This report presents findings of a 3-year analysis conducted on the impact of substance abuse on state budgets. An advisory panel of public officials, researchers, and financial experts was convened to provide guidance. They conducted an extensive review of articles and publications linking substance abuse to public spending. Several studies were also undertaken to document the cost of substance abuse on entitlement programs and aid to families and children, and to assess the cost of substance abuse in New York City. Five states (California, Florida, Minnesota, New Jersey, Vermont) were chosen to provide a cross section in terms of demographics, budgeting practices, and data available. The findings determined that substance abuse is among the largest costs to state budgets. For every dollar spent on substance abuse over 95.8 cents goes to pay for treatment while only 3.7 cents goes to fund prevention. By providing a map of state substance abuse spending, this study establishes a base against which policymakers can make informed decisions about future allocations. It suggests that the most significant way to reduce the burden of substance abuse on public programs is through targeted and effective prevention programs. (Contains 2 appendixes, 90 figures, 66 tables, and 102 references.) (JDM)