Legislature(2003 - 2004)
04/01/2003 08:01 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 161-CORRECTIONAL INDUSTRIES PROGRAM EXPENSES Number 1136 CHAIR WEYHRAUCH announced that the next order of business was HOUSE BILL NO. 161, "An Act allowing expenses of the correctional industries program that may be financed from the correctional industries fund to include the salaries and benefits of state employees." Number 1099 JERRY BURNETT, Director, Administrative Services, Department of Corrections (DOC), presented HB 161, saying it is a simple bill that allows for the correctional industry's product revenues to pay for state employees' salaries. Current state statute allows for the correctional industry's revenues to pay for all other administrative costs of the program. He revealed that state employees' salaries in "this program" are approximately $960,000 in fiscal year (FY 04) general fund revenues. He said the administration would like the ability to use the revenues from the correctional industry's product sales to pay for those state employees' salaries, thus reducing the general-fund cost of the program. MR. BURNETT noted that the correctional industry has eight "product service" enterprises operating now: Juneau Commercial Laundry, Fairbanks Garment/Flat Goods Shop, Kenai Office Furniture Systems Plant, Eagle River Garment Shop, Kenai Metals Plant, Seward Wood Furniture Plant, Palmer Auto Body Shop, and Juneau Staph Guard [Hospital Laundry]. He said 14 state employee product managers work for DOC in those industries, and approximately $4.1 million in product revenues is generated annually. In response to a question by Chair Weyhrauch, he said he guesses that [the Juneau Staph Guard Hospital Laundry] is in cooperative with Alaska Laundry; it provides sterile laundry services to the hospital and medical clinics. Number 0843 CHAIR WEYHRAUCH noted that [page 1, beginning on line 10] would amend [AS 33.32.020(a)] as follows: The commissioner of corrections shall prepare a report annually on all activities and balances of the fund and notify the legislature that the report is available. CHAIR WEYHRAUCH asked if the report for 2003 has been prepared yet. MR. BURNETT replied that he hasn't seen it and doesn't know the status. In further response, he said it would be a communication from the commissioner. He added that the information is in [the department's] detailed budget documents, ["Component: Correctional Industries Product Cost," included in the committee packet]. He also confirmed that [the information in the budget documents] is more or less where the commissioner's report is derived from. Number 0745 REPRESENTATIVE BERKOWITZ stated his understanding that prison industries provide goods and services to the state. He asked, "Shouldn't that be reflected somewhere in the fiscal note?" MR. BURNETT answered that it would only be reflected in the fiscal note if there were a change in prices or cost to the state as a result of HB 161. He said that isn't the intent. In further response, he said there is net income; there is approximately $300,000 in the product cost fund available at the end of this fiscal year. REPRESENTATIVE BERKOWITZ asked how much furniture is sold [that is made by the prison industry], for example, and what the equivalent commercial cost would be. MR. BURNETT said he didn't know, but offered to provide that information. He conveyed his belief that the industry's prices are competitive at this point. He remarked, "We need to work on our marketing and get [the product] out." He added that there is the potential for other customers besides the state. REPRESENTATIVE BERKOWITZ related his understanding that [the industry can sell to] the following: an agency of the federal government, a political subdivision of the state, other states or their political subdivisions, and nonprofit organizations. Number 0657 MR. BURNETT said, "We are also allowed to sell to ... private individuals [and] private companies if we are not competing with private industry in that venture." REPRESENTATIVE BERKOWITZ responded, "That being the case, I'm curious why the approach of the administration here is so sudden - why there's not a transition provided for in this legislation." MR. BURNETT replied that the fiscal policy driving [the bill] is that general fund spending needs to be reduced. He said the department believes there are significant opportunities to increase revenues within this component. REPRESENTATIVE BERKOWITZ asked how the department plans to do that when it gets rid off the 14 people who are currently managing the program. MR. BURNETT answered that the fiscal note shows that the department would be replacing the money and paying the people with product revenues, rather than getting rid of the 14 people. REPRESENTATIVE BERKOWITZ responded as follows: I'm a little confused. The current cost is $960,000. You're having $150,000 coming in. It would seem to me, when [there is] $810,000 in debts, that you're not going to be able to afford all the people [who] are currently in the program. If you can't pay people who are in the program, how are you going to continue to expand the program and market it? Number 0548 Mr. BURNETT answered that Representative Berkowitz was making some assumptions that aren't necessarily correct. One is in regard to the $150,000. He mentioned $300,000 in seed money to start paying people. He added, "So we would need to develop additional revenues beyond the current net revenues, somewhere in the neighborhood of $660,000, to ... retain all 14 of these people for this year." REPRESENTATIVE BERKOWITZ asked if [DOC] has a plan to do that. MR. BURNETT said he isn't personally in charge of this program, but believes the commissioner has been working with "some entities. He added, "We are working on that very plan." In further response, Mr. Burnett confirmed that the plan isn't complete yet. Number 0457 REPRESENTATIVE BERKOWITZ said it seems one reasons for having this program - which is on thin ice with lack of a plan at this point - is for the rehabilitation of prisoners. He commented, "I was wondering what plans the administration has, the department has, to continue the rehabilitation efforts at the eight correctional industries' product service enterprises - what you will do to facilitate rehabilitation, which is a constitutional mandate." MR. BURNETT related his understanding that, at this point, there is no intent to eliminate any of these programs specifically; therefore, he believes the programs would continue to the extent possible. He noted that the commissioner has been in contact with the Department of Labor & Workforce Development (DLWD) and has been working with them regarding job rehabilitation, which is also in the Alaska correctional industry statute. He mentioned job-training programs and said, "So we would be actively looking for any opportunities to continue rehabilitation." REPRESENTATIVE BERKOWITZ asked if the budget makes provision for expenditure of the $300,000 that's in reserves. MR. BURNETT answered yes. REPRESENTATIVE BERKOWITZ asked what would happen if that [$300,000] were exhausted. MR. BURNETT reiterated that the department intends to do everything possible to increase product revenues. Barring that, he said, it would have to look at other alternatives to providing the service. REPRESENTATIVE BERKOWITZ asked when the plan would be ready. He requested that Mr. Burnett make it available to the committee at that point. MR. BURNETT said, "To the extent that that plan becomes available, I see no reason why we couldn't provide it to you." He noted that the manager of the correctional industries is planning to retire this month; therefore, recruiting will begin for a new manager. He said part of the previously discussed plan will "come with the new correctional industries manager." In response to a comment by Chair Weyhrauch, he noted that the commissioner who is working on some of the information that the committee has asked to receive is presently out of town. Number 0177 REPRESENTATIVE HOLM asked Mr. Burnett to explain the purpose of correctional industries. MR. BURNETT defined correctional industries as "a mix of job training and activities for inmates in the correctional institutions." He explained that [the inmates] produce goods and services that are intended to "pay for themselves," and they achieve some job skills that hopefully are marketable upon their release. He noted also that the jobs keep the inmates busy, and a busy inmate is "better" to keep track of than those who are idle. Number 0092 REPRESENTATIVE HOLM referred to the page marked "78" in the previously indicated "Correctional Industries Product Cost" handout [the "Component Financial Summary" page]. He asked if he interpreted correctly that it shows a budget component of over $4 million. MR. BURNETT said that is correct. He explained that this amount would be the total program [cost] in FY 04. In response to a follow-up question, he noted that the sales this year were approximately $150,000 more than the costs - "the programs, less the state employees, which are not paid for." TAPE 03-35, SIDE A Number 0001 MR. BURNETT, in response to additional follow-up questions, clarified that the employees presently aren't paid for by product revenues, but are paid for by general fund dollars. They are listed under "professional industries administration." He said, "We would like to use product cost revenues to pay the state employees who manage the program." REPRESENTATIVE HOLM noted that there is only $150,000 more than production costs; therefore, there is a shortfall. MR. BURNETT [agreed that there is a shortfall] without producing additional revenues; in order to continue the programs, DOC would have to produce additional product revenue. In further response, he said DOC needs to have the authorization [from the legislature] to pay its state employee product managers from [product revenues] so that when the department is able to produce additional revenues, it can use that money rather than general fund money to pay those state employees. REPRESENTATIVE HOLM surmised, "Then this is a precursor to being able to function this way." MR. BURNETT said, "Right. We want to function as a full enterprise fund so that it pays all its own costs." REPRESENTATIVE HOLM said he agrees with that. Number 0200 REPRESENTATIVE SEATON said he has no problems with the authorization to use excess funds to pay salaries and benefits; however, if the outcome of adopting HB 161 might be that if the excess revenues are not sufficient, the managers and, therefore, the program - which is an integral part of rehabilitating the people in the states prisons - are eliminated, then he would be opposed to it. He said it is important to remember that the people in prison will be back out on the street, and rehabilitation is [an important] goal. Number 0374 CHAIR WEYHRAUCH related his understanding that it isn't the intent of those introducing the bill to do away with the programs if there are no funds; rather, it is to allow the flexibility to pay salaries and benefits of state employees from proceeds of the fund. MR. BURNETT concurred. CHAIR WEYHRAUCH asked if it would be all right with the administration if the committee included a letter with the bill [stating the sentiments that have been discussed]. MR. BURNETT responded, "I can't speak to that at this point." Number 0428 REPRESENTATIVE SEATON said he would like the administration to [respond] to the committee regarding whether they would receive and agree with a letter [of intent] from the committee. He said, "I think that's a fundamental policy issue that we need to decide here. And if we are misunderstanding or miscommunicating with the administration on the outcome of this program, I need that before I could go forward." [HB 161 was held over.]
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