent drug court, we excluded counties fully from having a program only if both drug court and diversion slot allocations were each less than eight at the given funding level. This means that in order for a county to host neither program, they would have needed to have allocations of fewer than eight participants in both programs. Diversion is less costly to administer, and several counties met the minimum requirement for diversion but not for drug court. In these cases, the counties still received the allocated diversion program slots and would implement the diversion program. The drug court slots, which were below the minimum number of eight participants in this case, were reassigned to counties that had allocated drug court slots of more than eight participants. This method of reallocation resulted in a set of counties in the split portfolio that would only host diversion programs. Analysis of Selected Portfolios using the WSIPP Model For each county-level slot allocation we ran in the WSIPP model, we recorded the corresponding results for changes in taxpayer costs, changes in victimizations, and the 25

27 likelihood in percentage terms that a given level of investment in a selected program would reduce victimizations. All analyzed portfolios produced results demonstrating a reduction in taxpayer costs. This cost reduction is a benefit accruing to taxpayers, and thus we present these figures as positive numbers titled benefits to taxpayers. All analyzed portfolios also reduced victimizations. These reductions are listed in our results tables as negative numbers, reflecting the number of fewer crimes predicted form the status quo. Each reduction estimate is the mean result of a Monte Carlo analysis within the WSIPP model. This analysis generates a percentage figure representing the portion of trials in which victimizations were reduced. This percentage allows for an assessment of the risk that a given investment in a portfolio of programs would actually result in an increase in victimizations. For example, we may list the reductions in victimizations from a given portfolio to be -15 with a likelihood of reductions to be 99 percent. This means that portfolio was run through the WSIPP model 10,000 times, and on average the predicted number of reduced crimes was 15. The 99 percent means that in 99 percent of the trials the predicted change in crime was negative. For further explanation of the Monte Carlo analysis used in the WSIPP model, see Appendix J. In addition to results extracted directly from the WSIPP model, we provide a monetized valuation of the benefits that accrue to victims as a result of the reduction in victimizations. Using existing research, we calculated an average cost associated with a single victimization of a type of crime. We then created weighted monetized values of a single reduced victimization as a result of participation in diversion or drug court. Our calculations produced a value of $4,495 for a victimization reduced from diversion and 26

28 $10,216 from drug court. (Appendix K provides an explanation of this calculation.) The numbers differ between programs due to differences in the populations they serve. These values allow for a calculation of victim benefits by multiplying them by the change in victimizations from a given program (obtained from the model). We define these figures as benefits to crime victims and list them as positive dollar values in our result tables (Tables 3, 4, and 5). The results described above for each county under each program portfolio at each funding level appear in Appendix L. Results We found the statewide effects of a specific program portfolio at a given funding level by aggregating the individual county level effects in that category. The statewide results of investments in each portfolio appear in Tables 3, 4, and 5. The first NPV figure, NPV ( Program ) Statewide, represents the annual benefits predicted from the specified annual investment in each program. Additionally, we provide a value representing necessary start-up costs that represent a one-time investment separate from the annual investment in the program. Thus, the second figure represents the NPV in the first year of operation. All dollar figures have been rounded to the nearest million. Table 3 shows positive annual statewide NPV of benefits of drug court at all investment levels before including start-up costs incurred in the first year, but only at a $20 million investment after including start-up costs. This difference demonstrates an issue of scale. An investment in drug court only makes sense if expenditures amount to a particular level of program participants that justifies the training of staff members to administer the program. (Please note that we estimated start-costs at a $5 million investment in drug 27

29 court to be $427,500 and we thus rounded to $0. In addition, the NPV figures that rounded to $0 resulted in actual values of the following: $5 million with start-up costs equaled $131,333; and $10 million with start-up costs equaled $389,531.) In terms of crime reduction, we see that an exclusive funding of drug court programs at all levels leads to confident estimates of victimization reductions. Table 3: Statewide results from exclusive funding of drug court programs Investment Level $5 Million $10 Million $20 Million Program Slots Funded 1,221 2,443 4,885 Change in Victimizations Trials where Victimizations are Reduced 100% 100% 100% to Taxpayers $3 million $6 million $12 million to Crime Victims $2 million $4 million $8 million NPV ( - Program ) Statewide $1 million $1 million $2 million First-year Start-Up $0 $1 million $1 million NPV ( -Program First-year Start-up ) Statewide Source: Authors $0 $0 $1 million 28

30 Table 4 presents the results based on exclusive funding of diversion programs at the three funding levels. In this case we find clearly positive NPV of all investments and these investments provide large returns while reducing crime. A $20 million investment exclusively in diversion leads to a calculated NPV of benefits of $106 million annually after the first year, incurring $4 million of first-year start-up costs. This investment also predicts a crime reduction of more than 8,000 victimizations. Table 4: Statewide results from exclusive funding of diversion programs Investment Level $5 Million $10 Million $20 Million Program Slots Funded 3,311 6,626 13,248 Change in Victimizations -2,192-4,415-8,682 Trials where Victimizations are Reduced 99% 99% 99% to Taxpayers $22 million $44 million $87 million to Crime Victims $17 million $35 million $68 million NPV ( - Program ) Statewide $27 million $54 million $106 million First-year Start-up $1 million $2 million $4 million NPV ( - Program First-year Start-up ) Statewide Source: Authors $26 million $52 million $102 million 29

31 Table 5 presents results of split investments of 75 percent in diversion and 25 percent in drug court. In this case, all three funding levels result in positive calculations of the NPV of benefits and reductions in crime. Thus, these portfolios reduce crime and costs. The inclusion of relatively more expensive drug court programs in these portfolios leads to fewer overall program slots being funded at each level here, as compared to the same funding level with only diversion. The highest calculated NPV of benefits comes with the highest level of investment, where a $20 million investment leads to a calculated NPV of benefits of $86 million annually, following the first year in which $3 million of start-up costs incurs. This investment predicts a reduction in crime of nearly 7,000 victimizations. Table 5: Statewide results from a 75% diversion and 25% drug court investment Investment Level $5 Million $10 Million $20 Million Program Slots Funded 2,485 DOSA Drug Court = 2, DOSA Drug Court = 5,577 9,945 DOSA + 1,218 Drug Court = 11,163 Change in Victimizations -1,703-3,419-6,751 Trials where Victimizations are Reduced 99% 99% 99% to Taxpayers $17 million $35 million $66 million to Crime Victims $13 million $26 million $53 million NPV ( - Program ) Statewide $22 million $45 million $86 million First-year Start-up $1 million $2 million $3 million NPV ( -Program First-year Start-up ) Statewide Source: Authors $21 million $43 million $83 million 30

32 Conclusion This analysis demonstrates that positive monetary and social benefits can result through an investment to expand TAD programs statewide. Excluding start-up costs incurred only in the first year, investing $5 million, $10 million, or $20 million in drug courts alone, diversion alone, or a 75/25-percent split between diversion and drug court leads to a relatively large positive NPV of benefits for the residents of the state of Wisconsin. While the largest NPV of benefits at each funding level are realized from investments made exclusively into diversion programs, we recognize that other factors beyond monetary efficiency play a role in the decision to invest in these programs. We account for considerations such as public perception of being tough on crime, the difference in the populations that diversion and drug court serve, and that both programs are already implemented in Wisconsin. From this, we recommend an annual investment of $20 million into a mixed program, with 75 percent going to diversion and 25 percent going to drug courts. We make this recommendation assuming that the taxpayer investment would be shared among a broad array of stakeholders throughout the state s criminal justice system. We believe this recommendation to be feasible, as it represents a level of investment equivalent to approximately 1.5 percent of the $1.3 billion Department of Corrections budget, and this agency is only one piece of the overall criminal justice system that may contribute to TAD expansion. This investment returns a NPV of $86 million annually, an increase of four times the initial expenditure. Funding both programs allows for inclusion 31