Bang for the buck: knowing which policies provide the best financial return is a powerful tool for lawmakers.

• Author: Williams, Richard

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Getting the biggest bang for each taxpayer buck is a priority for all state lawmakers dealing with the current budget crunch. With every decision, however, lawmakers are faced with a daunting volume of information. Choosing which policies offer the best short- and long-term return on investment is no simple matter.

Many lawmakers are turning to cost-benefit analysis to help make complex decisions, such as whether it is in the best interest of the state to invest in building a new prison or support a drug rehabilitation program. It's a tool that allows leaders to compare several public policy options to determine the best value. Cost-benefit analysis can assess programs with different goals because it turns all results into monetary values.

COST-BENEFIT ANALYSIS IN PRACTICE

Cost-benefit analysis determines only a program's cost-effectiveness, not its overall success. To understand the value of each option, lawmakers must look at the data side-by-side with evaluations of the program itself to help them identify the best policy options. For this reason, cost-benefit analysis is most valuable in issue areas that have reliable program data.

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In recent years, state officials have become increasingly interested in cost-benefit analysis in large part because of the experience in Washington. There, the Washington State Institute for Public Policy (WSIPP), a nonpartisan research office, has been conducting policy analysis at the direction of the Legislature since it was formed in 1983.

In the mid-1990s, the Legislature directed the institute to conduct evidence-based policy assessments on the state's criminal and juvenile justice systems. Through this initiative, WSIPP began using cost-benefit analysis in an effort to determine which programs made economic sense for Washington and also lowered recidivism rates.

One study in 1997 attempted to identify programs for the state's juvenile courts that reduce crime and save money. The institute conducted a review of many nationally known programs and identified several as cost-effective options, including Functional Family Therapy, an approach designed to improve a child's surroundings and increase communication among family members.

Although Functional Family Therapy was found to be cost effective in 1997, cost-benefit analysis allows for updated assessments as more program information becomes available. This helps to ensure that state programs continue to be...