Improving Budget Analysis of State Criminal Justice Reforms: A Strategy For Better Outcomes and Saving Money

An increasing number of states are considering criminal justice reforms proven to protect the public and produce significant cost savings. For example, some states are offering effective addiction treatment to more people convicted of drug-related crimes instead of incarcerating them. Other states are increasingly turning to sanctions other than prison time for people who violate the technical conditions of their parole, for example, by missing a meeting with their parole officer. The states that have implemented these reforms have seen their crime rates remain at historically low levels or fall further and have saved many millions of dollars in prison construction and operating costs, freeing up revenue they can use to avert or restore some recession-driven cuts to schools and other priorities. By allowing people who pose little threat to others’ safety to remain in the workforce and their communities, rather than in prison, these new approaches also pay off for states by providing broader economic and social benefits.

Despite those positives, some states have rejected these types of reforms. In some cases, legislators may have turned them down because they were not given a rigorous assessment of the cost savings that would result. Often, official state estimates of the savings or cost of proposed legislation either lack the information necessary to good decision-making or are not produced at all. By improving these estimates, known as “fiscal notes,” states can help legislators recognize any cost benefits and better allocate scarce budgetary resources.

Based on an analysis of all the fiscal notes written by states for significant adult sentencing and corrections bills enacted in the past three years^[2] — a total of over 600 bills from 49 states — this report finds that:

• States did not write fiscal notes for about 40 percent of the bills. Two states, Delaware and Hawaii, never write fiscal notes for criminal justice bills. Others, including South Dakota and Vermont, rarely write them. Without an official certification that a bill would save money, legislators may have less incentive to vote for it.
• The majority of states failed to examine fiscal impacts beyond a year or two into the future. Fifteen of the 29 states that wrote fiscal notes finding a significant fiscal impact failed to estimate the impact beyond two years. Some effective criminal justice reforms, including certain drug and mental health treatment programs, require initial modest startup costs but reduce future prison spending significantly. Without an official recognition of the future savings, legislators are less likely to be aware of the long-term fiscal benefits of these reforms, reducing the chances of enactment.
• About 15 percent of fiscal notes did not estimate a budgetary impact or indicated only that the impact was a generically positive or negative one. While some of these notes contained some useful information, they failed to accomplish the primary goal of a fiscal note:  to provide the best possible estimate of the bill’s impact on the state budget.
• Few states described the method used to determine fiscal impacts. Only 13 of the 29 states that wrote fiscal notes finding a significant impact consistently described the method they used to determine the cost or savings of a bill. Without an understanding of the methodology, lawmakers and the public are less able to evaluate the accuracy of fiscal notes, reducing their credibility and usefulness.
• Some states do little to ensure the credibility of their fiscal notes. In some states, executive branch agencies produce fiscal notes with no review by nonpartisan analysts. Perhaps worse, in New York a bill’s legislative sponsor produces its fiscal note and may use any methodology and sources to estimate the impact. Legislators must believe that fiscal note findings are credible before they can rely on them when deciding how to vote.

This report lays out best practices for writing criminal justice fiscal notes — ways to make these notes maximally useful to lawmakers and the public. A few states, including Texas and Washington, already produce fiscal notes that meet most of these standards, but no state incorporates all of these best practices. All states could improve their fiscal notes. Achieving these best practices may require states to appropriate a bit more money to the agencies that write fiscal notes (see Text Box). Nearly all the best practices described here apply to all fiscal notes, not just notes for criminal justice bills.