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California Prison Industry Authority Loses $24 Million in Last Two Years but Reduces Recidivism

In January 20013, California's Prison Industry Board (PIB) submitted its annual report to the state legislature regarding the activities and financial status of the California Prison Industry Authority (CALPIA), the agency it is charged with overseeing. CALPIA operates industry programs that employ approximately 7,000 prisoners annually in “manufacturing, service, and consumable factories” at 24 facilities statewide.

Much like a corporate board of directors, the PIB sets general policy for CALPIA and monitors the performance of its industries. Among other responsibilities, it ensures that CALPIA enterprises are “self-sufficient and that they do not have a substantial adverse effect upon the private sector.”

The PIB’s previous report to the legislature, released in January 2012, had noted that after years of profitability, CALPIA experienced a loss of $15.3 million in net assets in fiscal year (FY) 2010-11. The loss was reportedly the result of four factors: 1) a $17.4 million (9.6%) drop in operating revenues; 2) an $8.6 million expense for the anticipated settlement of three lawsuits filed by employee unions seeking back pay for state-imposed mandatory furloughs; 3) a $6.3 million obligation to pay for post-employment benefits such as retiree healthcare; and 4) one-time costs of $2.8 million associated with CALPIA factory closures.

Revenues had declined largely due to a reduction in government expenditures, reflective of the sluggish economy. Most of the goods and services provided by CALPIA go to governmental agencies. By far, the largest consumer of CALPIA products is the California Department of Corrections and Rehabilitation (CDCR), which accounted for 57% of CALPIA’s sales in FY 2011-12. Other major customers include the Department of Motor Vehicles, the Department of State Hospitals, the Department of Transportation, the Department of Health Care Services and the California Highway Patrol.

CALPIA also operates joint venture programs in which “private businesses may set up business operations inside California correctional facilities and hire offenders. This includes only those businesses that are starting a new company, expanding an existing business, or relocating to California.”

The January 2013 PIB report indicated that CALPIA had suffered another loss in net assets for FY 2011-12, in the amount of $8.86 million. The main cause of the fiscal loss was reportedly a $6.26 million charge for depreciation on equipment; other factors included an increase in the cost of raw materials and a 7.87% decrease in sales of products and services to the CDCR – largely due to the state’s realignment initiative, which has shifted thousands of state prisoners to county jails.

The report noted that over the past five years, “CALPIA’s revenues have declined 17.5 percent from $209.5 million in FY 2007-08 to $172.7 million in FY 2011-12.”

Despite the agency’s financial woes, the PIB report noted that prisoners who participate in CALPIA industry programs have sig-nificantly lower recidivism rates than those who do not. Based on FY 2009-2010 data, the one-year recidivism rate for prisoners employed in CALPIA programs prior to being paroled was 23.61%, compared with 45.7% for non-CALPIA prisoners. The two-year recidivism rate, using FY 2008-2009 data, was 38.55% for CALPIA parolees and 56.9% for other prisoners, while the three-year recidivism rate, based on FY 2007-2008 data, was 46.8% for CALPIA parolees and 63.7% for non-CALPIA prisoners.

However, a report by the California State Auditor released in May 2011 had concluded that “although one of its primary responsibilities is to offer inmates the opportunity to develop effective work habits and occupational skills, the California Prison Industry Authority (CALPIA) cannot determine the impact it makes on post-release inmate employability because it lacks reliable data.”

The State Auditor’s report also noted, “Although we found that the recidivism rate for parolees who worked for CALPIA were consistently lower than the rates of the general prison population, CALPIA overstated by $546,000 the savings it asserts result from the lower recidivism rate. Further, CALPIA did not acknowledge that factors other than participating in one of its work programs may have contributed to the lower recidivism rates among its parolees.”

Sources: Sacramento Bee;; California Prison Industry Authority, reports to the legislature for fiscal years 2010-2011 and 2011-2012

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