We withhold recommendation on $10.4 million requested from the General Fund for civil commitment of sexually violent predators released from prison until the Department of Corrections and other state agencies responsible for operation of the program resolve significant implementation issues. (We also withhold recommendation on $22 million requested by the Department of Mental Health and $800,000 requested by the Board of Prison Terms for the program--a total of $33.2 million.)
What Is the Sexually Violent Predator Program?The Governor's Budget proposes to provide three state agencies--the CDC, the Department of Mental Health (DMH), and the BPT--with a combined total of $17.7 million in the current year and $33.2 million in the budget year to implement the Sexually Violent Predator (SVP) program enacted last year by the Legislature and the Governor as Ch 762/95 (SB 1143, Mountjoy) and Ch 763/95 (AB 888, Rogan).
Under the SVP program, effective January 1, 1996, an inmate who has completed a prison term for certain sex-related offenses, who meets other specified criteria, and who would otherwise be released on parole can instead be committed, under provisions of civil rather than criminal law, to state custody for two additional years at a time for treatment of his or her mental disorder.
The civil commitment process begins with the screening of inmates by the CDC and the BPT to see if they appear to meet the criteria for commitment. In general, these criteria are that (1) the inmate has been convicted and sentenced to prison for a specified sexually violent crime, such as rape or child molestation; (2) the inmate's crime involved two or more victims; (3) the inmate's criminal acts involved efforts to promote a relationship with and then victimize a stranger; (4) the inmate has a diagnosed mental disorder; and (5) the inmate is a danger to the health and safety of others because of the risk he or she will engage in sexually violent criminal behavior.
If the CDC determines that an inmate may be a SVP, it refers the case to the DMH, which is charged with evaluating whether the inmate is appropriate for commitment. If the DMH determines that an inmate is a SVP who should be committed to state custody, it refers the case to the county counsel or the district attorney in the county which originally sent the inmate to prison. The county counsel or district attorney then seeks a civil court order committing the inmate to state custody for two years as a SVP. If, at the end of the two-year period, the person in state custody still qualifies as a SVP, authorities can seek another two-year commitment from the court.
The funding and personnel-years that would be budgeted for each agency, and the role of each agency in the SVP program, is shown in Figure 17 (see page 54).
What Is the Status of the Program?Although the law took effect at the beginning of the year, authorities are already screening, evaluating, and seeking civil commitments of SVPs by redirecting existing resources. In December 1995, the Director of Finance advised the Legislature of his intention to increase current-year expenditure authority for the three state agencies by $17.7 million for implementation of the SVP program. Based upon a review of the joint proposal by the three agencies, the Chairman of the Joint Legislative Budget Committee recommended that the additional funding not be approved until significant problems with the proposal had been resolved. The Chairman indicated that, because time was of the essence in implementing the new program, the administration should continue to redirect funds to begin the implementation and could resubmit a deficiency request when the problems were resolved. As of this analysis, the Director of Finance has not taken final action regarding the $17.7 million funding proposal. We anticipate that the three state agencies will probably present a revised proposal for current-year expenditure authority for the SVP program.
Sexually Violent Predator (SVP) Program
(Dollars in Millions)
|Department||Funding Request||Personnel-Years Requested||Role in SVP Program|
|$10.4||195.0||Screen and refer inmates to the DMH for evaluation; transport inmates and parolees; lease and guard unidentified 210-bed facility to house and treat SVP civil commitments.|
|Board of Prison Terms (BPT)||0.8||6.6||Assist the CDC in screening of inmates for the SVP program; process and conduct hearings for temporary holds of SVP-candidate inmates.|
|Mental Health (DMH)||22.0||369.5||Evaluate SVP candidates referred from CDC; house and assess inmates placed on 45-day temporary hold at 30-bed unit at Atascadero State Hospital; petition counties to obtain civil commitment of SVPs; house and treat those civilly committed at unidentified 210-bed facility.|
A legal challenge to the constitutionality of the program has been filed by an inmate whom the state is seeking to commit to its custody as a SVP and remains pending. Such a court challenge has occurred to a similar law in the State of Washington, resulting in a court-ordered freeze in that program.
Analyst's Concerns.Our review of the state agencies' SVP proposal found several significant problems in the proposed implementation of the program that we believe need to be remedied by the DMH, the BPT, and the CDC before their 1996-97 budgets can be approved. We are concerned about the budget request primarily because (1) the involved state agencies used conflicting caseload estimates in developing their implementation plan, (2) the requests for funding are greatly in excess of prior estimates of the cost of the measure presented to the Legislature just four months ago, (3) the administration has not indicated how it will provide facilities to house and treat the number of SVPs that the state agencies intend to commit to state custody, and (4) the implementation plan appears to be inconsistent with the law.
Our concerns about the implementation of the SVP program are detailed below.
Caseload Assumptions Conflict.The three state agencies have each based their expenditure plans on differing assumptions as to the number of state prison inmates who would be screened, evaluated, adjudicated, and committed as SVPs. Even different divisions within the CDC relied upon different caseload assumptions in the drafting of their expenditure requests. It would be premature to approve the budget request until the three state agencies are in agreement as to the likely workload that would be generated by the program and their spending requests have been adjusted to reflect this workload.
Program Much More Costly Than Anticipated.The caseload figures presented by the state agencies for the SVP program are significantly higher--more than seven times higher, according to the DMH--than the estimates prepared while Chapter 762 and Chapter 763 were being considered by the Legislature. These variations in caseload are significant because the cost of holding and treating each SVP would be high. The 210-bed treatment center proposed for SVPs would cost more than $112,000 per bed annually to operate. That compares to the $21,885 average annual cost of housing offenders in state prison, as well as the $57,000 to $138,000 per bed average annual cost of holding and treating various categories of criminal offenders in state mental hospitals.
State agency officials indicate that the higher caseload figures upon which the budget request is based reflect the state's initial results of screening inmate populations for potential SVP referrals. Nonetheless, the magnitude of the changes in the caseload and cost figures, and the fact that they came to light so soon after the passage of the measure, cause us to have significant concerns as to whether the estimates upon which this budget request is based are reliable.
It would be premature to approve the budget for this program until the state agencies have provided the Legislature with a full written reconciliation of the discrepancies in caseload and cost figures.
No Housing Plan Provided.None of the three departments charged with implementing the SVP program have presented a workable and realistic plan detailing how and where persons who receive a civil commitment as a SVP would be housed and treated. The same applies for inmates ready to be released on parole whom the agencies propose to temporarily hold in state custody while they are being evaluated and eventually committed under the law as SVPs. In both cases, the state agencies involved have contemplated an approach to implementation of the program that would apparently result in far more civil commitments of SVPs than there are beds available to house and treat them. For example, the DMH has suggested that 30 beds at the Atascadero State Hospital could be made available for those inmates who are about to be paroled but are placed on 45-day temporary holds, pending determination as a SVP. However, state agency officials have advised us that those beds would probably be filled to capacity by persons on temporaryholds by February 1996. No additional beds for this population have been identified.
Likewise, the state agencies proposed to house inmates who are declared SVPs by the courts in an unidentified leased private facility or, possibly later, at the Camarillo State Hospital. However, the state agencies have not yet presented the Legislature with a SVP housing plan indicating when those treatment beds would be available, how they would be phased in to keep pace with SVP commitments, or the capital outlay funding needed to provide the secure facilities necessary for a SVP population.
For example, the DMH had advised us that the population of SVPs would ultimately be expected to reach 400, well beyond the 210 beds now proposed to house them. The 1996-97 Governor's Budget indicates, however, that the population would actually be even greater, and would approach 650 by mid-1997. The state agencies have not indicated how this shortage of beds would be addressed in the budget year and ensuing years, nor the cost of housing this larger population of SVPs.
It is also unclear from the budget request what other programs for the treatment of mental illnesses of inmates, if any, would lose beds at Atascadero and other state mental hospitals in order to accommodate inmates committed to state custody as SVPs. For example, displacement of mental hospital beds for the treatment of mentally ill inmates beforetheir release from prison in order to free up more beds for SVPs aftertheir release from prison would have important ramifications for state spending levels, public safety, and the state's legal position in pending lawsuits over the provision of mental health treatment services for inmates.
At least initially, the state may need to consider alternatives to the SVP process, such as employing other means--intensive parole supervision, electronic monitoring, and home detention--to protect the public from felons who could potentially be designated SVPs but for whom the state lacks bed space. Based on the advice from the Legislative Counsel's Office, we believe Chapters 762 and 763 provide the Director of the CDC with discretion to manage the number of SVP screenings to ensure that the state does not generate more civil commitments than it has the capacity to house and provide treatment services.
Implementation Plans Inconsistent With the Law.Based upon the advice we have received from the Legislative Counsel's Office, part of the proposed implementation plan appears to be inconsistent with the new law. Chapter 762 and Chapter 763 state that SVPs are to be confined ". . . in a secure facility designated by the Department of Mental Health . . . " that also " . . . shall be located on the grounds of an institution under the jurisdiction of the Department of Corrections." Yet, the three state agencies propose to implement the program by placing persons whom the courts determine to be SVPs, as well as those temporarily held for a SVP determination, in state mental hospitals, not state prisons. The administration has advised us that it will propose legislation to amend the law to delete the requirement that SVPs be held at state prisons. Until such time as the law is changed, the proposal contained in this funding request appears to be at odds with the requirements of the law.
Conclusion.For all of these reasons, we withhold recommendation on the $10.4 million requested by the CDC, as well as $22 million by the DMH and $800,000 by the BPT, for a total of $33.2 million, to implement the SVP program and recommend that the three state agencies report at the time of budget hearings on the steps they intend to take to resolve these issues.
The Department of Corrections has yet to complete its evaluation of a series of pilot projects initiated four years ago, known collectively as the Preventing Parolee Failure program, to help parolees reenter society and not return to a life of crime. We recommend the adoption of supplemental report language directing the department to complete studies on recidivism and cost-effectiveness of the pilots and report to the Legislature whether the pilots should be discontinued, modified and tested further, or expanded to serve a larger statewide parolee population.
Program Launched Four Years Ago. In 1991, the CDC acted on its own initiative to internally redirect funding to a series of projects to help inmates released from prison or parole succeed in the community. Subsequently, the Legislature approved what is known as the Preventing Parolee Failure (PPF) program. The CDC now spends about $9 million annually on the pilot projects, which include five multiservice centers to house homeless parolees, nine computer learning centers offering literacy training and job placement services at 74 parole offices, and two networks of residential and outpatient drug treatment services for parolees. The ultimate goal of the program is to reduce parolee recidivism.
Mixed Results/Inadequate Evaluations.So far, evaluations of the PPF pilots have shown mixed results. For example, the literacy program documented strong and seemingly cost-effective gains in inmate reading and math abilities. However, the evaluation of two job placement pilot programs indicated that only 13 percent of the parolees assisted remained at their jobs six months after they were placed in the position. No attempt was made initially to measure the impact some pilot programs are having on recidivism rates. However, the CDC recently advised us of its intention to further evaluate the PPF pilots and their impact on recidivism. We believe this decision is appropriate.
Evaluations Should Be Completed and Conclusions Acted Upon.Given the more than $40 million in funding that has been expended on the pilot programs since 1991-92, we believe it is time for the CDC to complete those studies now in progress, determine whether each pilot was a success or failure, and to apply the lessons learned from the experimental programs. In our view, programs that have demonstrated their cost-effectiveness by reducing recidivism should be expanded to all appropriate inmate and parolee population groups. Programs which have not proven their cost-effectiveness after such a lengthy testing period should be terminated or modified and tested further. It is inappropriate, in our view, to continue pilot programs in perpetuity without reaching a conclusion as to their merit and acting on the information gained from the experiments.
Analyst's Recommendation.For these reasons, we recommend the adoption of the following supplemental report language directing the CDC to complete the evaluations:
The Department of Corrections shall (1) complete studies of the recidivism rates and cost-effectiveness of the Preventing Parolee Failure pilot programs in a timely fashion and (2) present a report for the Joint Legislative Budget Committee and the Legislature's fiscal committees by April 1, 1997, outlining its recommendations as to whether each pilot project should be discontinued, modified and tested further, or expanded to serve a larger statewide parolee population. The report should estimate the increases or reductions in department funding and personnel that would be necessary to accomplish each of its recommendations.
We recommend the adoption of supplemental report language directing the Department of Corrections to provide the Legislature with a plan by April 1, 1997, which will ensure that a complete and effective aftercare drug rehabilitation program will be available as necessary for all inmates who participate in the Substance Abuse Treatment Facility program at Corcoran.
Chapter 585, Statutes of 1993 (Costa, AB 10) authorized the construction of a 1,000 bed, $100 million Substance Abuse Treatment Facility (SATF) alongside a traditional 2,600-cell prison for inmates of various security levels at Corcoran. The CDC has begun construction of the new prison complex and is scheduled to begin occupying the SATF as well as the adjacent conventional prison in July 1997. The CDC believes the SATF is likely to be successful in rehabilitating offenders whose drug addictions are closely linked to their pattern of criminal conduct.
Aftercare Will Be Critical.Aftercare services for persons following their release from the SATF, which would range from Alcoholics Anonymous meetings to more intensive treatment in a residential rehabilitation facility, are a critical component of the proposed program. The CDC plan is to have aftercare service provided by the same private vendors who will be hired to operate drug treatment programs within the SATF. While the department's efforts to establish the SATF at Corcoran are on track, we believe the Legislature needs stronger assurances before the SATF opens that aftercare services will be available to complete the drug rehabilitation process after the offenders are paroled from the SATF. An ongoing CDC drug rehabilitation pilot program at the Richard J. Donovan Correctional Facility in San Diego County has demonstrated that in-prison drug rehabilitation programs can dramatically reduce recidivism--especially so if aftercare services are available to parolees. As a result, the pilot program has enabled the state to avoid the significant costs for incarcerating repeat offenders.
Such aftercare services were readily available to the parolees assigned to the Donovan prison program. Many were paroled to the San Diego area and continued treatment after their release from prison at a 40-bed aftercare residential facility within the county, operated by a private vendor.
We believe the CDC should provide the Legislature with assurances before the SATF program begins that similar strong linkages will be created between the SATF and the aftercare services provided by the two private vendors which will be hired to provide drug treatment services. The CDC should indicate, for example, whether SATF participation will be limited to drug-addicted inmates from certain selected communities in which the necessary aftercare programs will be available. If SATF were to take in inmates from all over the state, it is not clear how appropriate aftercare could be available or provided in many disparate locations in a cost-effective manner.
Although the evidence is strong that the SATF and aftercare programs will be cost-effective, we would note that the costs and resulting savings will not occur until 1997-98, when the drug treatment program commences.
Analyst's Recommendation.Accordingly, we recommend the Legislature adopt the following supplemental report language:
The Department of Corrections shall provide the Legislature's fiscal committees with a plan by April 1, 1997, that will ensure that an effective aftercare drug rehabilitation program will be implemented and available as necessary for all inmates who participate in the Substance Abuse Treatment Facility program at Corcoran.
We recommend the adoption of Budget Bill language prohibiting the Department of Corrections and its Richard A. McGee Training Academy from renewing their existing agreement with San Joaquin Delta College under which the college is claiming state categorical funding. We also recommend Budget Bill language prohibiting the academy from entering into any new agreement with Delta College or any other community college unless it already has been reviewed and approved in writing by the Departments of General Services and Finance.
Since 1989, San Joaquin Delta College and the CDC's Richard A. McGee Training Academy for correctional personnel have maintained agreements under which correctional officer cadets receive about nine associate degree credits for basic training they receive at the academy. Although the academy instructors are paid by the CDC, the college counts the cadets as part of its enrollment and on this basis claimed $2.2 million in state categorical funding in 1994-95. During this same period, the college reported spending just $427,000 on behalf of the academy program, leaving the college with a $1.8 million profit in state funding with no compensating state benefit. The agreement would maintain these terms through 1995-96.
We detail our concerns about this agreement, along with additional recommendations for addressing our concerns about it, in our analysis of the community colleges budget. (Please see the Higher Education section of this Analysis.) In summary, we believe the agreement abuses the state funding system for community colleges, may be illegal, and permits the academy to improperly circumvent the state budget process to augment its funding. Thus, we believe the academy should be prohibited from renewing the agreement when it expires on June 30, 1996. We recommend Budget Bill language directing the CDC to take such action.
Future Agreements Should Be Reviewed.We also recommend Budget Bill language prohibiting the academy from entering into any new agreement with Delta College or any other community college unless it already has been reviewed and approved in writing by the Department of General Services (DGS) and the Department of Finance (DOF). We have been advised by academy officials that the existing agreement between the academy and the college district was not subject to the approval process customarily required for other state contracts. Because of the major fiscal impact documented in this case, we believe such procedures are necessary to protect the state from costly and unwise agreements.
Analyst's Recommendation.For these reasons, we recommend adoption of the following Budget Bill language:
The Department of Corrections and the Richard A. McGee Training Academy are prohibited from renewing their existing agreement with San Joaquin Delta College by which the college provides community college credit to academy cadets. In addition, the Department of Corrections and the academy shall be prohibited from approving any new agreements with any community college unless they already have been reviewed and approved in writing by the Departments of General Services and Finance.
The Governor's Budget proposes $643,000 for the Department of Corrections to comply with the federal Americans with Disabilities Act mandates that public agencies provide "reasonable accommodation" for individuals with disabilities. A similar proposal was specifically rejected by the Legislature last year.
The Americans with Disabilities Act (ADA) which took effect in 1992, requires, among other things, that public agencies provide "reasonable accommodation" for disabled persons affected by governmental programs. The CDC is concerned that it is not in compliance with the ADA and thus is vulnerable to litigation by individuals asserting its noncompliance. We have been advised that seven employees have already filed ADA-related suits alleging illegal discriminatory activity by the CDC.
Last year, the CDC requested $1 million to move forward with an ADA compliance program, but the request was rejected by the Legislature. The Governor's Budget requests $643,000 and 4.9 personnel-years in staffing for a program to move CDC personnel policies closer toward compliance with the federal law.
As we advised the Legislature last year during budget hearings, we believe the CDC funding request is warranted because of the serious, and potentially costly, legal threat. However, the Legislature may wish to review this issue further, because approval of the $643,000 would constitute a significant change from the position taken last year by the Legislature to reject funding for ADA compliance activities.
We withhold recommendation on $1.6 million requested to develop a special education program for inmates age 22 and under, pending a report from the Department of Corrections at budget hearings on several significant policy questions regarding the funding level and funding source of this new program.
An Issue of Federal Compliance. Although the CDC provides various academic and vocational education services for inmates, it does not operate a special education program for inmates with disabilities as specified under a 1975 federal law, the Individuals with Disabilities Education Act (IDEA). We are advised that federal authorities as well as the state Department of Education have determined that the CDC has failed to comply with both federal and state law by not providing special education programs for eligible inmates under age 22 (older inmates are not eligible). Because some other states, as well as the Youth Authority, have been ordered by courts to implement special education programs, the CDC's legal office has concluded that the CDC is similarly vulnerable to a legal challenge.
Budget Request.The Governor's Budget requests $1.6 million and 24 personnel-years to develop and begin implementation of a special education program to meet both federal and state legal requirements. The activities carried out during 1996-97 would include the development of screening procedures to identify and search for inmates eligible for special education, the establishment of at least six special education centers within the prison system, and the development of the instructional program and the services that would be provided to inmates.
The CDC has estimated that development of the program could be largely completed in 1996-97 and that full implementation of instructional services for all eligible inmates could be completed in 1998-99. The CDC estimates that about 1,071 inmates would be eligible for the special education program if it were operating today. According to the CDC, the program would eventually cost $4.3 million annually and require 94 personnel-years in staffing.
Program Needs Legislative Review.We believe the CDC's proposal raises several significant policy issues that the Legislature should consider that could affect the funding provided for development of the program:
We withhold recommendation on the Department of Corrections' request for $22.5 million from the General Fund and 319 positions for the third phase of its health care delivery system, pending a report during budget hearings on (1) the total costs of the delivery system for the budget and future years (including the new phase), (2) the impact of continuing litigation on medical costs, and (3) the potential savings from the implementation of the health care delivery system.
Background. In 1991, partly as the result of litigation, the CDC contracted with the Western Consortium for Public Health to develop a mental health services delivery system. The result was a report which made recommendations for a comprehensive health services delivery system for both medical and mental health care. Based on this report, the department developed a three-phase plan to provide mental health services and medical care to inmates. The health care delivery system also included plans for licensing the CDC facilities as Correctional Treatment Centers (CTC), a new licensing category of facilities which provide subacute, 24-hour medical treatment for inmates.
The Legislature has already approved the first two phases of the system. Costs for the two phases were $8.1 million and $19.6 million, respectively.
Third Phase Costs Higher Than Planned. Last year, when the Legislature approved the second phase of the delivery system, the CDC reported that phase three would be the last phase, and that it was projected to cost $9 million and add 77 new positions. However, the budget requests $22.5 million and 319 positions to implement the third phase of the system in 1996-97. This request is $13.5 million more than originally planned. Moreover, the department advises that there will probably be a need for at least one more phase in 1997-98, adding more costs and staff.
Reasons for Higher Costs. The department indicates that there are several reasons for its higher estimates for phase three:
An Additional Phase Will Be Needed. The department's budget request also indicates that a fourth phase will be needed to complete implementation of the health care delivery system. The new phase will activate the correctional treatment centers and mental health treatment programs at San Quentin State Prison and the California Institution for Women.
No Savings Estimated. At this time, we believe that the department's estimates potentially overstate the costs of its medical and mental health proposal. This is because the department's request does not estimate any anticipated savings from the implementation of the new health care delivery system. For example, as the department activates medical and mental health facilities within its institutions, there should be savings from the decreased use of outside contract medical providers. Furthermore, there should be additional savings as the department makes better use of its own facilities which are less expensive than community facilities. In addition, the CDC incurs overtime costs for custody staff whenever its sends an inmate to a community provider. As the department uses its own medical facilities, it should see significant savings in medical guarding costs.
Analyst's Recommendation. We withhold recommendation on the department's request for the third phase of its health care delivery system, pending a report at the time of budget hearings on (1) the total costs of the delivery system for the budget and future years (including the new phase), (2) the impact of continuing litigation on medical costs, and (3) the potential savings from the implementation of the health care delivery system are being reported.
Baseline Adjustment for Contract
We recommend a General Fund reduction of $3.2 million for contract medical services because the Department of Corrections has not justified the request for additional funds. (Reduce Item 5240-001-0001 by $3.2 million.)
The department is requesting $65 million for contract medical services in the budget year, which is an increase of $3.2 million, or 5 percent, over the current-year amount. The additional funds would become part of the department's baseline budget. These expenditures are for a variety of medical services provided by contractors, such as hospitals, medical specialists, and laboratories. The proposed baseline adjustment would add about $21 per inmate for the budget year.
Contract Costs Should Be Decreasing. The department has implemented a variety of initiatives to reduce medical costs for inmates, including developing CDC medical facilities to replace utilization of contract facilities in the community. Reducing the use of outside hospitals is a priority for the CDC because the costs of community hospital stays make up 60 percent of contract medical costs. The department appears to have been successful in reducing outside hospital use. For example, between 1992-93 and 1994-95, the total number of days that inmates were inpatients in community hospitals decreased 28 percent. During the same period, the use of CDC hospitals increased almost 10 percent and the use of CDC infirmaries increased almost 7 percent.
The activation of the CDC's mental health care system has also reduced reliance on the DMH contract beds. In 1992-93, the number of the DMH patient days was 212,939. By 1994-95, the use of the DMH beds declined 10 percent to 190,903 patient days. We believe that, as the department activates additional mental health program beds as planned, the need for the DMH beds should decline even further.
Contract Negotiation. The CDC, with support from the California Medical Assistance Commission (CMAC), has also been negotiating the contract rates it pays community hospitals. Between 1993-94 and 1994-95, the average cost of a community hospital stay decreased 16 percent to $2,333 per day. As the department negotiates more of its contracts, the rates are likely to decline further. The CMAC has recommended that the department centralize and automate its claims processing system. In addition, CMAC has noted that many community hospitals have excess capacity and would be willing to cooperate with the CDC to develop "custody units." Implementation of these recommendations could lead to even further savings.
Increased Utilization of CDC Facilities. Currently, the CDC's own acute care hospital beds are underutilized. The CDC staffs its facilities based on 80 percent occupancy, but 1993-94 data show that facilities were at 71 percent occupancy. Since the average cost of a CDC hospital stay is $434 per day--a fraction of the $2,333 cost per day in a community hospital--the department could realize savings by maximizing the use of its own facilities.
Other Cost Containment Programs. Last year the Legislature approved the CDC's request for utilization review staff. Utilization review staff will be responsible for tracking contract medical costs and ensuring that cost effective care is provided. Full implementation of the utilization review program should lead to further savings. (We describe the status of these positions below.)
Analyst's Recommendation. We believe that the department's efforts to reduce contract medical costs should result in further savings and eliminate the need for the augmentation. However, the department's estimates of medical costs have not been fully adjusted to reflect the savings likely to result from the efforts to reduce contract medical costs. We believe that the proposed augmentation is not justified and we recommend that it be deleted, for a General Fund savings of $3.2 million.
We recommend that the 13 positions requested for the Department of Corrections quality assurance/risk reduction program be established as two-year limited-term positions because the proposed quality assurance program is new and the department does not have data to justify the positions on a permanent basis.
The budget requests 13 new positions to establish a quality assurance and risk reduction program. These positions would be responsible for reviewing health utilization and outcomes in order to assure that the department's "standards of care" are met and to reduce medical costs. In addition, the staff would review inmate medical lawsuits to determine if changes in department medical practices are warranted. The budget does not request additional funding for these positions, but instead would use "savings" that would be realized from the reviews. The department would have to generate almost $1 million in savings to defray the costs of these positions.
Current Utilization Review Activities.The department is developing a system for utilization review at its institutions. Last year, the Legislature approved 19 utilization review nurse positions in the 1995 Budget Act. These nurses, using the department's "Standards of Medical Care," are expected to review medical procedures to ensure that they are authorized, appropriate, and cost-effective. These are two-year limited-term positions. As of January 1996, the department has filled seven of the 19 positions, anticipating that all positions will be filled in March 1996. Because the department is still developing guidelines for the utilization review program, it does not have any data on its review efforts.
The department's current request would expand its utilization review efforts to include outcome and peer reviews. Utilization reviews concentrate on whether services are authorized and appropriate. Outcome and peer reviews augment utilization reviews, in that, these reviews evaluate the effectiveness of treatment and identify substandard staff and care. The proposed staff would review current treatment protocols to determine if they are effective and recommend changes to reduce costs.
Analyst's Recommendation. Because the department has not completed its utilization review program and, consequently, has no data on workload, we recommend that the proposed 13 new positions be two-year limited term. This would allow the Legislature and administration to evaluate the program's effectiveness before considering whether to make the positions permanent.
We recommend the enactment of Budget Bill language specifying that funds appropriated for Interferon treatments for inmates with hepatitis B and C be used only for that purpose because the Department of Corrections does not have adequate data to estimate the number of inmates needing this treatment. We further recommend that the Legislature also adopt supplemental report language directing the department to report on the number of inmates receiving Interferon treatment and the costs of providing the treatment.
Background. Hepatitis B and C are viruses of the blood. Individuals contract the disease through blood transfusions, needle exchange (from intravenous drug use or tattooing), and sexual activity with infected partners.
An infected person may show no, or limited symptoms. However, when these diseases become "acute" or "chronic," liver cancer or liver failure can result. The department notes that treating chronic and acute cases is costly, but has no direct data on the number of inmates who currently are being treated for conditions related to viral hepatitis. The department estimates that the level of infection among incoming inmates ranges from 35 percent to 55 percent.
Budget Proposal. The department is requesting $2 million from the General Fund for drug therapy and related tests for treating inmates with hepatitis B or C. Currently, the department treats only the symptoms related to liver dysfunction, but does not treat the actual disease. However, the department is requesting funds for using Interferon therapy. Interferon is the only known treatment for chronic hepatitis B and C. If Interferon treatment is successful, the CDC would avoid the long-term cost associated with treating inmates for liver cancer or failure. Determining if a patient is amenable to Interferon treatment requires a liver biopsy. The drug treatment, for those found to be amenable, lasts six months. This treatment is widely used and accepted under the state's Medi-Cal program. The department advises us that failure to provide medical care that is commensurate with community standards, exposes the department to potentially costly litigation.
Based on the level of infection in new inmates, the department estimates that approximately 2,000 inmates entering state prison in 1996-97 will need liver biopsies and that of these inmates, more than 600 will be amenable to Interferon treatment. The $2 million requested would cover the annual costs for biopsies and for the drug treatment. The department, however, has no estimate of the number of infected inmates in the current population or whether infection is spreading.
Analyst's Recommendation. Because the department has very limited data on the actual number of inmates that would be treated with Interferon, we recommend the Legislature enact the following Budget Bill language limiting the use of funding for Interferon treatments. This will ensure that funds not needed for this specific purpose will not be diverted to other, unbudgeted activities.
Specifically, we recommend adoption of the following Budget Bill language:
Of the funds appropriated in this Item, $2,046,000 is available for Interferon treatment, and related tests, for inmates infected with hepatitis B and C. Any funds not used for these purposes shall revert to the General Fund.
We also recommend that the Legislature adopt the following supplemental report language directing the department to report on the number of inmates receiving Interferon treatment and the costs of providing the treatment.
The Department of Corrections shall submit a report to the Joint Legislative Budget Committee and the Legislature's fiscal committees by December 31, 1996, on (1) the number of inmates that have been identified as having chronic hepatitis B and C, (2) the number of liver biopsies performed and the costs associated with the biopsies, and (3) the number of inmates receiving Interferon treatment.
The Governor's Budget provides $22 million from the General Fund to the Department of Corrections for inflation adjustments for operating expenses and equipment purchased during 1996-97. The department is one of only five state agencies receiving such a price increase adjustment.
Five Agencies Would Receive Adjustment.The 1996-97 Governor's Budget proposes $22 million from the General Fund to offset the effects of inflation on the CDC's costs of general operating expenses and equipment. This increase is based on the assumption that inflation during 1996-97 will raise the prices that the department pays for goods and equipment by 2.6 percent. The 1996-97 budget also provides inflation increases of different percentage amounts to the University of California (3 percent), the California State University system (2.6 percent), the Franchise Tax Board (2 percent), and the Trade and Commerce Agency's foreign trade offices (4.5 percent).
We would note that, last year, the 1995-96 Governor's Budget proposed $30.5 million for an inflation adjustment for the CDC but provided no similar adjustment for any other state agency. At the time, we recommended denial of the funding because we could find no analytical basis for providing the CDC with an adjustment denied to all other departments. The Legislature subsequently rejected the CDC funding request.
This year, because the CDC is not the sole agency for which a General Fund increase is being sought, we do not have a basis to recommend denial of the CDC's proposal, which would help it maintain its purchasing power for goods and services. However, the Legislature may wish to consider its own general policy regarding which state agencies are eligible to receive inflation adjustments, and in what amounts, for the budget year and beyond.
We withhold recommendation on $264,000 requested by the Department of Corrections for the procurement of prison telecommunications systems and services and recommend that the Departments of Corrections and General Services jointly report at the time of budget hearings as to how the state will maximize General Fund revenues from pay telephones located at state prisons.
Funding Sought By Two Agencies.The CDC has requested $264,000 in bond funds and 2.9 personnel-years for staffing to assist the DGS's Telecommunications Division in the procurement of several master contracts for telecommunications systems, including a new contract for pay telephone services used by inmates. The DGS has separately requested $451,000 and 2.8 personnel-years to continue and expand its ongoing Payphone Management Program Unit.
State May Be Missing Out on Revenues. Under a program managed primarily by the DGS, the state receives commissions from vendors who operate pay telephones at state facilities, including prisons. The commission revenues are deposited in the General Fund. At present, about $10 million per year is generated for the General Fund from prison pay phones, or about 86 percent of all state pay phone revenues. According to the CDC, the state receives about 22 percent to 32 percent of gross pay phone revenues under its contracts. We are concerned that the state has not maximized its opportunity for significant additional revenues. Published reports and our own discussions with correctional officials elsewhere indicate that other state and local correctional agencies have received much more advantageous pay phone contracts than California. For example, Kentucky correctional system officials advise that they signed a contract with the same vendor that provides pay phone services to California providing that state with 55 percent of the gross revenues. If it were feasible for California to win comparable contract terms today--and that is not a certainty--we estimate that prison pay phones would be generating at least twice as much per year for the General Fund.
State Renewing Old Contract Terms.We are also concerned that the timetable for procurement of pay phone services proposed by the CDC will not be complete until mid-1997. As a result, the state may be foregoing the receipt of tens of millions of dollars in additional prison pay phone revenues.
According to the CDC, the mid-1997 timetable was established in order to ensure new services are under contract by August 1997, when the present prison pay phone contracts are scheduled to expire. However, the CDC and the DGS had the option of terminating the existing contracts in August 1996 rather than letting them run to completion in August 1997. Because the CDC and the DGS were unprepared to rebid the prison pay phone contracts this year, the departments chose instead to let the existing contracts run another full year without any change in terms.
Accordingly, we withhold recommendation on both departments' requests for telecommunications procurement funding and recommend that the CDC and the DGS report at the time of budget hearings as to how they intend to maximize future General Fund revenues from pay telephones located at state prisons. We also discuss this issue in our analysis of the DGS budget. (Please see the State Administration chapter in this Analysis.)
We withhold recommendation on $14.7 million requested from the General Fund to reimburse counties for detaining parolees held in county jails for violation of parole conditions. We recommend that action on this item be delayed, pending an audit of reimbursement payments to Los Angeles County, as well as the receipt of information as to the cause of a projected doubling in local assistance costs and recommendations for curbing these costs.
Parolee Jail Costs Escalating.The state reimburses counties for their cost of temporarily incarcerating parolees in county jails who are held on the grounds that they violated the condition of their parole. The 1996-97 Governor's Budget provides $14.7 million from the General Fund to reimburse counties for these costs. However, the CDC has advised us that it anticipates revising its funding request for local assistance at the time of the May Revision. According to the CDC, the annual cost of the program could double to $30 million.
The department advises that audited and unaudited claims for local assistance exceed the amount provided for this purpose in the current year--also $14.7 million--by another $15.4 million. (A final claims figure will not be calculated until all claims have been reviewed further. Funding to pay these claims will be requested at a future date.) The CDC officials have indicated that they do not now know the cause of this significant increase in claims for local assistance.
Audit of Los Angeles Claims. The CDC has indicated that its funding request for local assistance may be revised to take into account the findings of an audit now being conducted by the State Controller's Office of 1993-94 reimbursements paid to Los Angeles County. Preliminary audit findings indicate that the county over billed the state during that period by millions of dollars. If the preliminary audit findings are affirmed when the final audit is released this spring, the results may substantially affect the total claims paid by the state in the current and budget year.
Thus, we recommend the Legislature delay action on the $14.7 million requested for local assistance until the Los Angeles County audit is completed. We also recommend that the CDC report at the time of budget hearings as to the cause of the significant increase in local assistance claims and its recommendations for curbing these costs.
We recommend the adoption of Budget Bill language directing the Department of Corrections to restructure the parole staffing ratios upon which budget requests of the Parole and Community Services Division are based to more accurately reflect the caseloads actually assigned to parole agents.
Parole Staffing Ratios Have Grown.In recent years, the CDC's Parole and Community Services Division has experienced significant budget reductions. For example, in 1992-93, as the state faced a $7.5 billion budget shortfall, the Legislature and the Governor agreed to reduce the division's budget by $32 million with the understanding that part of the reduction would result in significantly increased caseloads for parole agents and other division staff. Since that time, the division has experienced additional reductions in its funding due to unallocated cuts in the CDC budget.
We are advised by the CDC that, primarily as a result of these prior funding reductions, parole agents now typically supervise caseloads of 80 to 90 parolees. Workloads in this range have also been specified in collective bargaining agreements between the state and the labor organization representing parole agents. (The last agreement has expired but its provisions continue to be enforced while negotiations continue.) However, requests by the CDC for additional state funds to keep pace with the increasing number of parolees have not been based on these higher staffing ratios. Instead, the CDC budget requests have sought sufficient funding to provide one new agent for each additional 53.2 parolees--a much more intense level of supervision than is now the standard. The CDC officials believe the application of the 53.2 to 1 ratio in its budget requests is appropriate and necessary to ensure sufficient funding is available to the division to keep pace with other costs of parole services, such as rent increases for its parole offices, casework services, and overtime.
Fiscal Accountability at Issue. We are concerned that the formula upon which the budget is based makes it difficult for the Legislature to assess the validity of the CDC's spending requests or hold the department accountable. That is because the present formula makes it difficult for the Legislature to determine whether the CDC's funding requests simply accommodate an increased parole population or, instead, constitute a policy change by intensifying the supervision of its parolees. The CDC may be correct in asserting that insufficient funding is being provided to meet other operational costs. If so, the division's budget requests should be restructured to propose the resources needed for these support functions.
Budget Requests Should Be Restructured.For these reasons, we recommend that the Legislature direct the CDC to restructure the division's parole staffing ratios so that they are consistent with the division's actualstaffing practices. The CDC could propose parole ratios explicitly intended to intensify supervision if the fiscal impact were identified separately and justification is provided for more intense parole supervision. We believe it would also be appropriate for the CDC to review its funding formulas to ensure that, as its parole caseload grows, the resources for office rent, casework services, overtime, and other operational costs also grow appropriately. Finally, we recommend that the revised parole staffing ratios and funding formula apply to spending requests received for 1997-98 and afterward.
To accomplish this change in the CDC's budgeting process, we recommend the adoption of Budget Bill language directing the CDC to submit the revised parole ratios and funding formula to the DOF and the Legislature for review by December 1, 1996, and directing the CDC to use the revised staffing ratios in the calculation of its budget requests beginning in 1997-98.
Specifically, we recommend the following language:
The Department of Corrections shall restructure the parole staffing ratios that are the basis of its requests for changes in expenditure authority for 1997-98 and thereafter to be consistent with the actual parole staffing practices of the Parole and Community Services Division. The department may also propose parole ratios explicitly intended to intensify parole if the fiscal impact were identified separately and justification provided for more intense parole supervision. The department may also review and adjust the formula on which it bases its requests for changes in expenditure authority to ensure that the funding provided for office rent, casework services, overtime, and other operational costs increases or decreases appropriately with changes in the division's parole caseload. The department shall submit the revised parole staffing ratios calculated under this provision, along with any other proposed changes it proposes for its funding formula, to the Joint Legislative Budget Committee and the Legislature's fiscal committees by December 1, 1996. This restructuring of parole staffing ratios and any proposed changes in the funding formula should not result in any significant change in the expenditure authority provided to the division under the 1996 Budget Act.
We recommend that the Department of Corrections and the Department of Finance report at the time of budget hearings as to the measures the Department of Corrections will take to reduce its funding base by $22 million, as required by the 1995 Budget Act, and the programmatic effects of the reduction.
Unclear How Department Will Cut Required Amount.Control Sections 3.75 and 3.90 of the Budget Act of 1995 directed the DOF to allocate a total of $45 million in cuts to state agencies during the current fiscal year. The DOF allocated the required spending reductions last August, including a $22 million reduction to the CDC.
The Governor's Budget confirms that the CDC's expenditures in the current year have been reduced by $22 million, and proposes to carry forward this reduction in the CDC's funding base into 1996-97. The schedule of changes in authorized positions in the Governor's Budget specifies reductions amounting to $13.3 million and 50.9 personnel-years, but does not indicate how the remaining $8.7 million in spending reductions would be achieved. We are advised that, as of this analysis, the DOF and the CDC have not reached final agreement on the means by which the additional reductions allocated to the CDC would be achieved.
Accordingly, we recommend that the CDC and the DOF report at the time of budget hearings regarding the specific measures the CDC will take to reduce its funding base by $22 million and the programmatic effects of the reduction.
We withhold recommendation on $16 million requested to continue implementation of phase one of the Correctional Management Information System, pending a review of the Department of Corrections' assessment of recent schedule changes and the effect of these changes on 1996-97 budget request.
The budget includes $16 million from the General Fund to continue implementation of the CDC's primary information technology project--the Correctional Management Information System (CMIS). The project, begun in 1992, is intended to provide the department a computer-based system to maintain comprehensive information about offenders and support-related departmental activities. There are five phases comprising the CMIS project: (1) automating offender-related information, (2) establishing a parolee information network, (3) developing an inmate health care management information system, (4) automating other offender-related management functions, and (5) automating administrative management functions.
Need and Anticipated Benefits Drive Automation Effort. The purpose of this project is to improve prison operations and departmental administration. It is designed to replace critical, but costly and unwieldy manual operations, such as those associated with maintenance of an offender's prison record, which is currently a paper file. In addition to various management benefits which should result from new computer-based support systems, the department anticipates that operational efficiencies will generate substantial savings in staff time. Total benefits from phase one--the automation of offender-related information--are estimated to be slightly less than total phase one project costs ($93.6 million in benefits, $95.8 million in costs). Approximately one-half of the anticipated benefits ($46.7 million) would be direct cost savings. The remainder ($46.9 million) would be in the form of cost avoidance.
Recent Schedule Slippage May Delay Project.The contractor hired to develop and implement phase one of the CMIS project has recently advised the department that not all tasks will be completed in accordance with the schedule specified in the contract. Department staff were evaluating the extent and impact of the delay at the time this Analysiswas prepared, but anticipated that the delays would probably defer project completion until 1997-98. As the contractor is paid only upon completion of a task, the delay will likely reduce the need for funding in the budget year because all tasks which are budgeted will not have been completed. The amount of excess funds could be in the $9 million range, but cannot be verified until the department has completed its assessment. Consequently, we withhold recommendation on $16 million requested to continue implementation of phase one of the CMIS project, pending review of the department's assessment of the delay.
"Success Partner" Proving Valuable.In last year's Analysis,we noted that the CDC had hired a consultant to independently verify and validate the achievements of the project. This consists of monitoring the system development activities of both the CDC and the contractor hired to develop and implement phase one of the CMIS. The objective of independent verification and validation is to ensure a project's success by identifying problems early and verifying that they have been corrected, as well as validating that products delivered by the primary contractor meet the department's specifications. The CDC refers to the independent contractor as its "success partner."
We have supported this concept because history has shown that both primary contractors and state managers of various state projects have made decisions which have ignored fundamental project problems. While the cost of the independent contractor is significant--the CDC will pay up to $1.5 million for this service--we believe that paying up front to ensure project success is better than paying even more later to try to salvage a project that does not meet expectations or having to terminate the project at a cost of many millions of dollars.
Department staff associated with the CMIS project have stated that the services provided by the independent contractor have proven to be extremely valuable. They note that the independent contractor has identified project development activities needing corrections, as well as needed corrections with respect to work performed by the primary contractor. As noted in last year's Analysis, we believe that the CDC's use of an independent verification and validation contractor to assure the success of an information technology project merits consideration as a model for other critical or complex state information technology projects. We discuss this concept further in our discussion of information technology in the State Administration chapter of this Analysis.
We withhold recommendation on $21.1 million requested from the General Fund for correctional officer cadet training, pending receipt of updated prison population projections and updated projections of the need for new correctional officers at the time of the May Revision.
The 1996-97 Governor's Budget requests $21.1 million for salaries for correctional officer cadets and operating expenses for the Richard A. McGee Correctional Training Center at Galt. The budgeted request would provide sufficient funds for enrolling seven classes of 480 students in the academy, or a total of 3,360 cadets, during the budget year. This is the same amount of funding and assumes the same number of cadets as in the 1995 Budget Act. However, data provided by the CDC indicate that the number of cadets being trained are fewer than anticipated. In fact, the current-year budget for cadet training has since been reduced by $1.4 million on the assumption that 233 fewer cadets will be enrolled at the academy than expected.
Cadet Needs Affected By Prison Population.The number of correctional officer cadets who are trained each year at the academy is closely related to the size of the inmate population (although that is not the only factor involved). As of early January 1996, the number of inmates in the prison system was about 3,000 below projections. If this trend were to hold, the CDC would not need to train as many correctional officer cadets during 1996-97 and the budget for cadet training could be reduced accordingly. The CDC will update its population estimate for both the current and the budget year this spring.
For these reasons, we withhold recommendation on the $21.1 million requested for correctional cadet training pending receipt of updated prison population projections and updated projections of the need for new correctional officers at the time of the May Revision.
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