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South Carolina Prison Industry Program Problematic, Audit Finds

South Carolina Prison Industry Program
Problematic, Audit Finds

by Michael Rigby

The prison industries program of the South Carolina Department of Corrections (SCDC) is improperly managed, likely displaces workers in the surrounding community, and creates an unfair advantage in the marketplace, according to a review performed by the Legislative Audit Council of the state's General Assembly. A report of the audit's findings, which covered a period from July 2001 to June 2003, was released in October 2003.

According to the report, as of August 2003 the SCDC employed over 1,900 prisoners in its Prison Industries Program (PIP). More than 1,200 worked manufacturing goods and providing services for private companies (making it the largest private exploitation of prison labor in the country). These companies compensate the SCDC for the prisoner labor; the SCDC, in turn, pays the prisoners between 35 cents and $6.50 per hour. The other 700 plus prisoners make products or provide services that the SCDC sells to other government entities. These prisoners are paid slave wages ranging from nothing to 60 cents per hour.

The PIP does not have adequate goals or performance measures, according to the report. For instance, auditors found that the PIP generally employs better educated prisoners and those with longer sentences, rather than prisoners who could most benefit from the programthose with poor education and work skills and those slated for release within a few years. Notably, recidivism rates for prisoners in the PIP were no better than for those in the general population.

The PIP is probably not self sustaining either, noted a 1998 audit. The audit recommended that the SCDC use a true cost analysis system. Not surprisingly, the SCDCC has yet to implement such a system. Currently, the SCDC annually reports information on product sales and deductions from prisoner wages. According to the report, this procedure is inadequate and does not "accurately reflect the degree to which the program has met its goals."

In addition, the SCDC has inadequate methods for collecting child support, victim restitution, and room and board from prisoners wages, according to the report. For instance, the SCDC determines child support by asking prisoners to disclose this information when they're hired. The report noted, however, that this "may not be a reliable method of collecting such information." For example, although a sampling of 22 prisoners revealed that two owed victim restitution, auditors found that only one actually had money deducted from his wages.

The PIP also creates an unfair advantage in the marketplace, according to the report. This is because companies that employ prisoners can pay lower wages, forego fringe benefits, and are typically provided with subsidized rent (the SCDC charges most companies $1 a month for a minimum of 176,000 sq. ft. of space), subsidized utilities (one company lowered its electric bill from 7 cents per Kilowatt hour to 4 cents by reimbursing the SCDC directly), and other perks (the SCDC illegally pays half the cost of prisoner training, an arrangement that saved one company $50,000).

This training arrangement caught the attention of U.S. Justice Department officials who wrote in a May 14, 2003, letter that "sharing the cost of training does not meet the spirit of the fair competition requirement since competitor manufacturers in the community are not provided with the same support."

The report further found that SCDC saves these companies money through improper billing. In two instances, according to the report, the SCDC failed to bill companies for more than 8,700 prisoner hours, which amounted to $29,000. In another instance, a company was billed $2.06 an hour for prisoner labor rather than the $7.06 per hour it should have been billed. The report noted that there is no independent review of SCDC invoicing.

More importantly, the PIP probably displaces private sector workers in violation of federal law. 18 U.S.C. 1761(a) provides that prisoners employed by private companies involved in interstate commerce must be paid a wage comparable to that for similar work in the local community and may not displace private sector workers. The SCDC, however, fails to adequately assess whether private sector workers are displaced. Auditors found, for instance, "four counties with above average unemployment rates in which private companies employ inmates." The report also noted that the SCDC generally started prisoners at the Federal Minimum Wage (FMW) even when comparable wages in the community might be higher, further increasing the likelihood of displacing workers in the community.

But the FMW is still apparently more than the SCDC wants to pay. Auditors noted one example in which SCDC sends manufactured shirts directly overseas without crossing state lines in order to circumvent the FMW. Even worse, the SCDC maintains many contracts that do not involve interstate commerce. Under these contracts the SCDC may pay prisoners substantially less than the FMW. Notes the report: "Allowing certain industries to pay less than minimum wage can result in a significant competitive advantage."

South Carolina law goes even farther than federal law, mandating that no prisoner participating in the PIP "may earn less than the prevailing wage for work of similar nature in the private sector." South Carolina Code of Laws 24-3-430(D). However, each year beginning with fiscal year 02-03, according to the report, the General Assembly has overridden the requirement, allowing prisoners to be paid less than the prevailing wage.

As if all this weren't enough, South Carolina law also gives the SCDC "a legally mandated competitive advantage over private sector vendors when selling goods and state agencies," notes the report. To begin with, state agencies are not required "to solicit competitive bids, quotes, or proposals when purchasing items from SCDC." What's more, the law actually requires state agencies to purchase SCDC goods and services when its prices are equal to or lower than those of private vendors. Even when SCDC prices are higher, notes the report, state agencies are still allowed to purchase its goods and services. Consequently, "SCDC's competitive advantage over private vendors gives it the ability to increase its revenue by charging higher prices to state agencies."

A free copy of the report can be obtained online at See PLN indexes for more on the exploitation of prison labor. These complaints mirror the reality of prison slave labor across the country.

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