Costs of Drug Testing

The drug testing provisions in the proposed budget have also been put into separate legislation — AB192 — and the Legislative Finance Bureau has prepared estimates for how much this testing would cost. While the Finance Bureau cautions that these numbers are not applicable to the proposed drug testing in the budget bill (see this post for details about that drug testing), everything I have heard and read indicates that the drug testing proposed in AB192 is very similar to what is proposed in the budget bill.

To start, here are the numbers for setting up this drug testing:

  • Programming costs of just over $1.2 million.
  • Training, program management, testing, communications, and database development costs of around $360,000.
  • Vendor costs of $18,000.
  • Policy and rule promulgation costs of $38,000.

So, the total costs to set up this drug testing are just over $1.6 million.

[AB192 also includes a requirement to survey employers about their drug testing requirements. The costs for setting up this survey would be more than $1.2 million. Subsequent surveys every ten years will cost $865,000.]

Obviously, there are also annual costs for this drug testing.

  • DWD estimates that 85% of claimants will have to be screened to determine if drug testing is appropriate for them. That screening will cost $2 per claimant or $321,000 annually.
  • DWD estimates that 2.5% — about 4,000 claimants — will end up being required to undergo drug testing. DWD believes around 300 will refuse these tests, and that tests for the rest — at $40 per test — will cost around $149,000 each year.
  • DWD believes 318 of those tested will test positive — around 8.5% of those tested (a high positive test rate that is unlikely to occur when compared to prior testing). DWD also posits that only half of those testing positive will opt for treatment (an extremely low estimate, especially when treatment will be the only way for unemployment benefits to continue and these benefits are usually vital to paying rent and getting groceries). Treatment costs of $2700 per claimant, then, will only amount to just under $430,000 annually.
  • Staffing costs of .75 FTE or nearly $69,000 annually will be needed for managing all of this testing, and printing and mailing associated with this testing will cost $5,000.
  • Not yet known will be the costs for litigating disputes over test results or how much will be spent on test results that employers voluntarily submit to DWD.

With these numbers taken as is, drug testing will cost each year around $1.06 million.

Understandably, there are savings from this drug testing because claimants who test positive and do not seek treatment will not collect any unemployment benefits. Here, the Department of Workforce Development’s over-estimating the number of positive test results and under-estimating the number of folks who will seek treatment leads to significant savings. Nearly 460 claimants each year are expected to lose their eligibility for unemployment benefits, according to the Department’s estimates (NOTE: this number consists of of the 300 who refuse drug tests plus the 159 who test positive this number of claimants testing positive and refusing treatment is wrong, since only 318 are believed to test positive and only half of this number will presumably refuse treatment, leaving only 159 — not 459 as reported). Assuming an average benefit amount of $3,950, just over $1.8 million will then NOT be paid out to 459 claimants.

The Finance Bureau does not simply accept this number as the total savings, however. Employers’ unemployment taxes will be reduced somewhat for two reasons: (1) claimants who test positive and refuse treatment will not be paid any benefits that can be charged to employers’ accounts, and (2) claimants who test positive but seek out treatment will have their benefits paid out of the general balancing account rather than charged against their employers. In both cases, employers will be paying less in unemployment taxes (and even though benefits continue to be paid in the second scenario). Because the charges to employers’ accounts are being reduced, there will be a general reduction in employer’s unemployment taxes. So, according to the Finance Bureau, employers will see a general $194,000 reduction in their unemployment taxes. In addition, approximately $600,000 of benefits will be charged to the balancing account for those claimants seeking out treatment. As a result, the annual savings are down from $1.8 million to just over $1.02 million each year of this program.

In short, even with the Department’s generous estimates about how many will test positive and how few will actually seek treatment, this drug testing will still cost Wisconsin taxpayers around $30,000 each year. Keep in mind as well that, even though employers’ unemployment taxes are being reduced by $194,000 for the 300 refusing tests and the 159 testing positive, around $600,000 in benefits being paid each year to those testing positive and seeking treatment will be paid out of the balancing account.  As a result, the balancing account — which all employer pay a portion of their taxes into — is likely to have a negative balance that much sooner. Take out the generous estimates about how many will test positive and how many will refuse treatment, then the costs escalate further.

UPDATED 13 May 2015 (struck out reference to wrong number and added explanation for how that number is calculated; updated discussion at end of posts about costs of drug testing).

3 thoughts on “Costs of Drug Testing

  1. Pingback: This Narcotics Anonymous group brought to you by DWD | Wisconsin Unemployment

  2. Pingback: Drug testing is making a comeback | Wisconsin Unemployment

  3. Pingback: Drug testing for unemployment benefits is back | Wisconsin Unemployment

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