While the states' revenues are beginning to recover, almost all of them expect to have less to spend in 2012 than they had in 2008, before the Great Recession began exacting its toll. Since then, many states have relied on across-the-board cuts, but others have looked for ways to make more strategic decisions that target funds toward programs and policies that yield the greatest benefits in the most cost-effective way.
Cost/benefit analysis can play a key role in helping government leaders make better decisions on allocating limited tax dollars. This technique estimates the long-term costs and benefits of potential investments in public programs, allowing policy makers to compare options and identify those that most effectively achieve outcomes (such as reducing crime, improving high-school graduation rates or reducing child maltreatment) at the lowest cost to taxpayers.
Cost/benefit analysis has been used to a limited degree at the federal level for many years. Some states, including Oregon, Georgia and New York, have used this technique to assess individual programs, such as evaluating whether an economic development incentive is cost-effective in creating jobs. But one state has developed an approach that goes much further.
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