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California Uses $1.08 Billion in Federal Stimulus Funds to Pay Prison Guard Salaries

In a November 2009 letter to Governor Schwarzenegger and legislative leaders, California State Auditor Elaine Howle reported that corrections officials had greatly overstated the number of jobs they saved using $1.08 billion in federal stimulus money, claiming they retained thousands of positions that were never in jeopardy.

Faced with an economic crisis the likes of which the United States had not experienced since the Great Depression, on February 17, 2009, President Obama signed the American Recovery and Reinvestment Act into law. The Recovery Act set aside $787 billion in federal funds to retain and create jobs; other objectives included assisting those most affected by the recession and stabilizing state and local government budgets.

The latter goal was to be achieved through the State Fiscal Stabilization Fund Program. Under the terms of the Re-covery Act, a certain percentage of stabilization funds (18.2%) could be used for public safety and other governmental services; the remainder had to be allocated to education-related programs.

California applied for initial funding under the State Fiscal Stabilization Fund Program in April 2009. In its application, the state explicitly indicated that it planned to spend the entire governmental services portion of its allotted stabilization funds on public safety. And it did just that, using $1.08 billion in federal money to cover payroll expenses for the California Department of Corrections and Rehabilitation (CDCR).

The State Auditor found that the use of Recovery Act funds to reimburse CDCR payroll costs was “allowable” in light of the CDCR’s public safety mission. What the Auditor questioned, however, was the CDCR’s report – required of all recipients of Re-covery Act funding – that the money had been used to “retain” the jobs of 18,229 employees.

For purposes of the Recovery Act, a “job retained” is defined as an existing position that would have been eliminated absent funds received under the Act. By that definition, the State Auditor concluded the CDCR had significantly overstated the number of jobs that were saved.

As of August 2009, the CDCR had issued approximately 5,000 layoff notices – less than one-third the number the agency reported to federal officials as jobs retained. “Corrections simply reported how many correctional officers’ salaries were paid with Recovery Act funding,” the Auditor wrote, “regardless of whether these positions were truly at risk of being eliminated without federal funding.”

Corrections Undersecretary Mary Fernandez defended the CDCR’s calculations. “We followed the federal formula,” she stated. “Who knows what could have happened in May and June if we hadn’t gotten the money?”

That would be a moot question had California officials decided to spend over a billion dollars in federal stimulus fund-ing on other governmental services instead of salaries for prison employees.

Sources: Associated Press, California State Auditor Report No. 2009-002.1b

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