Jan-08-2007 02:00pm

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F-816

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60 YEARS OF SE R.V lCTi

January 5, 2007
Hon. Gloria Romero
Senator, 24u. District
Room 313, State Capitol
Sacramento, California 95814

DearS~ero:
In a recent letter, you asked us to assess the fiscal implications of the state's recently
signed contracts to house inmates in prison facilities in other states (Indiana, Arizona,
Oklahoma, and Termessee). As you are aware, the California Department of Corrections
and Rehabilitation (CDCR) has contracted with two private contractors-CEO Group, Inc.
and Corrections Corporation of America-to house a total of 2,260 inmates in five out-ofstate facilities in these four states. Specifically, you asked whether CDCR costs would be
reduced as a result of these contracts, particularly in light of the selection criteria for
detennining which inmates will be eligible for transfer to other states, as well as the
transportation an~ administration costs incurred as a result of their out-of-state placement.
We have reviewed the contracts and discussed them with representatives of CDCR
and the Department of Finance (DOF). Based on this information, we address each of
your questions below.
Out-Of-State Contracts Will Increase State Costs
Contract Daily Rate Higher. Based on CDCR estimates, the state now budgets on
average about $56 per imnate per day for each additional prison inmate--often refened
to as overcrowding costs per inmate. By comparison, the contracted rate for these new
out-of-state prison beds is higher, about $63 per inmate per day.ln addition to this daily
bed contract rate, the department will incur other costs, as detailed below.

Transportat ion Costs. Under the terms of the contract, t he state, not the private
vendors, pays for the transportation of inmates between California and the out-of-state
facilities. At this time, we are unable to estimate the total cost of transporting inmates as
part of this arrangement. That is because these transportation costs could vary
significantly depending upon such factors as the number of inmates who must be
transpo1·ted in order to fi11 the contract beds and the means of their transfer, such as
ground or air transportation. The CDCR estimates that the state would incur average
airfare and guarding costs of about $900 each way through contractors for each irunate
who is flown out of state. (We have not evaluated this cost estimate.) We are advised by

Los;bl;lt.ive Analyst'~ Offia:
CQIIfornia LegW:uurc
JlJizab~lh G. Hill •

Legislative Analysl
9:!5 l Street, Suite 1000 • Sacramento CA 9:'i!:ll-1
(916) 445·4-656 · FAX. 324-4281

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Hon. Gloria Romero

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CDCR thctt it intends to drive, rather than fly, inmates whenever possible to the Arizona
facility. In these instances, transportation costs would likely be lower than for airfare.

We would note that, under each contract, the contractor providing the out-of-state
beds has a right to submit a bid to provide transportation services whenever transfers
are scheduled. However, the state may reject that bid and use another transportation
provider that provides a "better quote."

Administrative Costs. We are advised by DOF that CDCR is likely to request
additional staff positions to administer the contracts as well as facilitate inmate
transportation. The number and cost of the positions that will be requested is W'lknown
at this time. In addition, the receiver appointed by a federal court to improve the inmate
medical system reported that, as of the end of November, it had incurred $66,000 in
costs to conduct medical screening of the offenders selected to be sent to other states
and to inspect the out-of-state facilities.
Medical Costs. Under the terms of the contracts for these out-of-state beds, the state
is responsible for reimbursing the contractor for the costs of any necessary medical costs
in excess of $2,500 annually per inmate for hospital or emergency services provided offsite, such as at a hospital emergency room. Depending on the nature of their injury or
illness, state expenditures could be more or less costly than if the inmate had been
provided medical services while housed at a COCR facility.
Sele ction Criteria for Inmate s Will Have Mixed Effect on State Cos ts
The contracts discussed above specifically exclude the following offenders from outof-state transfers: (1) those with serious mental health or physical problems, (2) females,
(3) juveniles, and (4) (in the GEO Group, Inc. contract only) sex offenders. We are
advised by CDCR that it will also exclude Level IV (high-security) irunates, as well as
those eligible for placement in a minimum support facility or conservation camp.
You raised several questions regarding which inmates will be selected for out-ofstate transfers, and how that selection process will affect state costs. Our analysis
indicates that the impact on costs of these selection criteria is likely to vary. On the one
hand, the selection process excludes inmates who are comparatively more expensive,
such as those with serious medical and mental health problems, so that those higher- .
cost inmates would be retained in California prisons. On the other hand, the state is also
retaining some of the least expensive inmates, such as low-level offenders eligible for
minimum support facilities and conservation camps.
As a result, the net fiscal effects of the selection criteria for out-of-state transfers cannot
be determined until the actual characteristics of the particular offenders who have been
transferred are known and can be compared to those of the irunate population remaining
in CDCR facilities. Currently, CDCR reports that only about 240 such out-of-state transfers
have occuned, making such a comparison premature at this time.

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Other Factors Could Reduce or Delay State Costs

As noted earlier, our fiscal analysis indicates that the cost per inmate for these outof-state contracts would be greater th an the average amount of funding budgeted for
inmates held in CDCR facilities. However, these contracts could result in some offsetting fiscal benefits t o the ~tate over time, due to several factors we discuss below.

New PrisotJ Beds Could Be Avoided or Delayed. As you know, the use of a significant
number of out-of-state prison beds could allow the state to avoid, or to at least delay, the
construction of an equivalent nwnber of in-state beds as state facilities approach their
maximum capacity. That means that, for at least some period of time, the state could avoid
or delay capital outlay costs which can be as much as $130,000 per prison bed. It could also
allow the state to avoid or delay the additional staffing costs that would be incurred in
activating and filling a new facility, which are generally about $97 per day, well above the
$63 per day contract rate now being incurred for the out-of-state beds.
Fiscal Benefits From Reducing Overcrowded Conditions. To the extent that the
transfer of irunates to out-of~state facilities succeeds in relieving overcrowding in CDCR
facilities, the state could eventually experience a reduction in some prison operating
costs. For example, a reduction in overcrowding could improve prison safety, which in
tum could reduce state costs associated with staff and inmate injuries, such as medical
costs and workers' compensation claims.
Program Opportunities Could Reduce Cost s From Recidivism. In addition, the
contracts require that out-of-state facilities provide all eligible offenders with the
opportunity to participate in p rograms, occupational training, and work. This also
could have fiscal (and programmatic) benefits for the state in the long term. These
programs-including academic education, vocational training, and substance abuse
treatment---could reduce the recidivism rate of those inmates after they are paroled and
released to California communities. A reduction in the recidivism rate would result in
an avoidance of some state (and local) government criminal justice system costs,
including the costs of reincarceration. The magnitude of these fiscal benefits is
unknown and would depend, in part, on the quality of the rehabilitation programs
offered in the out-of-state facilities.
We hope this information is helpful. If you have any further questions, please
contact Brian Brown of my staff at (916) 319-8351.
Sincerely,

4

Elizabeth G. Hill
Legislative Analyst

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