Drug legalization is self-funding. For starters, you take a $300 billion underground economy and subject it to taxation. States spend about $6 billion a year incarcerating non-violent drug users; that would pay for a hell of a lot of rehab.
A legal, regulated drug trade would pull the funding out from under criminal organizations that, in many cases, are more like armies than gangs. It would remove the rationale for asset forfeiture that turns the presumption of innocence on its head. It would undermine the case for no-knock warrants, intrusive bank reporting requirements, and an array of other assaults on individual liberty justified by the "war on drugs."
I share your philosophical unease at adding to the welfare rolls, but in pragmatic terms, the money is already being spent on incarceration. I support a solution that spends less money to achieve a better outcome, even if it means shifting the funds from the "law enforcement" to the "social welfare" line item on the budget.
Personally, I’d like to see us allow a state like California to try this, before we take the entire nation down a path that might work great but might be a disaster.
It is unfortunate that we have lost the ability of the states to be the testing ground for different ideas of how to handle issues.