Economics of Drug Policy and the Drug War

16. Official Estimate of the Economic Impact of Illicit Drug Use

"In 2007, the cost of illicit drug use totaled more than $193 billion. Direct and indirect costs attributable to illicit drug use are estimated in three principal areas: crime, health, and productivity.
"• Crime includes three components: criminal justice system costs ($56,373,254,000), crime victim costs ($1,455,555,000), and other crime costs ($3,547,885,000). These subtotal $61,376,694,000.
"• Health includes five components: specialty treatment costs ($3,723,338,000), hospital and emergency department costs for nonhomicide cases ($5,684,248,000), hospital and emergency department costs for homicide cases ($12,938,000), insurance administration costs ($544,000), and other health costs ($1,995,164,000). These subtotal $11,416,232,000.
"• Productivity includes seven components: labor participation costs ($49,237,777,000), specialty treatment costs for services provided at the state level ($2,828,207,000), specialty treatment costs for services provided at the federal level ($44,830,000), hospitalization costs ($287,260,000), incarceration costs ($48,121,949,000), premature mortality costs (nonhomicide: $16,005,008,000), and premature mortality costs (homicide: $3,778,973,000). These subtotal $120,304,004.
"Taken together, these costs total $193,096,930,000, with the majority share attributable to lost productivity."

"The Economic Impact of Illicit Drug Use on American Society," National Drug Intelligence Center (Washington, DC: United States Department of Justice, April 2011), p. ix-xi.

17. Anti-Drug Spending

"The narcotics trade has also significantly impeded fiscal growth and stability by diverting scarce resources away from more-productive uses. Between 1981 and 2008, federal, state, and local governments are estimated to have spent at least $600 billion (adjusted for inflation) on drug interdiction and related law enforcement efforts; factoring in costs associated with treatment and rehabilitation, the overall total rises to around $800 billion.34 If one were to also add in 'invisible' losses brought about by curtailed job opportunities and reduced workplace productivity, the true cost would be far higher."

Chalk, Peter, "The Latin American Drug Trade: Scope, Dimensions, Impact, and Response," RAND Corporation for the United States Air Force (Santa Monica, CA: 2011), p. 47.

18. State Spending on Correctional Systems

"In 2010, state expenditures totaled $1.9 trillion dollars while state spending on corrections was $48.5 billion. Between fiscal years 1982 and 2010, spending on corrections represented between 1.9% and 3.3% of total expenditures by state governments. Since 2003, corrections expenditures, as a share of total spending, fluctuated between 2.5% and 2.9% of state expenditures (figure 1).
"Between 1982 and 2010, spending on education varied between 29% and 33% of total state expenditures, spending on public welfare varied between 22% and 25%, spending on highways varied between 5.7% and 8.6%, and spending on health care and hospitals varied between 6.2% and 7.5%. Other expenditures (including air transportation, financial administration, police protection, and public safety expenditures) ranged between 29% and 32% of state expenditures."

Kyckelhahn, Tracey, "State Corrections Expenditures, FY 1982-2010" (Washington, DC: US Dept. of Justice Bureau of Justice Statistics, Dec. 2012), NCJ239672, p. 1.

19. Total Spending on Corrections by State Governments

"In fiscal 2015, corrections spending represented 3.1 percent of total state spending and 6.8 percent of general fund spending. General fund dollars are the primary source for state corrections and accounted for $50.9 billion, or 89.5 percent, of all fiscal 2015 state corrections spending. State funds (general funds and other state funds combined, but excluding bonds) accounted for 97.7 percent of total state corrections spending in fiscal 2015. Federal funds accounted for 1.2 percent and bonds accounted for 1.0 percent."

National Association of State Budget Officers (NASBO), "State Expenditure Report: Examining Fiscal 2014-2016 State Spending," (Washington, DC: NASBO, 2016), p. 54.

20. Trends in State Spending on Corrections in the US

"State spending on corrections reflects the costs to build and operate prison systems and may include spending on juvenile justice systems and my include spending on juvenile justice programs and alternatives to incarceration such as probation and parole. State spending for corrections totaled $56.9 billion in fiscal 2015, compared to $55.3 billion in fiscal 2014, a 3.0 percent increase in total spending with state funds increasing 3.1 percent and federal funds declining 1.4 percent. State spending on corrections in fiscal 2016 is estimated to total $58.0 billion, a 2.0 percent increase from fiscal 2015. State funds are estimated to increase by 2.1 percent, while federal funds are estimated to increase by 3.6 percent.
"Although state spending on corrections is estimated to increase for fiscal 2016, the growth rate has slowed. For several years states have been making criminal justice reforms to address the cost drivers of corrections expenditures, including limiting growth in inmate populations. Many states are examining their criminal justice systems and implementing reforms to concentrate resources on the most violent offenders while ensuring other offenders are equipped with the tools and supports needed to successfully transition back to the community. These reforms include alternatives to incarceration, earning sentence credits for good behavior, other sentencing changes, parole reforms, and increased treatment to address mental health and substance abuse disorders. And while several states have been successful in reducing the growth of their inmate population, costs continue to increase due to programming investments, increasing inmate health care expenditures, costly maintenance of aging facilities, and the personnel costs associated with running institutions."

National Association of State Budget Officers (NASBO), "State Expenditure Report: Examining Fiscal 2014-2016 State Spending," (Washington, DC: NASBO, 2016), p. 54.