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Youth incarceration: bad ROI

As a venture investor who has invested in companies with proven approaches to improving student outcomes in Maryland and across the country, my job it is provide strong returns on the dollars I invest on behalf of my clients. My approach to public policy is driven by the same bottom line analysis: Where are the places to invest with the best ROI, or return on investment?

Based on research on the direct and indirect costs of incarcerating youth, and the poor outcomes we get as a result, if I were advising on the use of taxpayer dollars I would counsel in favor of diversifying dollars away from further investments in incarcerating youth, and toward more effective educational and community products and services.

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New research from the Justice Policy Institute (JPI) shows that 33 states and jurisdictions — including Maryland, Virginia and the District of Columbia — pay more than $100,000 a year to confine just one child. The research also shows that the hundreds of thousands of dollars we pay for youth incarceration in this region are only the tip of the iceberg of what this approach costs all of us. Contrast this with the national average of $10,000 per year that states pay to educate a student.

In Sticker Shock: Calculating the Full Price Tag for Youth Incarceration, JPI showed that incarceration also produces poor outcomes over the course of a lifetime, leaving young people earning less and more dependent upon taxpayer-funded government assistance. In addition, it also increases the likelihood that youth will commit future offenses or be victimized themselves. Based on the number of youth locked up nationally, these long term impacts are costing taxpayers across the country between $8 billion and $21 billion each year.

The research also shows that if we want to get better outcomes and cut costs we can begin by reducing our reliance on incarceration. One common sense approach is to begin to shift resources away from incarceration and toward effective educational and community-based solutions that have been proven to get better outcomes in connecting young people to school and work, and to holding them accountable for their behavior, at a fraction of the costs for kids and communities overall. We have invested in over a dozen companies that provide data driven solutions aimed at keeping kids in school, providing alternative pathways for those who have dropped out, and connecting millions of youth with job relevant content and then to employers. While most juvenile facility beds cost hundreds and hundreds of dollars a day, a community-based approach to holding youth accountable can cost just $75, and online remediation, retention and job training can cost as little as $25 per student.

Instead nearly two-thirds of Maryland's $280 million juvenile services budget is being spent on facilities to lock young people up, residential facilities that remove youth from their homes, and administration to oversee this lopsided system. Maryland, like a lot of states, needs to diversify its juvenile justice investment portfolio and shift money from brick and mortar into less expensive, more effective ways to serve these young people in the communities they are from.

We should also be investing earlier to help youth succeed, or we'll all end up paying more later. We should be putting our resources in approaches that make smart investments in job training, treatment, schooling, drop-out prevention and recovery, mentoring, support for families and other positive pursuits so that we can help youth successfully transition to adulthood. Smart investments in juvenile justice will save hundreds of thousands a year on incarceration and billions of dollars over the long-term effects on the lifelong potential of a young person.

Finally, juvenile justice systems need to do a better job using data to see early signs of trouble and provide proven interventions before incarceration becomes necessary. By collecting and using recidivism data and tracking and measuring positive outcomes from interventions (such as when young people connect to school and work), we can begin to determine where the best ROI is for the dollars that we are spending on our youth.

Based on my assessment, the best investment option is clear: we need to shift the majority of our government dollars away from incarcerating youth, which we already know doesn't work and isn't needed for the great majority of youth, and instead invest in proven educational and community solutions. Otherwise, we will all end up paying billions of dollars down the road and lose the opportunity to invest in the way that gives young people the best chance for success.

Mark Grovicis a general partner of New Markets Venture Partners and a professor of business at the University of Maryland. His email ismgrovic@newmarketsvp.com

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