Prison Business Competes With Private Sector (California)

Colorado's version is Correctional Industries.

The Real Cost Of Prisons - Established in 1982, the Prison Industry Authority's mission is to rehabilitate inmates by putting them to work, and also to reduce the operating costs of prisons. But the authority -- which operates with little legislative oversight -- only employs a small fraction of the state's 172,000-plus inmates.

At present, the authority provides work for about 5,900 inmates and operates more than 60 service, manufacturing and agricultural operations at 22 prisons. Inmates earn from 30 cents to near $1 an hour to make flags, shoes, printing services, eye wear, gloves, office furniture, license plates, clothing and more. The authority can sells its products to federal, state and local government agencies. The state has been the biggest customer.

The Department of Corrections and Rehabilitation views the authority as a key part of a renewed effort to boost rehabilitation programs. But some lawmakers say the added responsibility might have to be accompanied by greater legislative oversight.

"There clearly is some benefit to the PIA, but at the same time I am concerned when the PIA is misusing its authority and unfairly competing with small businesses," said Assembly Member Juan Arambula, D-Fresno, who leads a budget subcommittee that oversees prisons.

By law, state agencies, with some exceptions, are required to purchase products from the authority, even if private businesses sell the items for less.

Businesses complain

The state auditor in a 2004 report found the authority's pricing to be fairly competitive, but said its cost savings claims were "questionable."

Last year, the authority posted a $4.7 million operating loss on $179 million in revenue, though the authority says it would have posted a small profit if it weren't for significant one-time costs associated with a streamlining effort.

The food packaging business was launched in 2003-04 and today includes cookies, bread and, most recently, peanut butter and jelly. But the move into the new enterprise has been plagued by delays and has generated plenty of complaints from small-business owners.

American Copak in Southern California, an Adolph supplier, says it faces the possibility of worker layoffs.

"We may be talking about 50 to 100 people, between our company, Adolph and the vendors who supply us," said American Copak president Steven A. Brooker. "This will cause a ripple effect."

Brooker's firm produces millions of peanut butter and jelly squeeze packets each year. The prison contract produces 25% to 30% of his overall revenue, he said.

"As a company, we knew we were going to compete against other small businesses," Brooker said. "But I never would have imagined that we would have to fight against the government for our business."

Other prison suppliers also are concerned. Christian Bartels, owner of CB Enterprises in Ceres, said 90% of his produce and other grocery items goes to the state prisons.

"What they are trying to do is do their own packaging and be their own manufacturer," Bartels said. "And once that happens, they won't need people in the private sector like me -- people whose employees are paying taxes, buying things and stimulating the economy."

Real Cost Of Prison