Legislature(1995 - 1996)
02/02/1996 01:00 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 428 - LEASE-PURCHASE CORRECTIONAL FACILITY HB 429 - CORRECTIONS: PRIVATE CONTRACT FACILITIES CHAIRMAN PORTER offered that a there would be a public hearing for CSHB 428(JUD) and with time permitting, a public hearing as well for HB 154. Number 232 JERRY SHRINER, Special Assistant to the Commissioner, Department of Corrections, was the first witness to testify on CSHB 428(JUD). He stated there were two aspects about the bill which the department finds of considerable interest. This legislation provides a clear recognition that additional prison beds are needed in the state. The department agrees with this. He noted the Cleary Final Settlement Act which dictates that the Department of Corrections send prisoners out of state because of over-crowding in Alaska's prisons. The second thing the department finds particularly attractive is the notion of a lease purchase financing for this prison bed space. MR. SHRINER stated that the department does not believe that they have a problem with impediments to contracting out goods and services. He believed that the department had an enviable record in this regard. They have an approximately $142 million budget and over $30 million of this budget is contracted out for goods and services. This is more than 25 percent of their budget for everything from groceries to pens and pencils, prisoner space, etc. Number 428 MR. SHRINER cited that the system includes 4,045 people in some form of secured custody, from minimum to maximum security and in half-way houses in the state. The majority of this population includes confined misdemeanants, restitution placements (under prison sentence but, allowed to work and pay restitution), or as furloughs from prison, which means they are technically incarcerated, but on furlough usually for community re-entry at the end of their sentence. This total in private facilities is about 650 people, or roughly 16 percent of their population which is in secured custody. About 450 of these individuals are in the state in Community Residential Centers (CRC's) and halfway houses. There's been no study done, but in discussions with other states, they believe that 16 percent of the secured population is greater than the national average. Almost all states have these types of people in placements. The department feels as though they are doing well in this regard and don't feel as though they have a problem. Number 560 MR. SHRINER outlined the department's concerns regarding specific sections of the legislation. Firstly, he referred to page two, line six of the CS, which adds the language, "including the standards of custody, care, and discipline that are required by order of a court." The department is concerned about this additional required standard, for example, if a facility did not meet either the Cleary Order or any unforeseeable order this pending legislation would require that the department bring these people out of certain facilities which would have been originally chosen based on these particular prisoner's needs. MR. SHRINER shored up this point by using the Arizona facility as an example. If for some reason this prison did not meet Cleary standards, presently this situation would be dealt with the court and the department would argue their position. This is not a statutory requirement and the department is concerned that this pending legislation would give prisoners more standing to oppose conditions that they weren't happy with or to demand immediate redress than they currently have under the court order. Number 719 MR. SHRINER then moved to page two, Sections (B) "may provide for the detention and confinement of all persons held by the commissioner under authority of state law, whether charged with or convicted of felonies or misdemeanors, without regard to the custody classifications for prisoners as determined by the commissioner, unless the security of the facility is inconsistent with those custody classifications; and (C) may not be administratively restricted or limited by the commissioner to use only for prisoners involved in certain rehabilitative or treatment programs authorized by law." MR. SHRINER stated that the department is concerned that these sections would possibly conflict with sections of the already existing Alaska Statute 33.30 and add an unreasonable burden on the Commissioner of Corrections. The department asked the committee to take a closer look at these sections. Number 795 MR. SHRINER urged the requirement of feasibility studies and comprehensive cost benefit analysis before a decision is made with regard to privatizing a facility. He pointed out that these studies might be required anyway under existing labor contracts. Mr. Shriner pointed out that some states are satisfied with their private facilities and others are not. The majority of states seem to be in the middle. Before this type of privatization project is undertaken in Alaska, feasibility studies should be undertaken while being mindful of Alaska conditions, costs, and the needs in Alaska. He stressed that these aspects are very important and ones which the department would like to stress. Number 893 MR. SHRINER referred to the section of the bill regarding the construction of a facility up to 1,000 beds in the third judicial district. The department's main concern is whether or not it is necessary to place these beds all in one location, in one facility. The department would like these beds spread around the state. The one facility, one location concept would make it difficult for the department to move populations. This would be especially true for pre-trial and pre-sentence populations, in order to have them in the right location, at the right time, without undue costs to support systems, judicial transportation officers and to the department. Number 1013 MR. SHRINER referred to page three, line nine which states, "(1) the total construction and related costs of establishing the correctional facility may not exceed $100,000,00." His impression regarding the intent of this section was to have both construction and operation for this facility combined in one Request for Proposal (RFP) contract. If this is the case, the department has additional costs that are related to establishing standards, assisting the Department of Administration, the department of revenue, site selection and setting standards for the design of the facility and in the on-going supervision of whatever private contractor who might operate the facility. There will be additional operating costs through the construction phase and on an on-going basis after this facility is in operation. He wondered if the additional costs which the department might accrue would also be included in the related costs description outlined in this legislation. Number 1102 MR. SHRINER stated that the department had concerns about what population will be held in this proposed facility. There seemed to be some conflict with this issue. He referred to the section dealing with changing contracting of rules and regulations which seemed to indicate that this facility would hold all prisoners committed to the custody and care of the department. Other sections of the bill seemed to indicate that this facility would hold only prisoners classified except for maximum security prisoners. The department's definition of classified are those individuals who have been sentenced and classified as medium, close, etc. The definition outlined in the legislation would preclude pre-trial and pre-sentence individuals from being held in this facility. He wondered what the intent of this section was. He specified further that the department was confused as to whether or not this facility would accommodate female prisoners and male prisoners other than maximum or whether it would take female and male, but not maximum of either one. Number 1247 MR. SHRINER referenced the section where it discusses under what conditions the department could assume the operation of this facility. Their question was, would the state be precluded from operating this facility if it was found that the state could operate it at less cost, and it would it preclude the state from operating this facility if for some other reason it was found to be in the best interest of the state, for example, treatment programs of whatever issues might come up. The limits of precluding the state from operating this facility is important. MR. SHRINER stated that finally under Section 3, the department is not clear about the reference to corrections employees being able to operate as contractor for the construction and operation of the facility. While the department does not have objection to this possibility, the way in which it is worded seems to indicate that current employees could also be the contractor and operator of the facility. This is certainly not acceptable since this could allow Mr. Shriner for example to be a special assistant, as well as a stockholder and an operator of the facility. Number 1371 REPRESENTATIVE CON BUNDE commented on an economy of scale concept in light of bigger prisons being cheaper, he asked Mr. Shriner if southcentral Alaska would be capable of filling a 1000 bed prison, which would aid in not needing to move people around as much. MR. SHRINER stated that not entirely. He added up the 200 prisoners in Arizona, plus the roughly 200 prisoners over the operating capacity Statewide which makes 400 and an additional 100 or so people in the 6th Avenue jail, if that were to be closed, totalling about 500 people. He made the point that any of these individuals could be spread out to different locations in Alaska, other than the 6th Avenue prisoners. He added that there is severe over-crowding in Matsu pretrial. If that facility doesn't expand for example, and these people were held in an Anchorage facility, they still need to go to court in the Matsu Valley, which means transporting them back and forth. Mr. Shriner summed up his comments by noting that after accounting for these 500 individuals, there would still be 500 beds left over to be filled in this 1000 bed facility. This additional bed space would still need to be paid for. He suggested incremental increases to the system to avoid paying for something that's not being used. Number 1565 REPRESENTATIVE DAVID FINKELSTEIN asked what in the existing law keeps the department from considering this legislation as an option. Is the department able to carry out what's outlined in this legislation if they chose to? Does the department have the discretion to most of this? MR. SHRINER thought there were no impediments to considering most of what's in this bill. The department in trying to develop a plan which would involve building a new facility, they would have to consider whether those facilities should be privatized or not. The department doesn't think they have any legal impediments to doing this. Number 1646 ROSS KINNEY, Deputy Commissioner, Department of Revenue, stated that his testimony would center around the credit and financing issues related to the issuance of $100 million of debt. In this case, if a private developer plans to sell certificates of participation or any other debt obligations associated with this stream of state lease payment. The developer would probably want to receive a rating for the proposed financing and the state ultimately looses control over their representation before the rating agencies since the developer doesn't require the state's participation. This could create serious coordination and representation problems for the state, particularly at this point in time when they're dealing with a long-range financial plan for the state of Alaska. MR. KINNY stated that even though this debt would be financed through a private developer, it would still appear on the state's debt statement and would part of the state's debt load as computed by the rating agencies. The manner in which the rating agencies consider this debt is very important for the state. A private developer interfacing with rating agencies without the benefit of the state's participation could possibly result with adverse debt ratio ramifications. MR. KINNEY added that the most important feature which needs to be considered is the maturity structure. The state bond committee is currently in negotiations with the rating agencies regarding the length of the state's maturity schedule. The rating agencies have historically viewed negatively any debt structure of the state that extended approximately beyond the year 2003. However, because of the extension with the Prudoe Bay curve, the rating agencies now indicate the possibility that they would be willing to extend this curve to possibly 2015 without adverse affect on the state's ratings. MR. KINNEY asked the committee to consider that these negotiations are very sensitive and the state needs to be the primary liaison with any credit issues related to matters of this nature. He pointed out that advances to securing the state's own financing, include the ability to refinance at any time favorable market conditions might provide savings. Also, it would eliminate the need to un-bundle the lease purchase from the construction and operating contracts should any problem arise due to non-performance on the part of the contractor or default in lease payments. Because of the state's high credit standing and institutional structure for the issuance of debt, it was Mr. Kinney's opinion that the state can sell lease purchase obligations more efficiently and at a lower cost than a private contractor. MR. KINNEY stressed that Office of Management and Budget (OMB) is in the process of preparing a six year capitol needs assessment in order to develop an overall financing plan to deal with these (indisc.) He added that concerns could be raised by the rating agencies and investors when a piece meal approach is taken to the capitol financing without realizing how the whole puzzle fits together. This comprehensive financing plan is needed in order to resolve the fiscal gap and finance capitol moods in a financially responsible manner. Number 1803 CHAIRMAN PORTER asked Mr. Kinny if there was a way to construct a lease purchase agreement so that the state's rating not be affected, minimized or negated. MR. KINNEY responded that it would be possible to include language in an agreement which required the state's participation and negotiation as it relates to debt issuance. He thought that the state's (indisc.) involved in the process to insure that there was a coordinated effort, not only in relation to this project, but to other projects which are currently on the table is important. Number 1803 CHAIRMAN PORTER asked if there was anything in this bill which would preclude this. MR. KINNEY said he didn't know if there was any language in this present legislation which would precludes this, but he felt there was no language which ensured that the state was in this loop. CHAIRMAN PORTER asked that Mr. Kinney propose language which would address his concerns. Number 1900 RITA ANDERSON, testified by teleconference from Nome against CSHB 428(JUD). Ms. Anderson stated that she has given members of the public tours of the facility in which she works in Nome. She argued that an adequate amount of people to work as correctional officers at reduced wages would not be feasible. She noted the high turnover rate of officers in private facilities and the increased incidents of violence, etc. of the prisoner population in private facilities. Number 2043 JOAN BENNETT SCHRADER, testified by teleconference from Kenai on CSHB 428(JUD). She pointed out that this was an extremely important bill and that their chapter had requested that a public hearing regarding this legislation be held on the peninsula. The Wildwood facility would be deeply affected by this. The chapter did not take a position good or bad about this bill, but asked that they receive more information. Number 2215 CHAIRMAN PORTER stated that the CS before the committee makes no substantive change to the bill, it only rearranges two sections so that they are isolated. REPRESENTATIVE CYNTHIA TOOHEY made a motion to adopt the CS before the committee. Hearing no objection, it was so moved. Number 2153 GLEN SCHRADER testified by teleconference from Kenai on CSHB 428(JUD). He noted the figures for this project. He felt as though this legislation created duplication. Instead of building a new facility, he felt it would be economically more sound to add onto already existing facilities. He said he was totally against the privatization of this facility. Mr. Schrader also had his doubts about the requirements of this private facility to supply adequate meals to the prisoners, etc. because the word "similar" used is so vague. (It was not entirely clear as to what section of the legislation he referenced.) Number 2277 ROSS DUNFEE, Vice President of Engineering, Arctic Slope Consulting Group, Inc. (ASCG) testified by teleconference from Anchorage to indicate their support for HB 428 and HB 429. He felt this legislation would help decrease prison over-crowding and provide an important economic opportunity for the state. Mr. Dunfee also felt that privatization of such a facility would help to ease the financial pressure of the state to fund such a project. He noted the long and short term job opportunities created by this legislation. Number 2376 DANIEL RAY testified by teleconference from Wasilla in opposition to CSHB 428(JUD). Mr. Ray works for the Department of Corrections. He cited the weak reputation of private prisons in the other states. He also pointed out the reduced wages and no benefit packages for private correction officers. Mr. Ray thought that the Matsu Valley correction officers could be put out of work by this privatization concept. He urged the committee to be careful in their consideration of this legislation. Number 2468 REPRESENTATIVE BUNDE said that it was his understanding that this legislation would not jeopardize the employment of any existing state employee prison guards. CHAIRMAN PORTER answered that this was his understanding too. TAPE 96-12, SIDE B 000 REPRESENTATIVE JOE GREEN asked about the references in testimony about closing the 6th Avenue jail in Anchorage and asked if this were true. CHAIRMAN PORTER understood that the usefulness of this facility has come and gone, the facility itself, not the people running it. Number 038 RICHARD TAYLOR, testified by teleconference from Fairbanks against the privatization of prisons. He works for the Fairbanks Correctional Center. He noted the increase in contraband which would result from privatization, among other things. Mr. Taylor said that a professional core of officers is needed, something a private facility could not provide. Number 106 KEN BROWN, testified by teleconference from Kenai against privatization of prisons. He has worked for the Department of Corrections for more than 24 years. He has been a member of the American Correctional Association since 1982 and is a certified auditor for this same organization. MR. BROWN noted that Alaska has one of the safest correctional systems in the country. There has never been an officer or an inmate killed in prison. The number of escapes is small compared to other states, as well as prison violence. The few hostage situations that have taken place ended without injury. MR. BROWN said the Department of Corrections has developed a professional work force. If the state builds a 1000 bed facility and this turns out to be a mistake, it will be a mistake which would be hard to correct. He noted that to institute the concept of privatization would be a radical change. This should not be taken lightly. MR. BROWN pointed out that the state should consider what they would do if they were required to take over the administration of a private institution. He noted that a 1000 bed facility would make up almost 30 percent of the already existing prison population. He also questioned whether or not the state needed a facility of this size. If the state was required to take over this facility they would have a hard time mustering the required staff numbers. MR. BROWN noted that this facility would not accommodate maximum security inmates, hence it would probably not be intended for pre- trial inmates. He added that pre-trial space is sorely needed. Mr. Brown also questioned the feasibility of the financial funding of this project, which also called for the state to eventually buy this facility. He suggested that the state ask the department what they could do with this money instead and cited some studies which had been done in years past that addressed these projects. MR. BROWN also wondered why it wasn't a requirement of this privatization system to come under budget of what it would take the state to build the same facility. He said that if this were the case, personnel costs would be cut first. He outlined what each correctional officers pay levels presently are. Mr. Brown felt that no correctional officer presently is overpaid. Number 490 CHUCK O'CONNELL testified by teleconference from Anchorage against privatization of prisons. He noted that he has been a labor relations advocate for the past 23 years and said that he was involved with the public employment act when it was passed in 1972. During this time lots of consideration was given to public safety, especially as it relates to people in 24 hour facilities. He added that employees working at facilities now are restricted from striking by law. He wondered how privatization would affect this concept and believed that the workers at this slated facility could be organized, but wouldn't come under the same statutes not to strike which affect current employees now. If these employees were able to strike, the liability would be unimaginable. Number 645 OFFICER GARY DAMRON testified by teleconference from Anchorage against the privatization of prisons. "I am currently a Correctional Officer III at Hiland Mountain Correctional Center. I am the shift supervisor there. I have ten years with the Department of Corrections, and today I am here on behalf of the 800 members of Alaska State Employee's Association (ASEA), and nearly 75,000 Correctional Officers of American, Federal State, county and Municipal Employees (AFSCME) in AFSCME Corrections United. If you will indulge me for a few minutes, I would like to give the committee a brief history lesson on privatization in the corrections arena. It has a long history of failure. And as someone spoke on Wednesday, we either have to remember history or we are doomed to repeat it. In 1780 the Walnut Street Jail in Philadelphia was opened by the Church of Pennsylvania. Then about 1810 it had to be taken over by the city because of abuses against prisoners. Louisiana was the first state in the mid-1800s to privatize a prison. It is now known as Angola and, as you know, it is run by the State of Louisiana. New York's most prominent prisons, both Auburn and Sing-Sing were once private facilities run by companies. In the late 1880s private prisons were so popular, they were the norm, not the exception. But around 1900, due to the abuse complaints from the private sector, both business and labor, the states were forced to accept responsibility from the private companies to manage and operate these facilities. That's our history lesson; we know that. We also know that we're thinking about doing it again. Some of the things about privatization that I would like to point out is (1) there is a very substantial conflict of interest for a private company to run a public prison. The first is that the state is charged by the Alaska Constitution with the reformation of the offender and deterrence. The private companies want to keep the cells full, to keep profits up. What incentive is there for them to run quality rehabilitation programs? Well, there's not. Because, if you reform, the offender, he or she becomes a productive member of society and you lose your revenue. The other thing is, rehabilitation programs are very expensive. Another conflict of interest comes to disciplinary problems inside of prisons. One of our best management tools that we have today is the forfeiture of statutory good time. If I were running a private prison and I thought I could take a few days or a few months away from a prisoner and keep him in my jail, I would jump on it in a heartbeat. It means more money. I would like to talk to you a little bit, too, about the two companies that seem to be at the forefront of Alaska's privatization efforts, Wackenhut and Corrections Corporation of America (CCA). Wackenhut runs the Savannah River and Rock Flats Nuclear Test Facilities. The employees there have been used to repress peaceful demonstrations and gather intelligence, quote/unquote, on U.S. citizens. And we all know about their reputation in Alaska. Unlicensed investigators in Alaska were used to quiet Alyeska Pipeline Service Company critics. They broke the law in three states, and they even went so far to investigate a U.S. Congressman. CCA, on the other hand, while not doing this kind of activity, was linked to possible corruption over its relationship to state and local officials in its home state of Tennessee. A U.S. Attorney in Nashville is currently investigating charges of a bribery kick-back surrounding a $1 million contract to CCA to operate the Southcentral Correctional Center in Pipeville, Tennessee." OFFICER DAMRON summed up his comments by stating that privatization was a public policy shift for the state of Alaska and privatization is not in the interest of public safety. Officer Damron submitted the remainder of his testimony in writing, which can be found in the appropriate bill packet. Number 840 STEVE LARSEN, AFSCME stated that he represented over 8,000 Alaska state employees for the American Federation of State and County Municipal Employees, including over 1000 correctional officers and staff. He cited the high level of professionalism and skill obtained by the Department of Correction employees, as well as a strong level of public safety. He felt this legislation would not ease overcrowding, first of all this a statewide problem. Adding 1000 beds in Anchorage is not only unnecessary, but does nothing to deal with overcrowding around the state. MR. LARSEN stated that privatization does not save money, it merely shifts costs. Once a private company has set up a facility, the state has no choice but to pay the asking price. They will initially low-ball the project, then raise the numbers when the costs are more accurately reflected as the project develops. MR. LARSEN noted that there was only one area where a private prison can save money. This area is employee wages and benefit, as well as staffing levels. He added that employees determine how successful a program is. He noted the low escape rates, low employee turn over rates, and a zero corruption rate in Alaska prisons. Mr. Larson asked the committee to consider expansion of already existing facilities. Number 1123 CHAIRMAN PORTER asked Mr. Larsen if his organization would have an opportunity to bid on this project. MR. LARSEN said he was not familiar with any mechanism which would allow them to do this. Number 1153 ARNOLD VILLEGAS, Correctional Officer, III, Department of Corrections made the argument that prisoners have the right while in incarceration to be safe. The privatization of prisons would compromise this safety. He also noted the exemplary safety record of the department. Number 1252 BILL BONN, as a correctional officer, stated from the gallery that he felt as though his concerns had already been addressed and made himself available to answer any questions. Number 1272 PAM LABEAU, President, Alaska State Chamber of Commerce thanked the committee for the opportunity to testify. She stated that the chamber represents approximately 700 business members statewide. As the voice of business their mission is to create a climate in the state which is conducive to a strong private sector. Ms. LaBeau said she was present to support this legislation because it represents a reasonable and logical action by state government which will save money for the state, while at the same time enhance business opportunities in the private sector. MS. LABEAU stated that the top priority of the state chamber is to help the state find ways to close the fiscal gap. A second priority is to help the state finds ways to privatize those government services that could affordably and efficiently be provided by the private sector. This bill does so. MS. LABEAU noted the Arizona private prison as an example, that the private sector can provide for the confinement and care of prisoners as satisfactorily and at a lesser cost than that experienced within the Alaska system. The missing element within a government operation is competition. The private sector must do things more efficiently and at a lesser cost in order to be the successful bidder among their competitors. MS. LABEAU said that the chamber does not accept the thinking that only government employees can do things well. It was private individuals who made this country and set up the government. This bill does require that the correctional officers would have the same training as the government employees. Ms. LaBeau said they felt the contract and lease purchase of a prison makes a great deal of sense. MS. LABEAU said in all the chamber sees no down side to this legislation. It makes good business sense and they urged the committee to support this bill. The chamber offered their assistance to work through the elements of this legislation. Number 1497 BILL PARKER testified by teleconference from Soldotna. He pointed out that private prisons are in business to make money for the shareholders. This takes money out of the state. He cited private prison track records and problems some of these prisons had in other states. Mr. Parker made the suggestion to expand on already existing facilities. Number 1782 REPRESENTATIVE MULDER as sponsor came to the table to respond to some of the presented testimony. He thought it was ironic how the concerns of the Department of Corrections never found their way to his desk in order that he could respond to them or work out some of the problems raised. REPRESENTATIVE MULDER referenced the statutory court order as expressed on page two, line six of the CS, which reads "including the standards of custody, care and discipline that are required by order of a court." REPRESENTATIVE MULDER pointed out that this section refers to the Cleary Settlement, ensuring that this prison meets this standard. Number 1989 REPRESENTATIVE MULDER then referred to the language outlined on page two, subsections (B) and (C) which Mr. Shriner thought could conflict with existing statutes, but REPRESENTATIVE MULDER pointed out that both these subsections begin with the word "may." These are not requirements imposed upon the department, but allow the department flexibility. REPRESENTATIVE MULDER then referenced language on page three, line nine and ten which reads, "the total construction and related costs of establishing the correctional facility may not exceed $100,000,000." REPRESENTATIVE MULDER felt as though this language was clear and it provided security for the state, that the construction and related costs would not exceed this amount. He pointed out that if the words "related costs" were deleted the state could be hit with charge backs. This total amount for building this facility would include everything. Number 1970 CHAIRMAN PORTER pointed out for clarification that this amount is in relation to the successful bidder, not other attendant costs of the Department of Corrections. REPRESENTATIVE BETTYE DAVIS asked that if this related cost number reflects construction costs, then there is a concern about what the added cost to the department would be. Number 2022 REPRESENTATIVE MULDER stated that he felt the added expenses were already outlined in the fiscal note. The fiscal note is a part of his frustration because he's not necessarily arguing about the price, but it denotes that the department does not intend to do any work on this project until FY 98. REPRESENTATIVE MULDER then moved to the next concern as outlined by the Department of Corrections. He referred to page three, line 19 which reads, "must be designed and constructed so as to house, in separate housing, (A) female prisoners; and (B) male prisoners..." REPRESENTATIVE MULDER said he didn't understand the confusion about classified prisoners and where this came from. He suggested it might be an attempt to confuse the issue. Number 2140 CHAIRMAN PORTER asked for clarification whether this facility would preclude pre-trial people from being housed there. REPRESENTATIVE MULDER said he didn't believe that it did, male or female pre-trial people would be housed at this facility. In response to the department's concern about whether it was found to be in the best interest that this legislation would somehow preclude the state from operating this facility, REPRESENTATIVE MULDER said that this assumption was absolutely, 100 percent right. This legislation directs the private sector to build and operate this facility. In regards to the concern about the facility being built and operated by the same entity REPRESENTATIVE MULDER noted an example of this which actually took place in Indianapolis. REPRESENTATIVE MULDER said he was willing to accept the figure of $77 per day, per prisoner at Lemon Creek. He noted that if this were the case, this adds up to $2.9 million in savings. The true, direct cost figure is $91.90 per day, per prisoner and if direct and indirect costs are combined, this figure changes to $119.20 per day, per prisoner at Lemon Creek. He noted a hand out as reference to additional similar figures from around the state. REPRESENTATIVE MULDER generally presented a figure of $106 per day, per prisoner without referencing a particular facility. He noted that if they were able to reduce by $1.00 per prisoner, per day, it would result in a $1 million a year savings. TAPE 96-13, SIDE A Number 000 REPRESENTATIVE MULDER then cited present correctional officer's salaries. He stated that public employees continue to suggest that the private sector employees with the same training somehow can not be as responsible as someone receiving a check from the state government. He said that the integrity of the private sector has been impugned here. After all, it's the profit that generates taxes to pay public employee wages. REPRESENTATIVE MULDER in response to testimony concerning insurance of private facilities, he cited Wackenhut as a company that's insured by AIG, the largest and one of the oldest in the world. The former Commissioner, Roger Endell, disagrees with the concept that existing facilities can be expanded. REPRESENTATIVE MULDER quoted a section of a memorandum included in the committee packet from Mr. Endell as follows: "Unfortunately perhaps, the expansion of existing state correctional centers would be a very expensive proposition. In fact, most of the infrastructures of existing facilities will not support expansion. Simply adding on to existing correctional centers by adding a wing here or there is neither wise from a correctional management perspective, nor from an intrastructural perspective. Sewer, heating, ventilation, food service, library, classroom, shop and all other spaces have to be sized to handle expansion. For example, the sewer treatment plant at the Hiland Mountain/Meadow Creek complex near Eagle River is at maximum capacity; the Juneau, Cook Inlet Pretrial (Anchorage), Hiland Mountain, Palmer and Fairbanks correctional centers have already been previously expanded, Juneau and Fairbanks a couple of times. Further expansions at these sites will likely require totally new 'stand alone' facilities in order to function safely." REPRESENTATIVE MULDER pointed out that the concept of expanding onto existing facilities is not viable. This option is expensive and inefficient. Number 265 REPRESENTATIVE FINKELSTEIN pointed out that these are complicated decisions to be made, whether to add onto existing facilities or to build an entirely new prison. He stressed that no matter what option is chosen, it's going to be expensive. REPRESENTATIVE FINKELSTEIN asked REPRESENTATIVE MULDER if he had reached the conclusion that it's more efficient to build the facility as outlined in the legislation. REPRESENTATIVE MULDER answered that he found it to be far more preferable to look for alternatives to the existing standard, business as usual, within the Department of Corrections. He stated he believed this legislation provided an alternative. REPRESENTATIVE MULDER stressed that the state is under court order, incurring fines in the range of $750,000. Every day the state of Alaska is being fined by the court for being in violation with Cleary. REPRESENTATIVE FINKELSTEIN said that REPRESENTATIVE MULDER had not responded to his question. He again asked REPRESENTATIVE MULDER if he could assure him that he has some basis that this is a less expensive alternative than expansion of one or two of the already existing facilities. REPRESENTATIVE FINKELSTEIN asked how they should decide as a committee that REPRESENTATIVE MULDER'S suggestions have more basis than the professional managers hired who happen to be heading in a different direction. Number 485 REPRESENTATIVE MULDER challenged the Department of Corrections to oppose this alternative by finding a cheaper proposal, but cited that they have expressed no interest or desire to come up with a long term, concrete plan and present it to the subcommittee. Number 547 REPRESENTATIVE GREEN referred to the financing of the facility. He wondered about the concept of the project not exceeding $2 million and after doing the math he came up with the figure of $55 per prison, per day to meet the pay out cost of the facility. This was a concern to him since this would be almost equivalent to what the state pays now for the prisoners in Arizona. This per day figure would increase too, once the cost of the facility is factored in to anywhere from $125 to $150. DENNY DEWITT, Aide to REPRESENTATIVE MULDER spoke to these concerns. He stated that when the numbers in the bill are used, which are the top side numbers this would be true. It is their judgment that the numbers put in the original legislation are high, but they could be adjusted down through the legislative process. If a full 1000 bed facility was constructed, which he said they doubted would be the case, although there are numbers to persuade them to suggest this would be appropriate, then the ability to proceed with this legislation is economically viable. The importance of noting that this a private sector proposal is that this project is required to be economically viable in a private sector setting. This is not an inhibition within the private sector. Mr. Dewitt seriously doubted that a private sector contractor would be required to meet a $55 rate debt service per day, in addition to the operating costs of a facility. Number 827 REPRESENTATIVE MULDER noted that a prison he visited in Texas operated by Wackenhut was charging the state $35 per day, $28 per diem, $7 debt retire. He pointed out that the real operative question here is the lease purchase agreement. REPRESENTATIVE MULDER said he was not necessarily wetted to a lease purchase. This facility could stay in the private sector as a property tax paying operation. REPRESENTATIVE FINKELSTEIN asked REPRESENTATIVE MULDER if he would be open to the idea of mending this approach, by amending the bill language to say facility or facilities and broaden it beyond the 3rd judicial district. REPRESENTATIVE MULDER stated that his direction is pointed towards a facility that creates an efficiency of scale. He added that he is sincere in reining in cost. REPRESENTATIVE FINKELSTEIN stated with REPRESENTATIVE MULDER's expanse of rhetoric aside, he pointed out that REPRESENTATIVE MULDER had stated that one of the facilities was prone to expansion, which could very well be a cheaper alternative. He asked why REPRESENTATIVE MULDER would want to preclude this if his goal is cost cutting. Number 997 REPRESENTATIVE MULDER stated that he was looking for a change of direction. REPRESENTATIVE FINKELSTEIN responded that he was afraid that when someone attempts to insert their own particular view points as if that's the only wisdom that exists, this is a much bigger issue. REPRESENTATIVE FINKELSTEIN said he missed the point when REPRESENTATIVE MULDER outlined the correctional officer salaries. He asked if there was a point behind this outline of salaries. REPRESENTATIVE MULDER stated that he provided REPRESENTATIVE TOOHEY with this information since she had asked for it. Number 1074 REPRESENTATIVE DAVIS asked what the time line to this project would be as versus a 1998 projection by the Department of Correction for their alternative. She felt as though the project might not be feasible absent any studies being undertaken to research this facility as an alternative. REPRESENTATIVE MULDER stated that the difference is that if this bill was passed, they had been given an indication by contractors that they could be up and running within 18 months. This would be the same timetable that the department has said they would begin looking at the problem and address it. REPRESENTATIVE DAVIS responded that she understood the department might be working on plans presently. She wondered if REPRESENTATIVE MULDER had actually met with the department to discuss their suggestions. Number 1181 REPRESENTATIVE MULDER said their door is open. He stated that they have bi-weekly finance subcommittee meetings and they talk to the department several times a week. He said that if the department has a plan, then they're all ears. REPRESENTATIVE DAVIS noted that when she introduces bills the first thing she does is meet with the affected department to make sure they understand what it is she is trying to do and to get an idea of what they need. She wanted to know if this is how REPRESENTATIVE MULDER handled this bill. REPRESENTATIVE MULDER noted for the record that the department was involved with hearings this summer, even the Commissioner was present and listened to the testimony. She and REPRESENTATIVE MULDER spoke in length about these hearings. He put her on notice about how he was going to proceed. This is not a new concept. He also pointed out that he was not the prime sponsor on this bill, but the finance committee. This legislation has been supported by the majority of it's members. Number 1278 REPRESENTATIVE DAVIS asked about copies of the minutes from these finance subcommittee meeting. REPRESENTATIVE MULDER pointed out that because this is a subcommittee they were not appointed a secretary, but said there were tapes available. Number 1311 REPRESENTATIVE FINKELSTEIN noted that all the amendments to be presented were drafted according to the previous CS. Before outlining his first amendment REPRESENTATIVE FINKELSTEIN stated that he does not disagree with the basic premise of this proposal, more specifically that privatization must be considered. He also felt as though the department was sincere on considering this. This bill affects directly the issue of building a new facility or adding on to already existing facilities. REPRESENTATIVE FINKELSTEIN also pointed out the issue of location of the new facility is very different issue than the privatization issue. The size of the facility is also a consideration, as well as the lease purchase versus private sector run facility. The middle ground would be to ask the department to consider this alternative, that the approach has been clearly laid out and a credible case can be made. REPRESENTATIVE FINKELSTEIN thought this legislation was a bit premature and rather than pushing it through the system, they should first let the department come up with a solution. If this solution is not satisfactory, then the legislature can institute some of these concepts as options. REPRESENTATIVE FINKELSTEIN then moved amendment number one which would affect the language on page one, line one following "Act" through page four, line 30. REPRESENTATIVE FINKELSTEIN proposed to delete all this material language and insert the following: "requiring the Department of Corrections to consider a lease- purchase option for the construction and operation of a correctional facility." The clause as rewritten would read as follows: "BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: Section 1. The Department of Corrections shall consider a lease- purchase option for the construction and operation of a new correctional facility in order to relieve overcrowding of existing correctional facilities." Number 1506 REPRESENTATIVE BUNDE objected. REPRESENTATIVE MULDER stated that this language littered the bill and is akin to adding intent language in the budget. The legislature is suppose to send a policy directive to the administrative, which is what this bill is. REPRESENTATIVE FINKELSTEIN agreed with this statement, but stated this legislation is more than a policy directive as he's already explained. He again stated that the issue is more about privatization and the policy directive can be achieved by the language proposed in this amendment. This legislation is a mandate which will impact the entire correctional system in the state. REPRESENTATIVE GREEN stated he was not sure that he followed the amendment. REPRESENTATIVE FINKELSTEIN responded that it was the title which is amended in the first place. This language amended version (O) of the CS instead of version (R). Number 1810 CHAIRMAN PORTER recognized that the objection to this amendment still stood. A roll call was taken. Representative Finkelstein voted in favor of the amendment. Representatives Davis, Green, Bunde, Toohey and Porter voted against the amendment. Amendment number one failed. Number 1831 REPRESENTATIVE FINKELSTEIN referenced amendment number two and said that this language referred to existing statute which says, Alaska will keep their prisoners in state. He felt as though this language was consistent with the testimony given. REPRESENTATIVE FINKELSTEIN's change was in regards to page two, line nine to delete "or in another state" from this clause. The language after this change would read as follows: "CORRECTIONAL facilities provided through agreement with a public agency for the detention and confinement of persons held under authority of state law may be in this state." Number 1871 REPRESENTATIVE TOOHEY objected to the motion to move amendment number two. REPRESENTATIVE MULDER pointed out that this amendment sought to change the existing statute. This would preclude the department from even considering alternatives. CHAIRMAN PORTER said he would speak against the amendment. If this legislation were to pass they would have a few years with the Alaskan construction of an institution to determine whether this is a viable option for Alaska or not. This is the intent of this legislation, but not to take away other options. Number 1974 REPRESENTATIVE FINKELSTEIN agreed with these comments, as well as the sponsor. The reason why it was offered was because of the testimony in support of this facility since that would allow Alaska to bring prisoners back into the state. If the building of this facility will effectuate this move, then it should be stated in this legislation. CHAIRMAN PORTER requested a roll call vote. Representatives Davis and Finkelstein voted in favor of amendment number two. Representatives Green, Toohey and Porter voted against amendment number two. Amendment number two failed. Number 2013 REPRESENTATIVE FINKELSTEIN stated that he might not need to offer amendment number three if he was able to get some clarification. He referred to language which dealt with maximum security prisoners on page two, line 22, which seemed to contradict language in another section which referenced classification of prisoners to be determined by the commissioner. In the one section it seems that prisoners will be housed without regard to the custody classification and he was confused as to how these sections related to each other. MR. DEWITT responded that the section which REPRESENTATIVE FINKELSTEIN proposed to amend is one that would generally allow the commissioner with more clarity to place prisoners in private facilities. The second section REPRESENTATIVE FINKELSTEIN referenced would put a limitation on the Anchorage facility in deference to the fact that services are already provided for in Spring Creek. The first addresses some concern in the authorizing statute, the other section is under codified law. Number 2083 REPRESENTATIVE FINKELSTEIN said this explanation helped to explain his concerns, but he was still unclear why there was a need to establish policy that this new facility cannot house maximum security prisoners, but other private facilities can. MR. DEWITT responded that is was a judgment as to what they ought to be doing in the construction of a new facility. The judgment was that Spring Creek fully satisfies the needs today of maximum security male prisoners and to duplicate this would not make any sense. Number 2145 REPRESENTATIVE FINKELSTEIN withdrew amendments number three and number four. He then offered amendment number five. REPRESENTATIVE FINKELSTEIN said this amendment deletes the provision on page four, line 28, which reads, "(1) a no-strike and no-slowdown pledge by the union or unions." He understood that this only applied to construction and, in this context, he didn't understand why they would want to insist on this no-strike issue. REPRESENTATIVE MULDER said that REPRESENTATIVE FINKELSTEIN was absolutely right to the extent that the no-strike provision is a trade-off for the project labor agreement. If the carpenter's union does not have a problem with this section, then why should this language be stricken. Number 2247 REPRESENTATIVE GREEN wanted to make sure that this did not conflict with any antitrust laws. REPRESENTATIVE FINKELSTEIN noted, for the record, that this is a mandatory clause which tries to micro-manage the construction of the facility. He pointed out that this ought to be a consideration negotiated at a later time during the construction phase between the department and the labor pool. REPRESENTATIVE TOOHEY objected to the motion to move amendment number five. A roll call vote was taken. Representatives Finkelstein, Bunde and Davis voted in favor of the amendment. Representatives Green, Toohey and Porter voted against the amendment. Amendment number five failed. Number 2328 REPRESENTATIVE FINKELSTEIN referred to amendment number six and said that the change he proposed was located on page three, line 27 following the word, "except." He wished to delete the word, "temporarily." This clause as amended would read, "(3) may not be operated by the state except when..." REPRESENTATIVE TOOHEY objected. REPRESENTATIVE FINKELSTEIN understood this provision dealt with those situations when the state would take over the operation of this facility. He pointed out that the word "temporarily" was not defined anywhere in the legislation. REPRESENTATIVE FINKELSTEIN worried that if this term was not defined then this takeover could last for an indefinite period of time. REPRESENTATIVE MULDER added that temporarily meant that under unforeseen circumstances, if the state was required to take over the facility until they were able to put out an RFP and find a new private contractor, the state would not permanently take over this facility. REPRESENTATIVE FINKELSTEIN pointed out that they agree on the disagreement. This was his perception as well, there's no definition of temporarily. This seems to be a relatively meaningless term other than intent, which the sponsor just described. CHAIRMAN PORTER recognized that the objection still stood and requested a roll call vote. A roll call vote was taken. Representatives Green, Davis and Finkelstein voted in favor of the amendment. Representatives Bunde, Toohey and Porter voted against the amendment. Amendment number six failed. TAPE 96-13, SIDE B Number 000 REPRESENTATIVE FINKELSTEIN offered amendment number seven for consideration by the committee. The proposed changes would take place on page three, line 30, the word "or" would be deleted and on page three, line 31, after the word "contractor" the word "or" and "(C) the state is able to operate the correctional facility at less cost than a third-party contractor," would be inserted. This section would read in it's entirety as follows: "(A) the private third-party contractor with whom the state has entered into an agreement to operate defaults in performance under the contract and state operation is reasonably necessary to ensure the facility's continued operation; (B) the state is unable to contract with a private third-party contractor; or (C) the state is able to operate the correctional facility at less cost than a third-party contractor." REPRESENTATIVE FINKELSTEIN noted that these changes would allow the Administration to regain control and under the circumstances that when after all the obligations have been made and all the contracts conditions met, if the state could operate this facility cheaper than a third-party contractor, then they should be to take it over. Number 023 REPRESENTATIVE MULDER pointed out that this would allow the department to construct another state facility if it is so determined that this was in their best interest. If in fact, it was determined that a private contractor would not be used to build this facility, the intent would require that the department come back before the legislature to explain why and ask for the legislature's permission to construct the facility. REPRESENTATIVE BUNDE asked for clarification that if the state could build a facility for less money, that the intent of this legislation would allow them to do so. REPRESENTATIVE MULDER responded that the legislature would certainly want to review their numbers. He pointed out that the proposed amendment would allow the department to build the facility without further review from the legislature. REPRESENTATIVE FINKELSTEIN thought that this noted section dealt with when the state would take over the facility temporarily. This section does not answer to the long-term goal of turning these facilities over to private concerns. There may be circumstances which occur where it's in the state's financial interest to operate this facility for whatever reason. He noted that it's hard to anticipate under what circumstances this would happen. This language should not be construed as meaning to give authority to build state facilities. Number 105 CHAIRMAN PORTER cautioned that there was no way to determine what is the less cost when assessing who should build or maintain this facility. Would it be a portion of a total of the department's costs. In this present legislation there is no attempt made to define what the determination of costs would be. Although he didn't disagree with the theory, CHAIRMAN PORTER wouldn't want the people in this facility to think they wouldn't have a job because the cost definition could not be agreed upon. REPRESENTATIVE FINKELSTEIN pointed out that the problem remains that someone will have to make these calculations. He questioned whether or not the state would have any recourse available to manage prisons in some circumstance not necessarily anticipated at this time. What happens when the state is faced with taking over a facility and this cost criteria has not been met. REPRESENTATIVE MULDER stated that when this time comes that the state can prove they can run it at a cheaper rate, then they can come before the legislature to obtain a blessing. REPRESENTATIVE FINKELSTEIN thought this process was analogous with a court proceeding since so many entities, including the governor have to agree upon these numbers. Number 230 REPRESENTATIVE BUNDE asked if there were provisions to renegotiate the contract. MR. DEWITT answered that they received assistance from the Internal Revenue regarding this issue and currently their regulations limit contracts with operation of the facility to five years. It would be a minimum of every five years, that re-negotiations would take place. He explained in greater detail the provisions of this renegotiation process. REPRESENTATIVE FINKELSTEIN added that there may be situations where negotiations are needed beyond and excluding this five year interim. CHAIRMAN PORTER asked for a roll call vote. Representatives Davis and Finkelstein voted in favor of the amendment. Representatives Green, Bunde, Toohey and Porter voted against the amendment. Amendment number seven failed. Number 405 REPRESENTATIVE FINKELSTEIN withdrew amendments eight and nine, but offered amendment number ten. REPRESENTATIVE TOOHEY objected to amendment number ten. REPRESENTATIVE FINKELSTEIN outlined the location of this amendment on page four, line 14, and it would require the deletion of "not more stringent than" and insert instead the phrase, "equal to." The amendment clause would then read, "Accreditation under this subsection shall be under standards of accreditation applicable to correctional facilities that are not more stringent than those applicable to state correctional facilities operated by the Department of Corrections." REPRESENTATIVE FINKELSTEIN pointed out that this language addresses the standards required of the organization who has jurisdiction over the facility. He stressed that this standard should be at least the same as what the state would be required to perform. Number 486 MR. DEWITT suggested that were several ways to assure quality, one would be through licensure or accreditation, or by a standard set by the department through policy consideration. The intent of this legislation makes the requirements to be met by a private contractor no greater than those required by the state. REPRESENTATIVE MULDER added that currently there are no facilities in Alaska which are accredited, except a private halfway house contractor. REPRESENTATIVE FINKELSTEIN said he didn't argue with this intent, but to say that they must be lower or can never exceed it, the middle ground is approximately the same. He felt that this was also the intent of some of the testimony heard on this issue. It seems that if there is an accreditation standard on the public facilities in general, this standard should apply to the private facility as well. He pointed out that there is no bottom limit on this scale. This was not what was represented to the committee as the intent of this legislation. Number 822 CHAIRMAN PORTER made reference to the fact that because the Alaskan facilities are not accredited is not a negative reflection on these institutions. There are other reasons why this accreditation has not been done, mainly because it costs so much money for the national accreditation organization to travel to Alaska. REPRESENTATIVE GREEN offered that they could amend the language to read "as stringent as those applicable to state..." He understood REPRESENTATIVE FINKELSTEIN's concern about a zero qualification and down grade. REPRESENTATIVE FINKELSTEIN asked to amend this amendment with this suggested language. Number 890 REPRESENTATIVE MULDER pointed out that their legal counsel who drafts these clauses does so for a living and had suggested this wording with this discussion in mind. These were the words the drafter came up with and REPRESENTATIVE MULDER felt as though he would be remise if he didn't stay with this phrasing. Their attorney felt as though this was the way it was best expressed. REPRESENTATIVE FINKELSTEIN said these changes were straight forward English. He questioned that the instructions to the bill drafter could have been as detailed as to the context of the discussion which just took place. Number 1033 CHAIRMAN PORTER interpreted this language to ensure that there won't be any unfair conditions placed on the private contractor. He thought it was appropriate to set guidelines for these standards. REPRESENTATIVE GREEN felt as though this language stacked the deck in favor of the private institution. CHAIRMAN PORTER responded that the only way this could take place is if the department agrees to it. Number 1094 REPRESENTATIVE FINKELSTEIN noted that the private contractor couldn't make artificially high standards because they already have to be met by the state institutions. If the state institutions are meeting them, then probably they are realistic. If no accreditation is required, then there should be none for either, if there is some level of accreditation, then they should be made the same. CHAIRMAN PORTER requested a roll call on amendment number ten. Representatives Finkelstein, Green and Davis voted in favor of amendment number ten. Representatives Bunde, Toohey and Porter voted against amendment number ten. Amendment number ten failed. Number 1172 REPRESENTATIVE TOOHEY made a motion to move CSHB 428(JUD), version (R), out of the Judiciary Committee with the attached fiscal notes and individuals recommendations. CHAIRMAN PORTER noted an objection to this motion and requested a roll call vote. Representatives Davis and Finkelstein voted against the motion. Representatives Green, Bunde, Toohey and Porter voted in favor of the motion. CSHB 428(JUD) was so moved from the committee.