Legislature(1995 - 1996)

04/18/1996 02:20 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
          HB 428 LEASE-PURCHASE CORRECTIONAL FACILITY                         
  SENATOR KELLY announced  HB 428  to be up for consideration, but sai        
 they would take a break at 2:45 p.m.                                          
 SENATOR KELLY called the meeting back to order at 3:12 p.m.                   
 DENNIS DEWITT, Staff to Representative Eldon Mulder, said HB 428              
 allows the Department of Corrections to pursue the use of private             
 facilities.  The first portion of the bill clarifies the ability to           
 contract for private services.  The second portion of the bill                
 allows the Department to enter into a lease purchase agreement with           
 a private contractor for a private facility in Alaska.                        
 There are some parameters like it can't be larger than 1,000 beds,            
 should be designed for expansion, should include housing for female           
 prisoners which is one of the critical needs we have in Alaska and            
 that construction costs should not exceed $100 million.  It should            
 be constructed with a project labor agreement.  There's language in           
 the bill that encourages the Department of General Services to                
 develop incentives in the bid process for bidders who promise to              
 employ Alaskans in the operation of the facility.                             
 The bill requires that correctional officers in this facility be              
 trained at the same level as correctional officers in the                     
 facilities operated by the State of Alaska.                                   
 MR. DEWITT said that we do need additional capacity in Alaska.                
 Today we're at about 107 percent of capacity in our facilities.  We           
 also have 206 prisoners in Arizona and we're spending nearly $6               
 million providing jobs for Arizonans.                                         
 Improving facilities for female offenders is one of the things                
 that's outlined in the Cleary final settlement agreement and it's             
 an issue that it has been agreed to by almost everyone involved in            
 the prison system.                                                            
 Number 400                                                                    
 The Subcommittee on Corrections held interim hearings on the topic            
 of privatization and found that the ability to move quickly is                
 enhanced using private sector facilities and the record of private            
 facilities is as good as public facilities in terms of safety and             
 quality of the product that they offer.                                       
 The cost in Arizona per inmate day is $59 with additional costs               
 bringing it up to $73 per day.  In Alaska we pay $109 per day.  He            
 believes that a facility built in Alaska by a private contractor              
 would substantially reduce the per diem cost in Alaska facilities.            
 Bringing competition into the market place will help bring the cost           
 of their other facilities down as well.                                       
 He believes HB 428 addresses the problem of prison capacity, brings           
 construction and operation jobs to Alaska, brings Alaska money back           
 to Alaska, provides innovative opportunity to address Alaska's                
 needs and assures safe and secure prisons.                                    
 BOB COLE, Director, Division of Administrative Services, thanked              
 Representative Mulder for attacking the problem of over-capacity              
 prisons in Alaska.  He said the number of offenders being held on             
 civil law matters has risen about 6% - 8% per year for the last               
 several years, the number of man days served has been rising                  
 MR. COLE said that the Governor has an alternative proposal which             
 envisions regionalized facilities that meet different requirements            
 of communities around the State.  This is particularly important              
 since the biggest portion of the rise in traffic is in misdemeanors           
 and pretrial populations which are localized kinds of offenders who           
 aren't sentenced yet, for the most part.  They don't think that a             
 huge centralized facility like the one proposed in HB 428 in a                
 single location in the State is going to solve problems in places             
 like Barrow, Nome, Palmer, and Juneau.                                        
 MR. COLE said they have concerns about the propriety of issuing               
 RFP's to private contractors to propose to build a facility of up             
 to 1,000 beds at $100 million instead of the design build mode.               
 They have some concerns about the propriety of doing that in the              
 sense that it would lock the State into an agreement for a 20 year            
 period of time.  The Governor's approach envisions issuing GO bonds           
 in the amount $148,500,000 for slightly over 1,000 beds dispersed             
 across the State.                                                             
 HB 428 offers no real opportunity for voter input.  They think when           
 they are asking the State for $100 million with a payback potential           
 of $200 million over a 20 year period of time that the voters                 
 probably should have something to say about it.  The Governor's               
 bill would put the entire matter on the ballot in November of 1996.           
 The Department recognizes the need for beds in Southcentral Alaska.           
 The Governor's proposal has an 600 bed proposal for the area in and           
 near Anchorage.                                                               
 MR. COLE also pointed out that the Governor's proposal is cast in             
 the context of a long range financial plan which has been submitted           
 to the legislature; HB 428 was not.                                           
 Number 475                                                                    
 SENATOR SALO asked if there was an accreditation process that would           
 require certain things of the correctional officers.  MR. COLE                
 replied there is a provision in HB 428 that would require                     
 comparability of training for correctional officers working in the            
 private sector.  This was put in in recognition of the fact that              
 the State Department of Corrections has an excellent record when it           
 comes to deaths, fights, assaults, and that sort of thing.  There             
 is a very rigorous process in place now for State correctional                
 SENATOR TORGERSON asked if this bill passed the full body, if they            
 looked at it as a mandate to go forward with private prisons or as            
 an option to lay alongside the table with the GO bond proposal?               
 MR. COLE answered if there is some agreement reached during the               
 session including both in a single piece of legislation, he didn't            
 know what the answer would be.                                                
 SENATOR TORGERSON said he didn't think this mandated building a               
 private prison since the wording was "shall" look into it and "may"           
 come forward with a proposal.  MR. COLE replied that the bill was             
 written permissively.                                                         
 Number 505                                                                    
 SENATOR KELLY asked for a spreadsheet analysis (capitalization                
 costs, finance costs, operational costs) of the Governor's proposal           
 over 20 or 30 years and the proposal in HB 428 for the same time              
 period.  MR. DEWITT replied that there are no sheet like that and             
 part of the problem in developing that, especially with the                   
 operational side, is that they have left it to the Department to              
 define the operational needs that the facility ought to fill.  He             
 said he had done a very "quick and dirty spreadsheet" in terms of             
 the capital costs on both proposals.  The Governor's proposal is              
 about $135,000 capital costs per bed and HB 428 is a little more              
 than $100,000 per bed.                                                        
 In terms of operation, they have no reason to believe they would              
 change the approximate $100 per day cost of operation in the system           
 through the Governor's proposal.  They would expect a private                 
 facility on the average to come in substantially below that.                  
 SENATOR KELLY asked him to bring him a side by side comparison of             
 the two proposals, construction costs and as near as he could with            
 the operational costs.                                                        
 SENATOR TORGERSON said one of the concerns he had with both options           
 is that they are not considering the option of lease purchase that            
 the City of Seward has done and the City of Kenai said they would             
 do.  He wanted to see the numbers on the lease purchase agreements            
 that the city would sell revenue bonds for and then lease it back             
 to the State as another part of that side by side.                            
 Number 540                                                                    
 MR. COLE said setting aside the matter of what's the right way to             
 provide correctional services, there are a number of financial pros           
 and cons to the lease purchase, private purchase, private                     
 capitalization, and general obligation bonding.  One of the reasons           
 they decided to go the general obligation bond route, in addition             
 to giving full disclosure and participation to the public, is                 
 because they are told it is financially advantageous to the State             
 to do that for a number of different reasons, both in terms of                
 initial capital cost and the payback.                                         
 CHUCK O'CONNELL opposed HB 428. It does not resolve the problems of           
 overcrowding in Juneau, Fairbanks, Nome, and Bethel.  It puts a               
 large monolith somewhere in central Alaska which could ultimately             
 result in some problems requiring them to house inmates where they            
 can have access to their attorney, families, etc.                             
 He wanted the committee to consider regarding the prisoners in                
 Arizona that you have additional medical costs, probation costs,              
 program and other divisional costs.  A private contractor would not           
 have those costs, but the State would still have to bear them.  So            
 if you're going to build a prison in Anchorage, the fair way to               
 compare that cost is to compare it to the cost of running a                   
 facility nearby.  For example, the Department has published a cost            
 of care institution by institution, presently at Palmer                       
 Correctional Center.  The cost is $62.51 per day while Mr. DeWitt             
 testified that the total cost in Arizona is $73 per day.                      
 MR. O'CONNELL said he thought we would be extremely competitive if            
 we compared the right figures.  He said that HB 428 is a whole new            
 approach.  Prisoners do not spend all their time in jail.  They are           
 on the road to the doctor, to the dentist, to court.  They are in             
 and out of jail all the time.  This is a public safety concern that           
 has had no study.  They are talking about spending $200 million               
 without a fiscal plan or analysis of whether or not this is a                 
 prudent way to spend state dollars.                                           
 MR. O'CONNELL reiterated that ASEA completely opposed this bill.              
 He said we have never had a correction officer killed in the State            
 of Alaska and we are the only State that can say that.  And we have           
 never had an inmate killed.                                                   
 TAPE 96-28, SIDE B                                                            
 He said we have an efficient, safe, correctional system and                   
 although the costs are high, when you compare the costs of the                
 institution itself to the cost of an institution in Arizona, they             
 are very competitive.                                                         
 SENATOR KELLY interrupted Mr. O'Connell and apologized to him and             
 everyone else for the little amount of time they could spend on               
 this issue today because of the end of session.  He said they would           
 come back on Tuesday and see what the Department of Revenue would             
 SENATOR KELLY adjourned the meeting at 3:37 p.m.                              

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