The Economic Impact of Substance Abuse

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The cost of substance abuse and addiction is staggering— hitting state budgets hard.

  • In 2005, state governments spent nearly 15 percent of their total budgets—nearly $136 billion—on substance abuse and addiction, and their peripheral effects. This level of spending is second only to the amount spent on elementary and secondary education and is up from 13.3 percent of budgets in 1998.1
  • Of this amount, 35 percent goes toward corrections, while the remaining 65 percent
    is devoted to health care, education, child and family assistance, mental health and
    developmental disability programs, and public safety.1
  • Of the $36.3 billion states spent in 2005 for adult corrections, including incarceration,
    probation and parole, 80.5 percent—or $29.2 billion—was spent on offenders who
    are substance-dependent.1
  • In health care spending alone, substance abuse and addiction represent $37 billion of
    state health care budgets, with more than 85 percent of these expenditures coming
    from the Medicaid program.1

Alternative methods of managing substance abuse can pay off for states.

  • The return on investment for states treating substance abuse is tremendous. For every dollar spent on treatment today, the future cost burden to the government can be reduced by $12 or more in reduced drug-related crime, criminal justice expenses and health care costs.2
  • Drug courts are an essential tool in successful outcomes for substance abusers in the
    justice system. As of June 2009, there were 2,038 fully operational drug courts across
    the country.3
  • The recidivism rate for defendants convicted of drug possession is high—more than
    50 percent. Researchers, however, find those who graduate from drug treatment court
    programs have lower recidivism rates, ranging from 2 percent to 20 percent.4

States’ fiscal crises have simultaneously provided opportunities to develop new strategies for substance abuse programs and forced funding decreases for successful programs.

  • In April 2009, New York lawmakers dismantled the state’s strict 1970s-era drug laws by repealing many of the mandatory minimum sentences for low-level drug offenders and giving judges the authority to send first-time nonviolent offenders to treatment instead of prison. The legislation also expands drug treatment and other alternatives to incarceration, potentially diverting half the state’s convicted drug offenders from prison.
  • A radical proposaThe Fiscal Impact of Substance Abuse and Addiction on State Programsl introduced in California to tax and regulate marijuana like alcohol could, if passed, generate an estimated $1.38 billion annually in new revenue.5
  • Kansas, which in recent years has shifted resources from incarceration to rehabilitation, was forced to eliminate 80 percent of the capacity in its substance-abuse treatment program for inmates, citing budget constraints.6

  Download the Table in Excel:  "The Fiscal Impact of Substance Abuse and Addiction on State Programs"


1. The National Center on Addiction and Substance Abuse at Columbia University. “Shoveling Up II: The Impact of Substance Abuse on Federal, State and Local Budgets.” May 2009.
2. National Institute on Drug Abuse, National Institutes of Health. “Principles of Drug Addiction Treatment: A Research-Based Guide, National Institute on Drug Abuse.” No. 00-4180, 2000
3. Bureau of Justice Assistance, Drug Court Clearinghouse Project. “Drug Courts—Facts and Figures.” June 2009.
4. National Drug Court Institute. “Research Findings.”
5. Walters, Dan. “Legal pot could generate $1.4 billion in revenue, tax board says.” Sacramento Bee: July 15, 2009.
6. Vera Institute of Justice. “Fiscal Crisis in Corrections.” July 2009.
7. State programs include justice, education, health, child family assistance, mental health / developmental disabilities, public safety, and state workforce.

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