Social work staff had envisioned a treatment community practicing group therapy as well as living group and recreational interaction in a graduated program that began with treatment motivation and progressed through inpatient therapy to an outpatient program in the community. In the implementation, however, they experienced conflicts and constraints arising from correctional requirements and organizational cost-benefit concerns -- especially regarding utilization of correctional space issues. These administrative stresses were reflected in clients' adjustment difficulties that culminated in disruptive behaviors when program cutbacks and political conflicts had resulted in the gradual reinstitution of repressive procedures, traditional resocialization programming, and finally clients, return to the correctional facility. The failure of this effort illustrates the conflict between treatment and correctional goals and the way in which financial limitations can be used as an excuse for phasing out more progressive program alternatives. As a result, juveniles with drug problems are still being incarcerated and their rehabilitation remains inadequately addressed in a coercive correctional setting.