Drug rehab is poised to become L.A.’s newest growth industry at the expense of the already cash-strapped county health department, if a state initiative on the Nov. 7 ballot is approved by voters.

Proposition 36 would essentially decriminalize drug possession and use by requiring probation and treatment instead of jail or prison time for anything short of selling or manufacturing controlled substances.

Had the proposition been in effect last year, it would have impacted 19,400 criminal cases in the county.

While providing a second chance for many nonviolent drug offenders, the initiative could lead to a proliferation of fledgling treatment centers rushing to cash in on the sudden surge in demand (and surge in supply of taxpayer dollars) for treatment.

“It would allow the gas station on the corner to open up for treatment,” said John Schwarzlose, president of the Betty Ford Center in Rancho Mirage.

Schwarzlose conceded that might be an exaggeration. Still, he said, passage of the ballot measure which had the support of 54 percent of the people surveyed in a recent poll could lead to a flood of new treatment centers staffed by less-than-qualified personnel dealing with addicts who would be happier on the streets than undergoing detox.

In the process, L.A. could be left to pick up a large part of the tab for those efforts.

Estimates by the L.A. County Department of Health Services put the annual cost of contracting out with private rehab firms to provide the treatment at $61.6 million. That cost includes an estimated $54.8 million for treatment of 22,000 offenders, and another $6.8 million for formal probation supervision of new offenders.

The initiative calls for the state to create a trust fund to help pay for the program and provide a statewide total of $60 million in the 2000-01 fiscal year. That amount would then increase to $120 million annually through 2005-06.

However, beginning in 2006-07, state allocations for the program could end, since it would be subject to the mutual consent of the governor and Legislature.

Big shortfall

Locally, county officials believe state funding could fall as much as $20 million short of the required cost each year, forcing them to dig into already cash-strapped budgets to make up the difference.

True, L.A. County would see some savings as a result of not having to jail those offenders, but with an $880 million health department deficit looming over the next five years, the prospect of coming up with money for the drug treatment program is not a pleasant one.

John Wallace, spokesman for Los Angeles Department of Health Services, said the state trust fund proposed under Prop. 36 is not sufficient to cover costs of running the program. “If we’re estimating our costs to be ($60 million), that’s half the (measure’s total statewide) budget, but we’re only a third of the population of the state,” he said.

According to the state Legislative Analyst’s Office, California spends $25,000 a year to incarcerate a single prisoner, while the cost of drug treatment for a single individual is $4,000 a year. Overall, the state predicts annual savings of $100 million to $150 million on the state level if the initiative passes, along with $40 million for local governments.

County Chief Administrative Officer David Janssen said the county would almost surely contract out for treatment services if the measure passes. That would immediately add $55 million a year to the local private-sector market for such services.

Teri Cannon, executive vice president of Behavioral Health Services Inc., said she expects a hefty increase in clients for companies like hers that provide alcohol and drug treatment and rehabilitation.

Cannon, whose company provides the county with between $8 million and $9 million in contracted services a year for 6,500 drug users, said the windfall wouldn’t necessarily lead to an explosion of new firms.

“It is such a specialized business that it would be hard to imagine someone starting up a new business,” Cannon said. “I’d more expect increased programs and services from existing providers.”

Safeguards in place

She said that’s the way it worked a couple of years back when the county increased contracts under the federal Temporary Assistance to Needy Families program that accompanied Welfare-to-Work legislation.

However, several years back, when managed-care organizations were willing to pay for alcohol and drug treatment services, many illegitimate centers did crop up and many were shut by state and local officials if they could not produce a license.

Orlando Ward, project manager for program development at Midnight Mission on downtown’s Skid Row, said sponsors of Prop. 36 were careful to make sure the measure would not fall prey to greedy fly-by-night entrepreneurs.

“Because the proposition requires that all programs be licensed, I don’t have any fear we’ll have people all of a sudden throwing a shingle over their door and calling themselves a treatment program,” Ward said. “Money isn’t new to the recovery game, if you will. There’s been a lot of funding since the war on drugs. It’s not one of those situations where you can just go to any program. There’s an existing list of certified programs.”

County Supervisor Michael Antonovich is urging the Board of Supervisors to oppose Prop. 36. Social issues, not budget concerns, are the nut of the supervisor’s objection.

“Individuals from such diverse fields as Pasadena’s Chief of Police Barney Melekian and actor Martin Sheen, who has first-hand experience of serious drug problems in his own family, agree that only the threat of jail time can keep many drug offenders in treatment,” Antonovich states in his motion.

In addition, the measure could cause budgetary problems after its funding is exhausted.

“I do know the costs in the initiative only run for five years, and if the state decides to stop funding, it would be a local mandate (to continue funding after that),” said Jean Huston, justice deputy for Antonovich.