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California Auditor: Prison Industries Loses Money and Fails to Demonstrate Rehabilitative Success

by Marvin Mentor

The California Department of Corrections and Rehabilitation's (CDCR) Prison Industry Authority (PIA) loses money in 20 of 28 enterprises it operates in CDCR prisons, provides rehabilitative work for a declining number of prisoners in spite of a meteoric climb in prison population, and lacks a marketing plan, according to the 67 page December 2004 report on PIA by the California State Auditor. PIA lost $10.2 million in 2002-03 and $5.5 million in 2003-2004, even though it sold nearly 97% of its $144 million annual output to state agencies, 47% of that to itself (i.e., CDCR).

The audit was initiated by California State Senator Dean Florez when he learned that PIA charged $7.30 for PIA-made prisoner canvas slip-on shoes when private industry offered similar shoes for $1.05. He called for a reorganization of PIA on grounds that it competes unfairly with the private sector.

PIA, controlled by an 11-member state Board, operates 60 factories and farms in 22 of California's 34 prisons. Twelve years ago PIA employed 6,295 prisoners, when the prisoner population was only two thirds of the current 168,000. Today, PIA employs only 5,669. Its intended benefits were to provide job skills to prisoners to prepare them for release. Of the 60.9% of CDCR prisoners who are assigned to prison work or educational programs, only 3.6% are in PIA.

PIA claims that it saves CDCR $14 million per year by employing inmates who would otherwise have had to go to educational or vocational programs. Auditors questioned these savings, trimming the estimate to $9.9 million at best by counting only the reduced incarceration attributable to work-time credits earned by the PIA prisoners. The Auditor opined that with newly enacted tougher sentencing and recidivist punishment schemes (replacing time credits with only 20% or 15% rates), PIA's ability to make these potential savings claims is impaired significantly.

Still, the Auditor recognized the long-range benefits of reducing recidivism by training future parolees with good job skills and work ethics. However, the Auditor was quick to note that CDCR has no system for tracking paroled PIA workers and has developed no proof that any benefit has ever actually accrued. This writer notes that this is symptomatic of a larger problem in CDCR -- it has no legislative directive to reduce prison populations via rehabilitation, no definition of either correction or rehabilitation in its charter and no incentive to either correct or rehabilitate so much as one prisoner. Thus, that CDCR (and hence the Auditor) cannot measure remedial results is no oversight. It is inherent in CDCR's very structure. (See, e.g., PLN, Mar. 2005, p.1, California Corrections System Officially Declared Dysfunctional Redemption Doubtful.)

PIA's 1,800 products are varied, from license plates ($20 million annually) to prisoner commodities (e.g., milk, bread, clothes, shoes, mattresses, laundry, printing and eyeglasses), to furniture for CDCR offices, Department of Motor Vehicle offices and even Governor Schwarzenegger's office. The prisoner workers earned approximately $8 million (30 to 95 cents per hour) in 2003-2004. In addition, PIA employed 662 full-time-equivalent state civil service employees, who earned an estimated $40 million. Added to the PIA Board's $1.2 million salary compensation, direct labor charges against PIA's income approached $50 million.

PIA has not always generated a net loss. In 1995, for instance, it showed a $10 million profit. Between 1996 and 2000, profit averaged about $2 million. Part of the $10 million loss in 2003-2004 (the base year of the Auditor's study) was an $11 million impairment from disposal of property following facility closures. By enterprise, some units were yet quite profitable. For example, optical products made $6.1 million then and $6.3 million the year earlier, but these profits were offset by losses in the furniture industry of $7.4 million and $4.4 million, respectively. Indeed, 98 % of PIA profits were generated in optical, license plate, fabric products and printing. The biggest losers, in declining order, were furniture, dairy, laundry, general fabrication, metal products and meat cutting. Furniture's $7.4 million loss was based upon 739 prisoners' work, and its per-prisoner enterprise loss was $10,000. Cleaning products, with fewer workers, had a per-prisoner loss of $18,700.

The Auditor criticized PIA for not have standardized pricing or discount policies. In a sample of 19 PIA products, its prices were below market in 3 cases and above market in the other 16. For eyeglasses made for CDCR, PIA charged $27 but could charge only $12.06 to MediCal-constrained Department of Health Services customers.

As to rehabilitative benefits for prisoners, the Auditor found that CDCR had not established prisoner participation targets. That is, CDCR had no data whatever to determine if PIA training aided prisoners' return to society, had no goals in setting the number of participants and had no objectives in trimming per-prisoner enterprise losses. As such, PIA's impact on CDCR was at best uncertain. It was not lost on state Senator Romero that of the prisoners employed by PIA, only 21% are eligible for time work credits (i.e., can cut incarceration costs by working). The balance are credit-ineligible lifers or other violent offenders. And if term-reduction through credits is a PIA goal, it was upstaged by the recent CDCR mandatory education program which grants (eligible) participants time credits at a lower enterprise cost than PIA's.

Even putting cost benefits and profitability aside, the Auditor concluded that CDCR was simply in no position to evaluate its PIA program without having a yardstick to evaluate performance. To that end, the Auditor proposed an audit tool, by PIA industry, measuring employment retention rate, comparison with outside industry's retention for that enterprise, and one, two and three year recidivism rates for all former PIA prisoner workers. Only with such data, and with target employment goals as well as business goals, could future audits reveal what value PIA is providing to CDCR. As reported often in PLN, prison industry programs worldwide have historically lost money, exploited prison labor and unfairly competed with private industry.

See: Bureau of State Audits Report No. 2004-101 (December 2004), Prison Industry Authority. (available from 555 Capitol Mall, Sacramento CA, 95814; and

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