Bulletin on Narcotics
Volume LII, Nos. 1 and 2, 2000
Economic and social costs of substance abuse
Estimating the costs of substance abuse to state budgets in the United States of America
S. E. FOSTER
Vice President and Director of Policy Research and Analysis, National Center on Addiction and Substance Abuse at Columbia University, New York, United States of America
Research Associate, National Center on Addiction and Substance Abuse at Columbia University, New York, United States of America
The National Center on Addiction and Substance Abuse at Columbia University is conducting a study on the impact of substance abuse on the budgets of the governments of the 50 states in the United States of America, the District of Columbia and Puerto Rico. The goals of the study are to provide policy makers with a map of how substance abuse affects the costs of state governments; to document the total bill for substance abuse that states pay, itemizing expenditure on prevention, treatment, research and consequences; and to point the way to more cost-effective investments.
The present article documents the methodology used in the study by the National Center on Addiction and Substance Abuse to estimate state costs linked to substance abuse. The methodology relies on previously documented costs of illness research to estimate the costs imposed by substance abuse on the health-care system and on the state workforce. It also documents costs that are directly attributable, namely, prevention, treatment, research and regulation. Finally, the methodology establishes the pool of substance-involved individuals for whom prevention and treatment may be a necessary condition of reducing public spending. The study demonstrates that states devote tremendous resources to managing the effects of substance abuse, while only a small portion of state spending is aimed at reducing substance abuse through treatment and prevention programmes. By providing a map of state spending on substance abuse, the study has established a base against which policy makers can begin to compare the value of alternative policies concerning prevention, treatment, regulation and tax that might reduce the consequences of substance abuse and addiction. Understanding the enormous costs attached to current policy choices with regard to substance abuse should help policy makers think more strategically about how they might invest in interventions that would yield a better return.
In the United States of America, spending on efforts to deal with substance abuse has, historically, been a minor blip on the radar of state budgeting. As the links between substance abuse and crime, child abuse and neglect, traffic accidents, disease and disability have been uncovered, state policy makers have begun to understand that substance abuse and addiction and their associated costs cut far deeper into state budgets than previously imagined.
To document just how large the toll is, the National Center on Addiction and Substance Abuse at Columbia University (CASA) is conducting a study of the impact of substance abuse on the budgets of the governments of the 50 states in the United States, the District of Columbia and Puerto Rico. The goals of the study are to provide policy makers with a spending map of the many ways that substance abuse affects the costs of state governments; to document the total bill for substance abuse that states pay, itemizing expenditures on prevention, treatment, research and consequences; and to point the way to more cost-effective state investments.
Better investments in the area of substance abuse are essential for three reasons. Firstly, current government spending on efforts to deal with substance abuse is bad public policy because it does not attempt to address the problem of untreated substance abuse and addiction, paying extraordinary costs for preventable consequences. Secondly, current thinking about government spending as inevitable annual outlay rather than as investment in better results neither encourages nor demands the development of more cost-effective prevention, treatment or intervention. Finally, the bad public policy of not addressing the problem of substance abuse and addiction is fast becoming bad politics because it involves profligate spending with no accountability.
The aim of the present article is to document the methodology used by CASA to estimate state costs linked to substance abuse and addiction for the purposes of inviting both domestic and international comment and refining the approach.
Previous attempts to document costs of substance abuse primarily have taken the form of cost-of-illness studies that estimate the overall economic costs to society of the abuse of drugs, alcohol and tobacco [1, 2]. Those studies have been compelling but they have not provided comprehensive estimates of costs to government. Other approaches have estimated the costs of substance abuse to selected government programmes such as health care [3, 4], federal entitlement programmes , prisons and jails  and child welfare . Those estimates have been of value to states but their narrow focus has not provided policy makers with aggregate spending across budget categories. Both approaches have failed to capture the attention of a critical mass of state policy makers or persuade them of the economic value of allocating resources in a different manner.
To gather data for the study, CASA administered a survey in September 1998 in the 50 states of the United States, the District of Columbia and Puerto Rico. The survey was completed by the authorities of 45 states, the District of Columbia and Puerto Rico.1 The participating jurisdictions account for approximately 90 per cent of budget spending at the state level in the country.
To determine which state programmes to include in the study, CASA undertook the following:
(a) A wide range of literature on the consequences of substance abuse for government programmes was reviewed;
(b) State programmes designed to prevent or treat substance abuse or to deal with the consequences of substance abuse were identified. In the latter category, only those programmes were included that were large enough to be of any consequence in terms of affecting the total amount spent on efforts to deal with substance abuse;
(c) State budget and programme officials were consulted to understand how those programmes were financed and to determine the most efficient and effective way to gather the data on spending;
(d) Between March 1998 and August 1998, interviews were conducted in California, Florida, Minnesota, New Jersey and Vermont2 to ascertain which government programmes were affected by substance abuse and to learn what, if anything, had already been done to record the costs to states of substance abuse. Some states, such as California, had already done extensive studies on the subject and had even tallied up direct state expenditures on the prevention and treatment of substance abuse .
CASA selected state budget officers as the appropriate target for data collection because those officers had the broadest view of and most expertise in the budget-related issues and because CASA was particularly interested in educating budget officers about the extent to which substance abuse affected the budget. A questionnaire was designed, dividing functions into broad sections, consistent with the way that most budget offices were organized. The programmes for which data were needed were grouped into nine clusters: human and social services; developmental disabilities and mental health; health; education; correctional services; public safety; judiciary; regulation and compliance; and capital spending. The instrument was designed in that way in order to make it easier for the budget office to distribute the survey questions among a variety of specialists in the budget office, requesting a manageable amount of data from each individual.
In order to capture as much of the spending associated with a particular programme as possible, CASA designed a survey instrument3 to obtain data on:
(a) Fiscal year 1998 for each state, the states own sources of general revenue, including spending of general funds and non-general funds but not federal or local funds;4
(b) Reported expenditures (not appropriations) from the executive budget presented in the winter or spring of 1998, since some states did not publish data on the adopted budget (differences between the proposed and adopted budgets were not expected to be large enough to skew the findings);
(c) All costs (programme administration, fringe benefits, service providers and capital).
To refine the programme categories, clarify instructions and get a sense of the kinds of questions state budget officers would have, CASA pre-tested the questionnaire in California, Florida and New York.
Linking expenditure to substance abuse
The data represented a combination of costs attributable to substance abuse and costs associated with substance abuse. Costs attributed directly to substance abuse and addiction fell into three main categories: (a) spending on prevention, treatment and research; (b) spending on the consequences, including health-care spending based on the probable causal link between substance abuse and addiction and a particular disease state, and spending on state worker absenteeism linked to substance abuse; and (c) expenditures for alcohol and tobacco regulation. For those categories, it was either self-evident that costs were attributable (prevention, treatment, research, regulation and compliance) or it was important to establish a causal link (health care and state workforce).
For other areas of spending, whether substance abuse caused the spending was of less concern than whether treatment or intervention would reduce the cost of the consequences associated with the problem. It is, however, a very important policy distinction. The cost-of-illness model has focused on increasing the precision of linking costs to causality. The operational question for a policy maker is not how many welfare recipients are receiving assistance because of their substance abuse, but how many welfare recipients will be impeded in their efforts to cease being on welfare and return to work because they abuse alcohol or drugs. Similarly, it is less important to establish the percentage of state inmates who committed crimes because of substance abuse than to determine the group of prisoners for whom treatment for substance abuse may be necessary to keep them from returning to prison.
It is necessary to establish the pool of substance-involved individuals, in other words, those who constitute the target group for policy intervention. Subsequent work should focus on matching the different forms of intervention with the different needs of individuals within that pool. Substance abuse often appears as one of a cluster of behaviours leading to increased costs to states; thus, solving the addiction problem is a necessary step towards eliminating those costs, but it will not always be sufficient.
Estimating the share of state spending on efforts to deal with substance abuse
CASA developed estimates of the share of spending for each programme designed to deal with problems that reasonably could be attributed to or associated with substance abuse by relying on an extensive review of the literature on the subject, including research conducted by CASA itself. Where possible, those estimates were based on peer-reviewed research. Where published research was lacking, CASA developed estimates and clearly documented the techniques used. Although using such a range of techniques lacked methodological purity, it provided national estimates where none were currently available.
The first step was to identify spending on programmes that were devoted to dealing with problems attributable entirely (100 per cent) to substance abuse. For the remaining programmes, the shares were adjusted for state differences in the prevalence of substance abuse.5
To obtain a national estimate for state spending on efforts to deal with substance abuse, CASA calculated average per capita substance abuse spending in each programme area for the total of the 47 responding jurisdictions. It multiplied those averages by the population of the non-responding states to estimate their substance abuse spending. Estimated spending for both responding and non-responding jurisdictions were summed to estimate spending levels for the nation as a whole. Although 47 jurisdictions participated in the project, in some instances they did not complete certain sections of the survey. In those cases, CASA also estimated aggregate spending for the non-responding states in all categories except research because of the low response rate in that section of the survey (only five responses).
Substance abuse prevention, treatment and research
CASA asked states to report all spending for programmes aimed at reducing alcohol, drug and tobacco use and abuse and for programmes providing treatment for tobacco use and for alcohol and illicit drug abuse. Examples included statewide media campaigns, local prevention networks, inter-agency coordination of prevention programmes, prevention education, treatment facilities, outpatient care programmes, research and capital spending for treatment facilities. All such programmes were devoted to dealing with problems attributable entirely to substance abuse.
Health-care spending was the second largest component of state budgets, after primary and secondary education. States spent about $60.4 billion (about 9.7 per cent of total state expenditures) of their own funds to finance health care under the Medicaid programme, the federal and state programme of health insurance for the poor and medically needy . Some states also financed health-care costs for people not qualifying for Medicaid.6
Substance abuse increased state spending on health care in three ways:
(a) Some people would become ill or injured as a result of their own substance abuse and would receive health care related to the illness. For example, lung cancer resulting from smoking led to a variety of health-care expenditures, such as hospital, physician and medication costs;
(b) Substance abuse injured innocent parties. Mothers who smoked during pregnancy would generally have lower birthweight babies, thus increasing state-financed costs from the time of the childs birth (and possibly increasing state-financed health expenditure throughout the childs life);
(c) People who smoked or abused alcohol or drugs often would have a lower level of health in general and would have more frequent, longer and more severe illnesses. For example, bouts of influenza tended to last longer for smokers than for non-smokers. Because the available data were inadequate, the CASA analysis did not include such costs.
CASA calculated the health-care portion of the analysis without taking into account the cost data from the state survey for two reasons. The basis for the estimates of health-related spending was epidemiological research showing a link between substance abuse and illness. Some states might have explored such literature in greater depth than others and some might have interpreted the research differently. It made sense to interpret and apply the epidemiological research uniformly across states. In addition, many states did not have ready access to data that described the illnesses of or the health care received by their residents on Medicaid and that were related specifically to substance abuse or that identified substance abusers; that fact made it difficult for patterns of Medicaid utilization to be analysed. Although in some cases such data existed, they were located in massive databases that included confidential patient information; thus, it would be difficult for states to use the databases for research purposes.
Although obtaining data on state-level spending by type of illness would have been ideal, it was not possible. Instead, state-level data on spending by type of provider were obtained. CASA devised the following two-step methodology to estimate the share of state health expenditures accounted for by efforts to deal with substance abuse, taking advantage of as much state-specific data as possible:
(a) National-level attributable fractions by substance and provider type were estimated. An attributable fraction is an estimate of the share of spending in a given programme that is caused by smoking, alcohol or drug abuse. For example, if 12 per cent is the smoking-attributable fraction for Medicaid-financed physicians services, it means that, on average, about 12 per cent of Medicaid payments to physicians is attributable to smoking;
(b) Those attributable fractions were multiplied by state-specific health spending to arrive at state estimates of spending attributable to substance abuse.
Step one: national attributable fractions
National-level attributable fractions were developed for each major form of substance abuse (smoking, alcohol and drugs), for each major type of medical provider (such as hospitals, physicians and home providers). A total of 24 different attributable fractions were developed: three substance types by eight provider types.7
To estimate attributable fractions, population-attributable risk (PAR) values were used, either estimated directly or as reported in epidemiological research. A PAR value is an estimate of the probability that a given episode of disease is attributable to (or caused by) a factor such as substance abuse. It reflects both the relative risk of getting the disease and the prevalence of substance abuse. For example, if 19 per cent is the alcohol-related PAR value for liver cancer, it means that 19 per cent of the incidence of liver cancer is the result of alcohol abuse.
For alcohol, the PAR values used were developed by the National Institute on Alcohol Abuse and Alcoholism of the United States for specific diagnosis (malignant neoplasm of the esophagus, alcohol-related injury involving motor vehicle traffic etc.). For illicit drugs, CASA developed its own PAR values based on a thorough review of the epidemiological research. In the case of smoking, CASA used state-specific smoking attributable fraction developed by Miller and others .
Those PAR values were applied to the latest available public-use medical care databases, relying on the coding system of the International Classification of Disease . The database of the 1987 National Medical Care Expenditure Survey, conducted by the National Center for Health Services Research, was used for hospital inpatients, hospital outpatients, physician services, prescription drugs and miscellaneous services. It was assumed that nursing home expenditures would have the same attributable fractions as that of elderly hospital patients. The process undertaken to calculate hospital spending attributable to alcohol was as follows:
(a) The amount of hospital spending financed by Medicaid for each patient with a given disease was multiplied by the PAR value of that disease. The number of all patients with that disease was calculated in order to develop an estimate of the hospital spending financed by Medicaid for that disease that was attributable to alcohol abuse. The process was repeated for each illness represented in the data file;
(b) The total amount of hospital spending financed by Medicaid that was attributable to alcohol across all diseases was calculated in order to estimate the total hospital spending by Medicaid that was attributable to alcohol;
(c) The amount of hospital spending financed by Medicaid that was attributable to alcohol was divided by the total hospital spending financed by Medicaid to arrive at the alcohol-attributable fraction: the share of hospital spending financed by Medicaid that was attributable to alcohol abuse;
(d) The process was repeated for other provider types and other substance types. The result was an attributable fraction for each type of provider and each type of substance.
Step two: applying attributable fractions to state health spending
To develop state-by-state estimates of Medicaid and other health spending attributable to substance abuse, CASA multiplied the attributable fractions by provider type (derived in step one) by the 1998 spending by provider type obtained from the Health Care Financing Administration. Several states did not provide a sufficiently detailed breakdown of spending by provider type. For those states, CASA used a two-step process. First, it calculated average attributable fractions by substance type using state-specific data for 1997 from the Health Care Financing Administration, effectively weighting the national provider-type attributable fractions by the states spending by provider type. CASA then multiplied those state-specific weighted-average attributable fractions by 1998 total state spending on health programmes to arrive at substance abuse attributable spending.
Several studies have focused on documenting and quantifying the adverse effects of alcohol, tobacco and illicit drug use on the workforce [13-15]. Some have been studies of one organization only, others of large firms and still others of particular regions, making the comparison of results difficult. A further complicating factor is the variation in definitions of the quantity and frequency of substance use.
Drug and alcohol use has been associated with employee absenteeism, lower productivity, increased turnover, workplace accidents and higher costs of health insurance . Because of severe data limitations, the CASA study has focused only on analysing the absenteeism of substance abusers (comparing it with that of persons not abusing substances); by sex and substance type.8
CASA conducted a logistical regression using data from the National Household Survey of Drug Abuse (for 1994) and the National Longitudinal Survey of Youth (for the periods 1984-1988 and 1992-1994). The National Longitudinal Survey of Youth allowed CASA to control a large number of relevant demographic and socio-economic variables and to focus on absenteeism. That methodology was used to pinpoint a probable causal relationship between employee substance abuse and absenteeism. The sample was restricted to individuals who had paying jobs in the private sector, who had occupations in any area except the military, farming, fishing or forestry and who worked in any industry but not in the military, public administration or agriculture. From that analysis, CASA identified prevalence rates and extra days absent as a result of substance abuse, for men and women, by substance type.9
Following that, the prevalence of substance abuse (by gender and type of substance) was multiplied by the number of persons in the states workforce (broken down by gender) to obtain the estimated number of substance abusers in the workforce (broken down by gender and type of substance). Those subtotals were multiplied by gender-specific and substance-specific extra days of absences per person per year to obtain the total number of days lost per year. Once those subtotals were combined, that number was divided by the expected number of days of work per year (the number of persons in the workforce multiplied by 230 days) to obtain a proportion spent on substance abuse.
In the state workforce section of the survey, CASA requested payroll figures for state government employees, total spending on fringe benefits and the share of spending on efforts to deal with substance abuse in employee assistance programmes. The share of spending attributable to substance abuse, adjusted for state differences in prevalence of binge-drinking and illicit drug use, was applied to the payroll and fringe benefits. That total was added to 100 per cent of the share of spending on substance abuse in employee assistance programmes to obtain the figure for total spending attributable to substance abuse in the state workforce sector.
For most states, spending on prisons has been the fastest growing part of the budget, jumping by 28 per cent between 1995 and 1996 . In its report on the adult prison population, CASA documented the enormous impact of substance abuse on state spending for correctional services . To estimate the percentage of the inmate population involved in substance abuse, CASA used the following categories for such inmates:
(a) Ever used illegal drugs regularly;
(b) Convicted of a drug law violation;
(c) Convicted of an offence involving driving under the influence;
(d) Under the influence of drugs and/or alcohol while committing the crime that led to incarceration;
(e) Committed an offence to get money for drugs;
(f) Had a history of alcohol abuse (defined as ever having received treatment for alcohol abuse).
Using such a definition, it was estimated that 81 per cent of state prison inmates were involved in substance use.
To arrive at total state costs of adult correctional services associated with substance abuse, CASA combined state expenditures for such services in the following areas:
(a) Costs of running and maintaining adult correctional facilities, associated administrative and staffing costs;
(b) Costs of special programmes such as mental health, education or religious services provided to adult inmates;
(c) Parole and early-release programmes;
(d) Adult probation;
(e) State categorical aid to localities for adult correctional services;
(f) Capital spending on prisons.
CASA applied the 81 per cent share, adjusted for state differences in prevalence of alcohol and illicit drug use, to the costs of the state offender rehabilitation programmes and added 100 per cent of the costs of treatment programmes for alcohol and drug abusers provided by state correctional departments. It was assumed that a similar share (81 per cent) of adult probationers and parolees were involved in substance abuse and that local spending of state aid for correctional services would follow the same pattern.
Data on the prevalence of drug and alcohol abuse in the juvenile justice system were found to be scarce.10 In one study, it was shown that 70 per cent of juvenile offenders had a serious alcohol or illicit drug problem . In a more recent study in New Jersey, 67 per cent of male juvenile offenders reported having used cannabis in the previous 30 days while 57 per cent of such offenders reported having used alcohol in the previous 30 days . In a study in Maricopa, Arizona, 56 per cent of male juvenile offenders tested positive for drugs .
In the absence of recent national estimates of the extent of substance abuse in the juvenile justice system, CASA conducted an analysis of data for 1997 gathered through the Arrestee Drug Abuse Monitoring Program by the National Institute of Justice of the United States Department of Justice. Variables were chosen to mirror those in the CASA report on the adult prison population . Juveniles11 in correctional facilities who had been involved in drugs were categorized as follows:
(a) Tested positive for drugs;
(b) Reported having used alcohol in the previous 72 hours;
(c) Under the influence of or in need of alcohol or drugs;
(d) Received treatment in the past;
(e) Currently receiving or could use treatment for abuse of alcohol or various illicit drugs. It was found that 66.3 per cent of youth in the juvenile justice system were involved in substance abuse.
To arrive at total state costs for juvenile justice attributable to substance abuse, CASA combined state expenditures in the following areas:
(a) Juvenile correctional facilities, including residential centres, boot camps and work-study camps;
(b) Diversion programmes;
(c) Capital costs of juvenile correctional facilities.
CASA applied the 66.3 per cent share, adjusted for state differences in prevalence of alcohol and illicit drug use, to the costs of such juvenile justice and added 100 per cent of the costs of treatment programmes for alcohol and drug abusers provided by state departments of juvenile justice.
The judiciary system has several branches: criminal, juvenile, family and civil and drug courts (which may be further differentiated into family drug court or juvenile drug court). CASA did not identify any studies documenting the full impact of substance abuse on courts, although several studies documented the prevalence and characteristics of drug law offenders (drug possession and trafficking) in both juvenile and adult courts [19, 20]. To develop a more comprehensive picture of the impact of substance abuse on the courts, CASA employed the methodology described below:
CASA analysed the involvement of arrestees in substance abuse, using 1997 data from the Arrestee Drug Abuse Monitoring Program, to estimate the proportion of substance abusers entering the judiciary system. The following categories were used for those involved in substance abuse:
(a) Tested positive for drugs;
(b) Reported having used alcohol in the previous 72 hours;
(c) Under the influence of, or in need of, alcohol or drugs;
(d) Received treatment in the past, currently receiving treatment or could use treatment for abuse of alcohol or illicit drugs.
It was estimated that 83.8 per cent of criminal court costs were substance-linked.
Previous CASA research had shown that 70 per cent of child welfare cases were involved in substance abuse ; that is, in those cases, the problem had been caused or exacerbated by substance abuse and addiction. In some states, juvenile justice cases may be represented in this category as well. Seventy per cent of those costs were assumed to be linked to substance abuse.
No share for spending on substance abuse was developed for civil courts because it was not possible to link costs of tort, property rights, and estate or small claim cases to substance abuse and addiction.
Any state spending on drug courts, including family dependency drug courts, was considered 100 per cent attributable to substance abuse.
In order to estimate costs relating to substance abuse that were linked to the courts, state authorities were asked to identify all court costs for state programmes by type of court, including court personnel, contracted services, supplies and the cost of state programme administrators and policy analysts who spent the majority of their time on the programme. The share of spending attributable to substance abuse, adjusted for state differences in prevalence of alcohol and illicit drug use, were applied to the total spending by type of court. The values of substance-linked spending by type of court were added together to obtain a total for courts.
Child welfare programmes
The link between substance abuse and child neglect and abuse is well documented. CASA research found that substance abuse and addiction cause or exacerbate 70 per cent of child welfare cases in the United States. In other studies, the rate of substance abuse among parents of children in child protective services was found to be between 40 and 90 per cent [22-25]. For the present study, 70 per cent was used as the share of child welfare spending attributable to substance abuse.
To determine spending on child welfare, states were asked to identify all programme costs, including grants to individuals and families, the cost of caseworkers or service providers and other programme costs. They were also asked to include the following costs: adoption assistance; foster care; independent living; family preservation and other programmes to prevent out-of-home placements, promote reunification of families or provide a safe environment for children; child abuse and neglect intake and assessment; and administrative and staffing costs to run such programmes.
The 70 per cent share of spending attributable to substance abuse, adjusted for state differences in alcohol prevalence, was added to total state spending on child welfare, after the cost of any child welfare programmes specifically targeting substance abuse was removed. Both categories of costs were combined to obtain the total cost of substance abuse to the child welfare system.
Income support programmes
Substance abuse may be the primary reason that people need income assistance or it may impede a persons ability to become self-supporting. The income support programmes included in the present study were Temporary Assistance to Needy Families, General Assistance and state supplements to the Supplemental Security Income programme.
Temporary Assistance to Needy Families and General Assistance
In the majority of national and state prevalence studies, it was estimated that between 7 and 37 per cent of welfare recipients had a substance abuse problem . Two previous studies by CASA estimated the prevalence of female recipients of Aid to Families with Dependent Children with substance abuse problems to be between 20 and 27 per cent [5, 27]. For the purposes of the present study, a more conservative figure of 20 per cent was used as the share of spending attributable to substance abuse for recipients of Temporary Assistance to Needy Families.
There were limited data available on the percentage of the population receiving General Assistance that is involved in substance abuse. In one study of a county in California, it was estimated that at least 43.3 per cent of the population receiving General Assistance had a substance abuse problem that was linked to the receipt of assistance . In the absence of national data, CASA used 20 per cent as the proportion of substance-linked spending on the Temporary Assistance to Needy Families programme, recognizing that it was probably a very conservative estimate.
Supplemental Security Income
Federal legislation passed in 1996 ended payments to individuals who were receiving Supplemental Security Income because of drug addiction and alcoholism. When benefits were terminated on 1 January 1997, 2.6 per cent of all beneficiaries were removed from the rolls. About one third (34 per cent) of those people retained or re-established eligibility in December 1997 on the basis of a condition other than substance abuse . Therefore, only 1 per cent of people receiving Supplemental Security Income were originally certified by virtue of drug or alcohol addiction. CASA could find no studies documenting the extent to which individuals qualifying for Supplemental Security Income under another condition also had drug and alcohol problems and, if so, what percentage of them might be capable of supporting themselves if their addiction problems were addressed. For that reason, for Supplemental Security Income, 1 per cent was used as the associated share of spending.
To estimate costs linked to substance abuse for those programmes, states were asked to identify costs for cash assistance, emergency assistance, employment and training services for the Temporary Assistance to Needy Families or for those receiving General Assistance, income maintenance to the aged, blind and disabled, and administrative costs to run those programmes. Shares of spending associated with substance abuse, adjusted for state differences in alcohol prevalence, were combined with total costs in each area to obtain a figure for total spending for income support programmes.
According to data from a nationally representative population sample of non-institutionalized civilians in the United States, about one half (50.9 per cent) of those with a lifetime mental disorder also have a lifetime addictive disorder, otherwise described as alcohol and illicit drug abuse and dependence . That may be a conservative estimate of the occurrence of a co-morbid addictive disorder in the population receiving mental health treatment through the state, since the institutionalized population was not surveyed and people with more severe mental health problems often receive residential care.
Mental health costs included in the present study refer to expenditures for administration, community contracts, housing programmes, institutionalization and capital costs for building and maintaining facilities. The share of spending associated with substance abuse was 50.9 per cent, which was applied to the total of those costs, after adjusting for differences in state prevalence of alcohol use.
To estimate the share of state costs for the developmentally disabled that was caused or exacerbated by tobacco, alcohol or drugs, CASA used as a basis The Economic Costs of Alcohol and Drug Abuse in the United States, 1992 , in which the number of individuals with fetal alcohol syndrome who were receiving care in 1992 was estimated at 38,884,12 or approximately 9 per cent of the total developmentally disabled population of 434,657 who were served in 1992 in institutional and residential care in the United States . While CASA considered the figure of 9 per cent to be conservative, since it was based solely on fetal alcohol syndrome, that figure was used to calculate the share of state spending for the developmentally disabled that was attributable to substance abuse. That share, adjusted for state differences in prevalence of alcohol and illicit drug use, was applied to total state costs for developmental disabilities, such as administration, community contracts, housing programmes, institutionalization and capital cost to build and maintain facilities, to develop state totals of associated costs.
There were limited data available for estimating costs to the state for public safety other than for criminal and juvenile justice and courts. CASA asked states to report costs for special drug law enforcement programmes, highway safety and accident prevention programmes, state highway patrol and local law enforcement programmes.
The main area where some data were available was highway safety, that is, the proportion of motor vehicle accidents that involved alcohol. There were no data available on the number of drug-related motor vehicle accidents. Using data collected by the National Highway Traffic Safety Administration , CASA made an estimate of the proportion of reported motor vehicle accidents involving alcohol, based on the following:13
(a) A calculation of the number of motor vehicle accidents where alcohol was involved for each type of accident (such as property damage, injury and fatality): crashes involving alcohol accounted for 16.7 per cent of accidents involving property damage, 20.4 per cent of accidents involving injuries and 40.8 per cent of accidents involving fatalities;
(b) A calculation of the percentage of total motor vehicle accidents involving alcohol for each accident type: property damage involving alcohol represented
78 per cent of all traffic accidents involving alcohol; injuries represented 21 per cent and fatalities represented 0.003 per cent;
(c) A calculation of an average for total accidents involving alcohol.
Using that approach, CASA estimated that 17.6 per cent of highway traffic accidents involved alcohol. That percentage was also applied to accident prevention programmes, state highway patrol and local law enforcement programmes not specifically targeting alcohol or drug abuse. Costs were adjusted for state differences in prevalence of alcohol use. The total cost of programmes targeting alcohol or drug abuse was included.
As mentioned in other categories, CASA included in its analysis funds expended (not budgeted amounts) by the state for new construction, capital improvements and equipment for adult and juvenile correctional facilities, substance abuse treatment facilities, mental health facilities and facilities for the developmentally disabled. Included were funds paid for out of current general taxes or dedicated taxes, capital spending from bond proceeds and interest paid out for bonds already issued. The share of each category spent on efforts to deal with substance abuse (for example, 81 per cent for capital spending on adult correctional facilities and 50.9 per cent for capital spending on mental health), adjusted for prevalence of alcohol and illicit drug use, was used to estimate the portion of capital spending linked to substance abuse. Capital spending associated with substance abuse was added to other costs in each category.
States spent almost one quarter of total state funds (22 per cent) on primary and secondary education in the fiscal year 1998 . In that area of the budget, it was difficult to establish the share of state spending attributable to substance abuse for three major reasons:
(a) State governments allocated most education funds in lump sums to local school districts;
(b) There was a bias against labelling children; therefore, it was difficult for researchers to determine which children were exposed to substances in utero or in the home and which children were abusing substances;
(c) It was difficult to find literature or research linking costs in the education system to substance abuse.
Using the International Guidelines for Estimating the Costs of Substance Abuse  as a benchmark, there is neither a matrix of costs nor any delineation of the theoretical issues to help lead to agreement on how to measure those costs in the case of public education. Nonetheless, there is a broad consensus that the costs are potentially significant.14
CASA has identified three ways that substance abuse affects schools:
(a) Parental use affects the capacity and readiness of children to learn;
(b) Faculty and staff use affects the learning environment;
(c) Student use affects the interest and capacity to learn, and school security.
All of those factors might affect the costs of education. For example, maternal alcohol use during pregnancy could result in increased special education costs for students with fetal alcohol syndrome. Parental substance abuse might result in programmes for at-risk youth, staff-intensive compensatory education programmes, after-school programmes, summer school and other programmes. Substance abuse by students might necessitate increased staff in support and health-care roles or might result in class disruption; violence associated with such substance abuse might require increased school security costs for security personnel and equipment and increased expenses for insurance and workers compensation and for repairs and replacement of vandalized or stolen material. Substance abuse by faculty members might involve increased workforce costs and lost productivity.
Although few of those costs are reported to states in ways that can be linked to budgets, when those costs are combined, they represent a considerable amount of expenditure. To take the first steps towards developing an estimate of the costs of substance abuse to the education system, CASA identified cost areas that could be linked to substance abuse, including the following:
Lost productivity of staff and added costs for additional staffing
Programmes for at-risk children
Special education programmes
Property and liability
Staff health insurance
Employee assistance programmes
Employee training, policy and staff development
CASA estimated that those costs combined could account for between 10 and 22 per cent of annual state expenditures for primary and secondary education.
To review that approach and associated estimates of costs, CASA convened a group of experts in the area of school finance and substance abuse. The group was concerned by the unavailability of data for making more precise estimates, but after reviewing and refining the list of effects, it informally posited a range of 10-20 per cent for the estimated impact of substance abuse on the public education system. For the purposes of the present study, the lower end of the range, 10 per cent, was chosen as a conservative estimate of the share of education spending attributable to substance abuse.
CASA included that estimate as a placeholder for budget purposes for three reasons:
(a) State budgets were heavily dominated by education spending, and failure to recognize costs in that area would be a major oversight;
(b) According to experts in the field and qualitative literature, substance abuse had a significant impact on schools and on the achievement of their goals;
(c) Schools represented an important opportunity to intervene, since problems of substance abuse that started in primary and secondary school would show up later in other state systems such as correctional services, child welfare, mental health or welfare.
By including that budget estimate, CASA hoped to promote research into the question of the impact of substance abuse on schools and education spending.
Regulation and compliance
In its analysis, CASA total spending on state personnel responsible for collecting alcohol and tobacco taxes (including fringe benefits) and state funds budgeted for boards or governing bodies enforcing alcohol and tobacco regulations or issuing alcohol and tobacco licences. Those costs were 100 per cent attributable to substance abuse. CASA also estimated the total tax revenues received by states from alcohol and tobacco sales.
The present study documents the full dimensions of state spending linked to substance abuse and addiction. Specifically, the study reveals that states devote tremendous resources to managing the effects of substance abuse through incarceration, treatment in health and mental health systems, foster care, special and compensatory education and various other areas. Only a small portion of state spending is aimed at reducing substance abuse through treatment and prevention programmes.
By focusing on state budget costs, it can be shown more clearly which of those costs are under the control of state policy makers. It does not, however, provide a comprehensive picture of governmental spending on that problem. Similar analyses of federal and local spending are needed to complete the picture.
By providing a map of state spending on substance abuse, the present study establishes a base against which policy makers can begin to compare the value of alternative prevention, treatment, regulatory and tax policies that might reduce the consequences for the state budget of substance abuse and addiction. Understanding the enormous costs attached to current policy choices on substance abuse should help policy makers think more strategically about how they might invest in interventions that would yield a better return on their investments.
If, for example, 4 per cent of a state budget is linked to coping with the consequences of untreated addiction in state prisons, the costs and benefits of interventions to reduce those costs can be considered in terms of how they affect current spending. States might want to consider investments such as the following: the elimination of mandatory sentences for drug offences and the requirement of mandatory treatment; treatment-linked diversion programmes; prevention activities in the schools; treatment for parents who abuse substances and who neglect or abuse their children; increased taxes on alcohol; or any of a variety of other interventions that might reduce the consequences of substance abuse linked to crime.
As the present study shows, a policy response of reductions in prevention or treatment expenditures will have the effect of increasing rather than decreasing state costs. Furthermore, policy strategies that involve only civil or criminal justice sanctions without requiring treatment will, in the long term, raise rather than reduce state costs. By thinking about expenditures as investments, policy makers will be in a better position to demand specific results for their investments. An investment-based approach will help policy makers ensure accountability for expenditure of public funds by showing the return and the results.
CASA recognizes that the spending map presented is breaking new ground and hopes that it will help to shift the public debate from expenditures on the problem of substance abuse to investments in better results.
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1The states that did not participate in the survey were Indiana, Maine, New Hampshire, North Carolina and Texas.
2Two former state budget directors were contracted to help choose states and set up interviews. The study team, consisting of staff and consultants, conducted over 40 interviews with state officials and their staff. The interviews were designed to identify ways to develop a cost base that was both complete and consistent with the way in which programmes were organized and administered in different states.
3The survey instrument was developed for and with CASA by the Fiscal Studies Program, a research unit within the Rockefeller Institute of Government (in Albany, New York). The Fiscal Studies Program was also responsible for collecting the budget data and conducting specific analyses.
4General funds refer to predominant funds for financing a states operations. Revenues are received from broad-based state taxes; however, how specific functions are financed differs from state to state. Non-general funds refer to other state funds (expenditures from revenue sources that are restricted by law for particular governmental functions or activities), for example, a tax dedicated to a particular trust fund; and bonds (expenditures from the sale of bonds, generally for capital projects).
5Costs in those categories were linked primarily to alcohol and illicit drugs. Because the sample size was not sufficient to estimate the prevalence of illicit drug abuse by state and because most research showed the primary drug of abuse to be alcohol with a high prevalence of alcohol abuse occurring in conjunction with illicit drug use, the associated fractions were scaled using alcohol prevalence of binge drinking in the state in the past month .
6Examples of other state-funded health-care programmes include programmes for patients infected with the human immunodeficiency virus (HIV) who receive general assistance, child health-care programmes and prenatal care programmes.
7The provider types refer to hospital overnight, emergency room, outpatient, medical-provider visit, home-provider visit, medical supply purchase, prescription drugs and dental.
8CASA adopted the methodology in its study entitled Substance Abuse and American Business (publication forthcoming).
9The following definitions were used:
(a) Smoker: an employee who smoked more than 16 cigarettes per day in the previous month;
(b) Heavy drinker: a male employee who drank more than 5 drinks, five or more times in the previous month or a female employee who drank more than 3 drinks, five or more times in the previous month;
(c) Current drug user: an employee who used cannabis and/or cocaine in the previous month;
(d) Absent: an indicator for worker absence at any time during the previous month (National Household Survey of Drug Abuse) or week (National Longitudinal Survey of Youth).
10CASA is conducting a study of substance abuse and the juvenile justice system.
11All the juveniles in the sample were male.
12That figure includes moderately retarded persons with fetal alcohol syndrome aged 22-65 in the developmentally disabled systems and severely retarded persons with fetal alcohol syndrome aged 5-65 in those systems.
13The estimation was made with the guidance of the author of the report presenting the data collected by the National Highway Traffic Safety Administration .
14Experts in the field of education, school finance and cost estimation of substance abuse formed a focus group, conducted by CASA on 19 July 1999, in Washington, D. C. The group reached the conclusion that the costs of substance abuse were potentially significant.