Legislature(1997 - 1998)

02/17/1998 01:40 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HOUSE BILL NO. 53                                                              
                                                                               
"An Act relating to the authority of the Department of                         
Corrections to contract for facilities for the                                 
confinement and care of prisoners, and annulling a                             
regulation of the Department of Corrections that                               
limits the purposes for which an agreement with a                              
private agency may be entered into; authorizing an                             
agreement by which the Department of Corrections may,                          
for the benefit of the state, enter into one lease of,                         
or similar agreement to use, space within a                                    
correctional facility that is operated by a private                            
contractor, and setting conditions on the operation of                         
the correctional facility affected by the lease or use                         
agreement; and giving notice of and approving a lease-                         
purchase agreement or similar use-purchase agreement                           
for the design, construction, and operation of a                               
correctional facility, and setting conditions and                              
limitations on the facility's design, construction,                            
and operation."                                                                
                                                                               
Representative Mulder MOVED to ADOPT work draft version 0-                     
LS0194\X, Luckhaupt, 2/16/98, as the version before the                        
Committee.  There being NO OBJECTION, it was adopted.                          
                                                                               
Co-Chair Therriault explained that the "X" version included                    
new language that addressed the "local and special acts                        
legal concern.                                                                 
                                                                               
Representative Grussendorf pointed out a conflict in                           
language used on Page 2, Line 16 and Point #3 in the Letter                    
of Intent.  [Copy on file].  Co-Chair Therriault explained                     
that 20 years referred to the utilization of the facility,                     
whereas, Item #3 addresses the facility's operation.                           
Representative Grussendorf asked who would be responsible                      
to provide the original debt amount.  Co-Chair Therriault                      
noted that the company would be required to have their own                     
bonding in order to secure the facility.                                       
                                                                               
BERNIE R. DIAMOND, SENIOR VICE PRESIDENT & SECRETARY,                          
MANAGEMENT AND TRAINING CORPORATION (MTC), OGDEN, UTAH,                        
introduced his company, a private firm located in Utah.                        
Ninety percent of MTC's business is through the federal                        
government with the Department of Labor (DOL).  MTC is the                     
largest contractor with the federal DOL in the job corp                        
program.                                                                       
                                                                               
Mr. Diamond commended the Alaska State Legislature for                         
considering privatizing their prisons.  He noted that his                      
company has secured contracts throughout the country                           
because of their education and training programs.  These                       
programs help to cut recidivism.                                               
                                                                               
Mr. Diamond provided Committee members with a "Comparative                     
Recidivism Analysis of Releases from Private and Public                        
Prisons in Florida".  [Copy on file].  He emphasized that                      
the intent was not to take over the Department of                              
Corrections, but rather to work in partnership with them.                      
In Texas, the Management and Training Corporation (MTC)                        
operates the largest private prison in the country.  The                       
building was completed and paid for under the proposed                         
schedule; a facility with 1700 beds, built in under a year.                    
He elaborated on MTC's good record, recommending that with                     
passage of the proposed legislation a competitive bidding                      
process could be opened up.                                                    
                                                                               
Mr. Diamond suggested that rather than the State putting up                    
the money to build the facility, MTC could use the State's                     
bonding authority; then the City of Delta Junction would                       
not be liable to pledge.  The State contract would be                          
presented to MTC's private investors to provide the $30                        
million dollar allocation cost.  Once those funds were                         
paid, MTC would give that facility to the City of Delta                        
Junction, which would then provide them in the future with                     
an income stream.                                                              
                                                                               
Mr. Diamond acknowledged that his firm was disturbed to                        
read in the Anchorage paper that the deal had been sealed                      
with another company.  He emphasized that language in HB 53                    
would strike the competitive nature of the bid.  Mr.                           
Diamond urged the Committee to consider an amendment to HB
53 to provide for competitive procurement.  He cautioned                       
that if the bill's language remains as written, and if it                      
was the intent of the Department of Corrections (DOC) to                       
contract in that way, and if federal funds were used, it                       
would be illegal.  All federal contracts specify that any                      
funds used as federal funds must be competed for,                              
otherwise, much more State money would have to be                              
appropriated.                                                                  
                                                                               
Representative Martin spoke to the value of privatization;                     
although, he suggested that the proposal presented by MTC                      
had been submitted too late.  Mr. Diamond stressed that MTC                    
has a large interest in pursuing SB 179.  He believed that                     
participation would require the addition of language to                        
change the intent in order to a create competitive                             
procurement.  Mr. Diamond stressed that Alaska has the                         
responsibility to solicit bids from more than one firm.                        
                                                                               
In response to Representative Mulder, Mr. Diamond explained                    
that Adak was too far away to be workable in relationship                      
to costs related to inmates.  Representative Mulder                            
continued to question Mr. Diamond regarding a past proposal                    
to use the Adak Island for a private prison facility.  He                      
emphasized that MTC has had the opportunity to look at Ft.                     
Greely for the past two years.  Mr. Diamond countered that                     
the proposal had been brought to MTC's attention only two                      
weeks ago.                                                                     
                                                                               
Representative Mulder inquired about the substance abuse                       
program, which MTC had implemented.  Mr. Diamond replied                       
that program was situated out of Merana, a small community                     
near Tucson, Arizona.  About 60% of the inmates are in the                     
last period of substance abuse treatment, while the others                     
are there for alcohol treatment.  He offered to mail                           
Committee members the studies and results from that                            
facility.                                                                      
                                                                               
Representative Mulder inquired how realistic the $70 dollar                    
per day rate was.  Mr. Diamond recommended that portion of                     
the legislation should be amended.  The other twenty-nine                      
states that have permissive legislation include language                       
listing a 3% - 15% percent decrease.  Also, language could                     
be added stating that there must be savings of at least 10%                    
under the State per diem rate for the same service offered.                    
He pointed out that the $70 dollar rate should include                         
capital costs, which was not realistic.                                        
                                                                               
Co-Chair Therriault pointed out that the wording of the                        
bill does not preclude the Commissioner of the Department                      
of Corrections from requiring a competitive bidding                            
process.  Mr. Diamond commented that Section #4 would                          
strike that requirement.  He recommended adding a 6th point                    
by amending the Letter of Intent and calling for                               
competitive procurement.                                                       
                                                                               
MARGARET PUGH, COMMISSIONER, DEPARTMENT OF CORRECTIONS,                        
voiced appreciation for opening up the debate on the                           
competitive bidding process.  She provided Committee                           
members with a handout addressing the Department's                             
concerns.  [Copy on file].  She pointed out that the State                     
count is, currently, 3,218 prison beds filled, and that is                     
518 above emergency capacity.  She cautioned, the trend is                     
upward.                                                                        
                                                                               
Commissioner Pugh reminded Committee members that public                       
protection is the first mandate of the Department of                           
Corrections.  A schedule has been ordered to be submitted                      
to Judge Hunt by March 9th. Commissioner Pugh reiterated                       
that the current concern is the short-term need.                               
                                                                               
Co-Chair Therriault suggested that the short-term concerns                     
could be addressed in the Supplemental.  He added that                         
passage of HB 53 is not the solution to the State's                            
problem, although, a part of the long-term solution.                           
                                                                               
MARGOT KNUTH, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF                        
LAW, provided Committee members with handouts, "Cost                           
Comparison for the House Finance Committee" and "Private                       
and Public Prisons, Studies Comparing Operational Costs                        
and/or Quality of Service".  [Copies on file].  She spoke                      
to the cost comparisons of a publicly versus a privately                       
operated 800-bed medium custody prison.  Studies comparing                     
the operational costs of public and private prisons have                       
been of interest to many jurisdictions around the United                       
States General Accounting office.                                              
                                                                               
Ms. Knuth pointed out that the Governor's proposal to                          
address prison bed needs in Alaska is to expand the Palmer                     
Medium Correction Facility.  In going with the Ft. Greely                      
proposal instead, the handout compares the cost of care of                     
inmates at Arizona and then added the total cost of care                       
for an inmate at Palmer. The cost at Arizona is $82.34                         
dollars per day; at Palmer the cost is $86.60 dollars per                      
day.                                                                           
                                                                               
Co-Chair Hanley recommended that the analysis be based on                      
the capacity divided by the cost, not the actual numbers.                      
He commented that it was not fair to count the over-                           
capacity cost given the number of prisoners to be shipped                      
out.  Ms. Knuth pointed out that there will be a decrease                      
cost of care, which will off set those costs.  Co-Chair                        
Hanley reiterated that Palmer is 1/3 over capacity and when                    
it is brought down to capacity, there will be a substantial                    
increase in the per diem rate.                                                 
                                                                               
Co-Chair Hanley asked the anticipated cost to build the                        
Palmer Correctional facility.  Ms. Knuth replied that there                    
currently is not an 800-bed facility in Alaska.  She                           
suggested that it was not fair to compare the costs of a                       
300-400-bed facility in Palmer to an 800-bed facility.  The                    
800-bed facility would indicate the economy of scale.                          
                                                                               
Co-Chair Hanley pointed out that there would be a capital                      
cost included in the Delta facility.  He commented that it                     
was important to add up the creation of 800 beds in the                        
Governor's proposal and compare that to the 800 bed cost in                    
Delta on a cost comparison basis.  Ms. Knuth pointed out                       
that when leasing space in Arizona, the State does not                         
consider the capital costs; we would not at Delta either                       
because eventually it will become their asset.  She                            
stressed that it is important when considering a location                      
for medium security prisoners, to compare what the cost                        
would be as compared to shipping the prisoners out of                          
state.                                                                         
                                                                               
Co-Chair Hanley asked the Governor's cost for the Palmer                       
expansion.  Ms. Knuth replied it would be $75 thousand                         
dollars per bed, capital cost.  Commissioner Pugh added                        
that the Governor's total proposed cost would be $16                           
million dollars.  Co-Chair Hanley noted that amount would                      
not be included in the per diem rate.  Ms. Knuth responded                     
that there would not be an offset to the proposed Ft.                          
Greely plan as there will be no asset.  Co-Chair Hanley                        
questioned the value of the asset.  Ms. Knuth noted that                       
the State would use it indefinitely at no additional cost,                     
except maintenance.  Co-Chair Hanley argued the long-term                      
cost factors involved.                                                         
                                                                               
(Tape Change HFC 98- 31, Side 2).                                              
                                                                               
Representative G. Davis questioned the City of                                 
Delta/Greely's responsibility within the negotiations.                         
                                                                               
REPRESENTATIVE GENE KUBINA referenced Section #4, which                        
stipulates that, the provisions of AS 33.03.031 (a) and (c)                    
would not apply to the lease agreement.  He questioned why                     
(a) was being exempted.                                                        
                                                                               
MARGIE VANDOR, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF                       
LAW, spoke to exemption of paragraph (c).  She stated that                     
the language is permissive and that the Department could                       
still go out to competitive bid.  The confusion is that the                    
lease of the facility is under section (a) with the the                        
State and the City of Delta.  Within that lease, stated in                     
subsection (b) is the operational lease with a private                         
third party.  Under subsection (b), the agreement to lease                     
must provide for an agreement between the City of Delta and                    
a private third party, which would then create a separate                      
agreement.                                                                     
                                                                               
Ms. Knuth spoke to subsection (a).  The major impact of                        
that section is that it would allow the Commissioner to                        
continue to send prisoners to Arizona, even if there was                       
space available at Ft. Greely.  She was troubled in                            
deleting the last sentence of (a) as it specifies that the                     
Commissioner "may not enter into an agreement with an                          
agency, unable to provide a degree of custody, care, and                       
discipline similar to that required by the laws of the                         
State".                                                                        
                                                                               
Co-Chair Therriault stated that passage of the bill or the                     
building of the facility would not preclude utilizing out-                     
of-state beds in the future.  He added that the Letter of                      
Intent specifies that the State does not intend anyone to                      
be housed below the established standards.                                     
                                                                               
Representative Kubina argued against deletion of section                       
(a).  He asked if the purpose of exempting (a) was so that                     
all laws would then be applicable to apply to both a                           
private and public facility.  Co-Chair Therriault                              
reiterated that custody, care and discipline are all                           
covered in the intent language according to the American                       
Correctional Standards.                                                        
                                                                               
Representative Mulder spoke to exemption of (a).  That                         
section pertains to the commissioner's findings.  In                           
deliberations, there has been concern with the                                 
Commissioner's willingness to proceed with the plan.  He                       
thought, that in order for the statute to require a                            
"finding" by the Commissioner, that could provide another                      
opportunity for the Commissioner to "sand-bag" the                             
proposition.  He summarized that the exemption would                           
provide more direct authority.  Representative Kubina                          
reiterated his concern with the proposed action and the                        
fast track that the bill is on. In conclusion, he urged                        
that the last sentence of the paragraph should be                              
applicable to a prison facility.                                               
                                                                               
Representative Mulder stated that it was his intent that                       
the legislation meet or exceed the accreditation standards.                    
He added that the Letter of Intent was not intended to                         
limit important criteria.  Representative Grussendorf asked                    
if Point #5 was a realistic goal in meeting the $70/day                        
cost.  Co-Chair Therriault replied that by placing that                        
number within the Letter of Intent, the Legislature would                      
be giving clear direction to the Commissioner where the                        
costs are expected to be.                                                      
                                                                               
Representative Mulder noted that he would review AS                            
33.30.031(a) and if necessary would offer to amend that                        
concern on the floor.                                                          
                                                                               
Representative Martin MOVED to report CS HB 53 (FIN) out of                    
Committee with individual recommendations, the Letter of                       
Intent, and the accompanying fiscal notes.  There being NO                     
OBJECTION, it was so ordered.                                                  
                                                                               
CS HB 53 (FIN) was reported out of Committee with a "do                        
pass" recommendation, a House Finance Committee Letter of                      
Intent and with a fiscal note by the Department of                             
Corrections and zero fiscal notes by the Department of                         
Administration and the Department of Revenue.                                  
                                                                               
(Tape Change HFC 98- 32, Side 1).                                              

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