Fiscal Impacts of the Opioid Crisis on State and Local Governments

AuthorRobert Bifulco,Iuliia Shybalkina
Published date01 September 2022
Date01 September 2022
324 ANNALS, AAPSS, 703, September 2022
DOI: 10.1177/00027162221137171
Fiscal Impacts
of the Opioid
Crisis on State
and Local
1137171ANN The Annals of the American AcademyFiscal Impacts of the Opioid Crisis
Adverse effects of the opioid crisis on individuals influ-
ence the need for state and local government expendi-
tures and erode their tax bases. Systematic estimates of
the magnitude of such fiscal impacts are lacking. We
estimate the magnitude of the effect of the opioid crisis
on state and local expenditures and discuss approaches
that might be taken to evaluate the impact of the crisis
on revenues. We find that the fiscal impacts of the opi-
oid crisis on state and local governments are modest for
the U.S. as a whole but are likely to be greater in states
with particularly high rates of opioid-use disorders. Our
analysis aims to encourage and guide more in-depth
studies in the future. Such studies can inform intergov-
ernmental aid policies designed to offset the fiscal
impacts of opioid misuse and can also contribute to
assessing damages in opioid lawsuits.
Keywords: opioid epidemic; state and local govern-
ment; fiscal impact; economic cost; health
care expenditures; criminal justice expen-
ditures; income tax revenue
Public officials report that opioid epidemics
have strained state and local government budg-
ets. In places affected by the crisis, interviews
with local officials suggest higher costs for child
removals, hospitals, emergency calls, medical
examiner and coroner services, jails, courts,
and homelessness assistance. Other impacts,
such as reductions in tax revenue due to lost
Robert Bifulco is a professor in the Public Administration
and International Affairs Department at the Maxwell
School, as well as a senior research associate in the
Center for Policy Research and the Education Finance
and Accountability Program (EFAP). His prior teach-
ing experience was at University of Connecticut, where
he received the Distinguished Professor Award.
Professor Bifulco has taught courses on public budget-
ing, state and local finance, economic analysis, educa-
tion policy, research methods, quantitative analysis,
and program evaluation.
economic productivity, are less directly observable by local officials, but no less
troublesome. In response, officials indicate that they have been forced to use
contingency funds, cut opioid response efforts, reduce spending on other govern-
ment priorities, and increase taxes (Farmer 2018; NACo and ARC 2019; Seligson
and Reid 2017). State and local governments have brought numerous lawsuits
against opioid manufacturers, distributors, retailers, and doctors in recent years,
based in part on the fiscal damages caused by the crisis (Hoffman 2021).
There are few systematic estimates of the magnitude of the fiscal impacts that
the opioid crisis has had on state and local governments, however, and this article
helps remedy that lack of knowledge. First, we lay out a definition of fiscal
impacts to guide such estimates, suggesting that opioid-use disorders (OUDs)
can influence the fiscal health of governments by affecting the need for public
services, the cost of providing those services, or the capacity of governments to
raise revenues. Second, we review existing evidence regarding the fiscal impacts
of the opioid crisis and related studies that have estimated broader social costs.
Third, we draw on studies that have assessed social costs to estimate the magni-
tude of the impact of the crisis on the expenditure needs of state and local gov-
ernments and discuss approaches that might be taken to estimate impacts on
revenue raising capacity. We also ask how large the fiscal impacts might be in
states with particularly high rates of OUDs. In our conclusion, we discuss the
possible implications of our findings for legal cases against opioid manufacturers
and distributors and for intergovernmental aid programs.
Our results indicate that the total fiscal impact of the opioid crisis on state and
local governments across the U.S. is not large. For instance, in the period 2016
through 2019, estimated impacts on expenditure needs range from $39 to $66 per
capita per year, or about 0.4 to 0.7 percent of total direct general expenditures by
state and local governments. There are reasons to believe that these estimates of
the effects of opioids on expenditure needs are less than the full impacts, and
these estimates do not include impacts on state and local government revenues,
which another study has estimated to be between $4 and $5 per capita in 2016
(Segel etal. 2019). We do not, however, find reasons to believe that the full fiscal
impacts for state and local governments have been large, on average.
Several qualifications of these conclusions are worth noting. First, fiscal
impacts are only a fraction of total social costs, as the latter include costs incurred
by private individuals as well as government agencies and have been estimated to
be as high as $622 billion (or nearly $2,000 per capita) in 2015 (Council of
Economic Advisors 2017). Second, the notion of fiscal impact used in this study
differs from the concept of the “cost of abatement,” which is often used in legal
claims against opioid manufacturers. The cost of abatement is typically inter-
preted to include the cost of new as well as existing programs needed to eradicate
Iuliia Shybalkina is an Assistant Professor at the Martin School at the University of Kentucky.
She specializes in the intersection of public budgeting / financial management and public man-
agement by studying public participation in local finance, property and sales taxes, economic
development, intergovernmental relations, and challenges in state and local finance. Her work
has been published in Public Budgeting and Finance, Economic Development Quarterly,
Public Administration, and Journal of Behavioral Public Administration.

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