STATE OF CALIFORNIA -DEPARTMENT OF CORRECTIONS AND REHABILITATION

ARNOLD SCHWARZENEGGER. GOVERNOR

OFFICE OF THE SECRETARY
P.O. Box 942883
Sacramento, CA 94283-0001

June 24, 2009

Mr. Clark Kelso, Receiver
California Prison Health Care Receivership
50 I J Street
Sacramento, CA 95812-4038
Dear Me Kelso,
I am thankful for the recently enhanced spirit of collaboration and cooperation between our two
organizations over the last several months. Although it is a continued team effort on both sides, I
specifically think the work of your Chief Deputy, Elaine Bush, and my chief of staff, Brett
Morgan, have set the tone for a stronger working relationship going forward. I am convinced the
California Department of Corrections and Rehabilitation (CDCR), the California Prison
Healthcare Services, and the inmates all benefit when we collaborate in our missions.
During the last two months, we have invested a considerable amount of time negotiating a
potential agreement concerning the construction of health-care-focused prison facilities and
related litigation, among other things. All parties acted in good faith, and I uppreciate the time
and effort you and others on your staff put into this process. As you know, the most recent draft
of the proposed Memorandum of Understanding (MOU) would require the State defendants to
help the Receivership seek approximately $2 billion in funding from the California Infrastructure
and Economic Development Bank (I-Bank). For the reasons set forth below, we cannot agree to
a MOU that requires the State to seek I-Bank funding, or any other additional funding not
previously appropriated by the California Legislature. This decision docs not, however,
foreclose the possibility of reaching an agreement coordinating our efforts to achieve our shared
goals.
Currently, the State is facing at least a $24 billion budget deficit, and the Stute Controller
recently projected the State will run out of cash in July. The State's precarious financial
condition will result in severe and significant cuts to vital State programs. The State cannot at
this time become further indebted for correctional healthcare. Additionally, in light of the
administration's prison refonn proposals, it is unclear whether all of the construction
contemplated in the MOU is necessary to achieve constitutionully adequate medical care in
California's prison system. In aggregate, these proposals would reduce the prison population by
approximately 19,000 inmates. One such proposal, for example, would provide CDCR with the
ability to furlough aged and infinn inmates serving detenninate tenns. This proposal alone
would likely affect the need for future medical construction.
In addition, the California Legislature has already provided nearly $8 billion in funding through
Assembly Bill (A B) 900 for CDCR to construct capital projects. Of this $8 billion, roughly $1

Mr. Clark Kelso, Receiver
Page 2

billion was directly appropriated to improve healthcare. Of the remaming appropnatlOl1, a
significant amount of that money can also be used to build appropriate beds for inmates with
disabilities and/or other health needs. In addition to this legislation, COCR has almost doubled
its health care spending on inmates from fiscal year 2005-2006 to the present. We believe that
additional improvements in the delivery of health care will result from implementation of AB
900. Together, the Receivership's improvements in the delivery of health care and the State's
implementation of AB 900 will address any remaining healthcare and capacity needs that may
exist.
We also believe AS 900 funding is a more secure source of funding and will pennit COCR to
fund its necessary capital projects. As you know, on June 17, the California Supreme Court
denied the petition for review in the case of Taxpayers for Improving Public Safety (TIPS) v.
Sclnt-urzcncggcr. The related case of Californians United for a Responsible Budget (CURB) v.
the State Public Works Board previously resolved in the State's favor. The Supreme Court's
action in TIPS ended the litigation over the validity of these bonds, and it also cleared the way
for the California Attorney General's Otlice to provide a clean bond opinion for AB 900
projects.
In conclusion, I sincerely hope the economic realities of our time and the administration's efforts
to address population levels, which prohibit the State defendants from entering into the proposed
MOU for I-Bank financing, will not sidetrack our joint efforts to further improve medical care
and to return the day-to-day management of prison healthcare back to COeR. Please be assured
that COeR and the Governor remain committed to these goals.
Please let me know if you would like to meet and discuss this further.
Sincerely,

MATTHEW L. CATE

Secretary