LAO Analysis of the 1997-98 Budget Bill
Judiciary and Criminal Justice, Departmental Issues Part I-a

  1. Youth and Adult Correctional Agency (0550)
      1. Internal Affairs Responsibilities Should Shift to Inspector General
  2. Department of Corrections (5240)
    1. Overview of the Inmate Population
      1. Who Is In Prison?
    2. Inmate and Parole Population Management Issues
      1. Inmate Population Growth Slows
      2. Why Have the Inmate Population Projections Changed?
      3. Projections to Be Updated by May
      4. Inmate Housing Plan Calls for New Prison, Leased Facilities, and More Overcrowding
      5. Legal Clarification in Community Correctional Facility Plan Needed
      6. Uncertainties Regarding Leased County Jail Bed Proposal

Youth and Adult

Correctional Agency


The Secretary of the Youth and Adult Correctional Agency (YACA) is responsible for overseeing and coordinating the activities of the following departments:

The agency is responsible for coordinating budget and policy direction for these departments and boards. The Office of Inspector General within the agency provides oversight of internal affairs investigations conducted within the juvenile and adult prison systems.

The budget proposed for the agency in 1997-98 is $1.3 million, the same level of expenditures as estimated for the current year.

Internal Affairs Responsibilities Should Shift to Inspector General

We recommend the adoption of supplemental report language directing the Secretary of the Youth and Adult Correctional Agency (YACA) to submit a plan to the Legislature by December 1, 1997, to (1) reorganize and centralize internal affairs operations relating to California Department of Corrections personnel within the office of the YACA Inspector General, and (2) examine whether the operations should be further consolidated with similar functions in the Department of the Youth Authority.

In the Crosscutting Issues section of this chapter of the Analysis, we provide an analysis of the CDC's fragmented internal affairs operation and offer recommendations for improvement which we believe will reduce the state's current vulnerability to litigation and claims for damages in such cases. We propose, among other changes, that existing CDC internal affairs resources be consolidated under the YACA Inspector General. We further propose that the mission of the Inspector General be fundamentally changed from one of auditing and monitoring how internal affairs investigations are conducted to becoming the central, independent agency in charge of conducting such inquiries.

A detailed explanation of our proposal is provided in the Crosscutting Issues section of the Analysis. Consistent with that proposal, we recommend adoption of the following supplemental report language:

The Secretary of the Youth and Adult Correctional Agency (YACA) shall submit a plan to the Legislature by mber 1, 1997, to reorganize and centralize internal affairs operations relating to Department of Corrections personnel within the office of the YACA Inspector General. It is the intent of the Legislature that the Secretary examine whether California Department of Corrections internal affairs operations should be further consolidated with similar functions in the Department of the Youth Authority.

Department of Corrections


The California Department of Corrections (CDC) is responsible for the incarceration, training, education, and care of adult felons and nonfelon narcotics addicts. It also supervises and treats parolees released to the community.

The department now operates 32 institutions, including a central medical facility and a treatment center for narcotic addicts under civil commitment. The CDC system also includes 11 reception centers to process newly committed prisoners, 52 community correctional centers, 38 fire and conservation camps, the Richard A. McGee Correctional Training Center, alternative sentencing programs, 119 parole offices, and outpatient psychiatric services for parolees and their families.

The budget proposes total expenditures of $3.8 billion for the CDC in 1997-98. This is $208 million, or 5.7 percent, above the revised estimate for current year expenditures. The primary cause of this increase is the growth in the inmate population and the expansion of prison facilities and staff to accommodate that growth. The Governor's budget proposal for 1997-98 provides for the activation of the state's 33rd state prison (which includes a substance abuse treatment facility), four new community correctional facilities, the leasing of additional county jail beds for state inmates, and the completion of a program to build emergency overcrowding beds on the grounds of existing institutions ($56 million). The CDC budget has also been adjusted to reflect the full-year cost of staffing added during the current year ($138 million).

Proposed General Fund expenditures for the budget year total $3.7 billion, an increase of about $250 million, or 7.3 percent, over the revised estimate for current year General Fund expenditures.

The Governor's budget assumes that the state will receive about $299 million from the federal government during 1996-97 as partial reimbursement of the $518 million annual cost of incarcerating and supervising felons on parole who are illegally in the United States and have committed crimes in California. The funds are not included in the CDC's budget display, but instead are scheduled as "offsets" to total state General Fund expenditures.

Overview of the Inmate Population

Who Is In Prison?

Figures 15 through 18 illustrate the characteristics of the state's prison population, which was about 141,000 as of June 30, 1996. The charts show:

Inmate and Parole Population Management Issues

Inmate Population Growth Slows

The Department of Corrections (CDC) projects that the prison population will increase significantly over the next five years, reaching a total of 204,215 inmates by June 2002. Although the projected growth is significant and accommodating this level of population growth would pose a significant challenge for the CDC, the projections are substantially lower than recent long-term population forecasts.

As of June 30, 1996, the CDC housed 141,017 inmates in prisons, fire and conservation camps, and community correctional facilities. Based on the fall 1996 population forecast prepared by the CDC, the Governor's budget assumes that the inmate count will reach 150,970 by June 30, 1997, and increase further to 159,823 by June 30, 1998. These figures represent an annual population increase of 7 percent in the current year and 5.9 percent in the budget year. As can be seen in Figure 19, this continues an upward trend in the prison population that has persisted since the early 1980s.

The budget also assumes that the population will increase further over the following four years, reaching 204,215 inmates by June 30, 2002. This represents an average annual population increase of about 6.4 percent over the six-year period from 1995-96 through 2001-02.

Change from Prior Projection. The fall 1996 projection (the basis for the Governor's budget) has decreased significantly from the prior forecast released by the CDC for spring 1996 upon which the 1996 Budget Act was generally based. If the spring 1996 forecast proved correct, 4,200 more inmates would be in CDC custody as of June 30, 1997, than under the new fall 1996 forecast. Figure 20 (see page 64) compares the two most recent projections.

The differences between the spring 1996 and fall 1996 projections are magnified in the long run. Under the spring 1996 forecast, the inmate population would reach nearly 287,000 by June 2005. The fall 1996 projection is that the state prison system will have 238,000 inmates as of that same date. Although some changes in CDC forecasts are inevitable, the latest round of revisions are unusually large and have prompted the CDC to initiate consultation with outside statistical experts to reexamine its projections methodology.
Figure 20
Department of Corrections

Projected Prison Inmate Population

1995-96 Through 2001-02

Year a Spring 1996 Governor's


1995-96 143,170


141,017 2,153
1996-97 158,684 150,970 7,714
1997-98 172,694 159,823 12,871
1998-99 188,038 170,344 17,694
1999-00 203,593 181,734 21,859
2000-01 219,795 193,094 26,701
2001-02 236,514 204,215 32,299
aPopulation as of June 30 each year.
bActual data.

We discuss the specific reasons for the changes in CDC's inmate population projections later in this analysis.

Parole Population Growth. As of June 30, 1996, the CDC supervised 98,013 persons on parole. The Governor's budget assumes that the parole population will be 103,382 as of June 30, 1997, and will increase to 109,282 by June 30, 1998. These figures assume a parole population increase of 5.5 percent in the current year and 5.7 percent in the budget year.

The budget also assumes that the population will increase further over the following four years, reaching a total of 128,787 parolees by June 30, 2002. This represents an average annual population increase of about 4.7 percent.

Potential Risks to Accuracy of Projections. As we have indicated in past years, the accuracy of the department's projections depends on a number of significant factors. Among the factors that could cause population figures to vary from the projections are:

Significant change in any of these areas could easily result in a prison growth rate higher or lower than contained in the CDC's projections.

Inmate Count Running Below Projections. The actual CDC inmate count has already varied significantly from the CDC's fall 1996 projections. As of mid-January 1997, the CDC had overestimated the number of inmates who would be incarcerated by almost 2,000. Halfway through 1996-97, the CDC also had underestimated the number of parolees being supervised on parole by about 700. We discuss the fiscal ramifications of these population trends later in this analysis.

Long-Term Impact on CDC Budgets. The major increases in the prison population can be expected to result in significant increases in the CDC budget that, in the long run, are likely to outpace overall state revenue increases.

We have estimated how the CDC budget is likely to grow between now and the 2005-06 fiscal year if, as under the current practice, both prison and parole caseload were fully funded and no other significant policy changes were made in CDC programs. The result is that the CDC operations budget (excluding capital outlay and debt service costs) would grow to nearly $6.2 billion by 2005-06. Thus, the CDC budget would grow at an average annual rate of about 7.5 percent, compared with an annual 5 percent to 5.5 percent growth in revenues that would occur for the state General Fund under a moderate economic growth outlook during that same ten-year period.

Why Have the Inmate Population Projections Changed?

The principal reasons for the significant changes to the inmate population projections include changes in the estimates of the length of term served by some offenders and, more importantly, general slowing of new admissions to prison from court. The slowing in new admissions appears to be closely linked to the drop in crime in the state.

The fall 1996 forecast represents a significant departure from the prior forecast released by the CDC in the spring. According to the CDC, two main reasons explain the lower projections: a change in the assumptions regarding the prison terms received by "second-strikers, " and, more importantly, slower new admissions to prison from court.

Shorter Terms Than Anticipated for "Second-Strikers." First, some offenders sent to prison under the 1994 "Three Strikes and You're Out" law are receiving shorter prison terms than anticipated. The CDC had previously assumed that offenders who were sentenced under the Three Strikes law, and who had only one violent or serious crime on their record (often referred to as "second-strikers"), would have to serve an average sentence of eight years in state prison. Based on sentence data it has collected, the CDC now estimates that each second-striker will get a prison term of about six years because of the way judges are exercising their discretion in sentencing decisions.

New Admissions to Prison Moderating. Second, the courts are sending fewer newly convicted felons to state prison than had been predicted earlier. Although the number of parolees sent to state prison for parole violations has generally been in line with projections until recently, commitments to prison of persons with new felony offenses are running below expectations. The rate of growth has moderated significantly since the 1980s, when increases on the order of 15 percent annually occurred regularly. During the 1990s, the growth rate had usually been less than 5 percent. The CDC now projects that the moderation in the growth rate of new admissions will continue and result in significantly fewer inmates being in prison in 1996-97 than it had previously forecast for that period. Recent trends indicate that the number of parolees returned to prison by the courts is also lagging below CDC projections.

Changing Mix of Admissions. In addition to revisions in the total number of new admissions, the mix of offenders being sent to state prison has also been changing. For example, offenders whose primary commitment offense was a violent or serious crime dropped from 35 percent of new admissions in 1992 to 30 percent in 1995. Meanwhile inmates who committed a drug-related crime increased from 32 percent to 36 percent over the same period.

The changing mix of offenders also translates into a slower pace of growth for the prison population than would otherwise have occurred. This is because inmates committed for violent and serious crimes serve prison sentences that are almost twice as long, on average, as inmates committed for drug-related or nonserious property crimes. The prison system is getting a smaller share of inmates with long sentences and a larger share of inmates with short sentences. This adds up to a net reduction in the length of prison time that must be served by new admissions than would otherwise be the case.

Why Have Admissions to Prisons Dropped So Significantly? It is difficult to pinpoint with any precision the reasons for the drop in admissions to prison. However, a review of statistics charting the levels of criminal activity and activity in the criminal justice system suggests that it is the direct result of an overall decrease in adult felony crime and especially violent and serious crime.

Crime is Down. The overall number of crimes reported to the Department of Justice (DOJ) by the state's law enforcement agencies has been dropping. The number of reported crimes in the six major categories (homicide, rape, robbery, assault, burglary, and motor vehicle theft) has decreased from 1,073,613 in 1991 to 938,922 in 1996, a 13 percent drop over the last four years. Because the state's overall population has continued to climb while the number of reported crimes has fallen, crime "rates" have dropped significantly as well. The data reported by DOJ on California's falling crime rates is consistent with data collected by the FBI for California and the nation. It is also consistent with national surveys of the public conducted by the federal government to gauge the number of persons nationally who have become victims of crime, regardless of whether the crime was reported to authorities.

Less Crime Does Not Automatically Mean Fewer Prisoners. Because only a small fraction of crimes committed in California result in the arrest, prosecution, conviction, and sentencing of the offenders to state prison, it is possible that a downturn in the number of crimes committed would not result in a decline in the number of persons admitted to prison. For example, prosecutors might bring felony charges against the same number of robbers as before, but dismiss fewer cases of persons arrested for robbery.

Because of the uncertain relationship between crime and incarceration rates, we analyzed the level of activities at each procedural step in the criminal justice system. We found that the drop in crime was consistent with reductions at each step in the criminal justice system. Specifically, we identified a drop-off in the numbers of arrests, complaints sought against offenders, felony cases prosecuted, felony convictions, and sentences to prison.

Reasons for the Falloff in Crime. If the slower growth in new admissions to prison appears to be closely linked to a decline in crime, it is important to understand why crime itself has declined. The issue is of obvious importance: If the underlying causes of the trend can be determined, the state might be able to tailor strategies to continue the trend and thus have an impact on the prison population. Or, if the factors leading to less crime involved matters outside of state control, policymakers would at least be in a better position to know whether the trend would continue.

Although we know of no comprehensive or conclusive study that has been published by either criminal justice agencies or criminologists that has determined why crime has declined in California in recent years, our analysis suggests that the following factors have played a role in the drop in crime:

We believe the questions about the relationship between crime and incarceration, as well as the causes of the falloff in crime, are important issues for further review. We note that the trends in California are also evident in other states and may involve factors that are not unique to this state.

Projections to Be Updated by May

We withhold recommendation on the California Department of Correction's (CDC's) request for $56 million to fund additional inmate and parole population growth, pending review of the revised budget proposal and population projections to be included in the May Revision. We also note that the CDC has not yet complied with legislative direction to restructure its budget requests for parole caseload adjustments.

The budget requests an increase of $56 million and 427 personnel-years above the estimated current year funding level to accommodate the growth in the inmate and parole populations projected by the CDC.

Projections Will Be Updated. As we indicated earlier, recent trends indicate that the population projections released by the CDC last fall have overestimated the number of inmates who are being incarcerated. As of mid-January 1997 the total CDC inmate population count was running about 2,000 below projections.

Meanwhile, CDC's fall projections appear to have somewhat underestimated the number being supervised on parole. Halfway through the fiscal year, the parole count was about 700 above what had been projected, a direct result of a trend in which releases of inmates from prison exceeded expectations.

If these trends hold, they could result in a significant reduction in the amount requested to accommodate inmate population growth and a smaller, but still significant, increase to accommodate larger parole caseloads. Because the cost of incarcerating an inmate is much higher than the cost of parole supervision, the net effect of these caseload discrepancies is likely to be a significant reduction in the CDC funding requested in the current and budget years. We would expect the reduction to be in the tens of millions of dollars.

Department Must Restructure Parole Funding Requests. The Supplemental Report of the 1996-97 Budget Act directed the CDC to restructure the parole staffing ratios that are the basis of its requests for changes in expenditure authority so that they are consistent with the actual parole staffing practices of the department.

As we noted in last year's Analysis of the CDC budget, parole agents now typically supervise caseloads of 80 to 90 parolees. However, requests by the CDC for additional state funds to keep pace with an increasing number of parolees have not been based on these staffing ratios. Instead, the CDC has 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 supplemental report language specified that the CDC was to submit the revised parole staffing ratios to the Legislature by December 1, 1996, and that these new ratios were to be the basis of its 1997-98 funding request.

The purpose of the supplemental report language was to ensure that, as the Legislature considered future CDC budget increases, it could sort out what funding was being requested to accommodate changes in caseload and what funding was being requested to intensify the existing level of parole supervision.

When this analysis was prepared, the CDC had not yet complied with the supplemental report language. The new parole staffing ratios had not been submitted to the Legislature. Moreover, the Governor's budget applies the same 53.2 to 1 ratio of parolees to parole agents that it has been using in the past. We are advised by the CDC that it is in the process of addressing the supplemental report language requirements, but have received no indication when that effort will be completed. Thus, the funding requested in the Governor's budget for regular parole caseload increases is overstated.

Analyst's Recommendation. For these reasons, we withhold recommendation on the request for $56 million above the funding level provided in the 1996-97 Budget Act to support the inmate and parole population pending receipt and review in May of the CDC's revised estimates and pending the CDC's compliance with the supplemental report language on restructuring its requests for parole caseload adjustments.

Inmate Housing Plan Calls for New Prison, Leased Facilities, and More Overcrowding

We withhold recommendation on the California Department of Corrections's plan for housing the projected increase in the prison population because of continued uncertainties about the inmate population projection.

Inmate Housing Plan for 1997-98. The Governor's budget includes an inmate housing plan to accommodate the additional 8,853 inmates that the CDC expects to receive during 1997-98. The plan has the following major elements:

Leased Jail Beds Omitted from Housing Plan. The CDC plans to lease about 1,400 jail beds from Los Angeles County at the Peter Pitchess Detention Center to hold state parole violators who are awaiting hearings on the revocation of parole and return to state prison. The housing plan specifies that the CDC would occupy the first 900 beds at Pitchess during the current year. However, due to an apparent technical error, the housing plan does not include an additional 500 Pitchess beds that it proposes to activate during the budget year. The CDC is expected to revise its housing plan this spring to include the additional jail beds and to indicate, if necessary, how 500 other beds would be eliminated from its housing plan. That housing plan also is expected to take into account recent changes in the proposal timetable for occupying the Pitchess jail beds. The issue is discussed in more detail below.

Population Will Exceed Available Prison Space. The housing plan is based upon CDC projections that the prison system will run out of space to house additional inmates early in the year 2000 if new prison facilities are not made available by that date.

The CDC estimates that when all funded prisons are completed in the budget year, the system capacity will be about 146,000. This capacity total does not include an additional 30,000 beds available on a temporary basis in such locations gymnasiums and dayrooms. Thus, the maximum capacity of the prison system of about 176,000 would be exceeded by approximately January 2000 if the CDC projections prove correct. However, as we have noted earlier, the inmate population is not growing as quickly as the CDC had projected. The CDC intends to update its housing plan at the time of the May revision to take the more recent inmate population trend into account. It now appears that the CDC will exceed its capacity in the middle of the year 2000 instead of January.

Court Intervention Could Make Housing Plan Obsolete. If new prison beds are not built or the shortage of prison space relieved in some other fashion by the time the state runs out of beds in the year 2000, CDC officials and others have predicted that the federal courts may intervene to cap the prison population at an unknown level, much the same way they have imposed population caps on many of California's county jail systems. (If the federal courts were to intervene in this fashion, CDC's housing plan would immediately become obsolete.)

Analyst's Recommendation. Because the inmate population is running well below the fall 1996 projections of the CDC, it is likely that the housing plan will change significantly by the May Revision. Thus, we withhold recommendation on the plan at this time pending receipt of the CDC's revised prison inmate population projections and the updated housing plan provided in the May Revision.

Legal Clarification in Community Correctional Facility Plan Needed

We withhold recommendation on the request for $29.9 million to contract for 2,000 additional medium-security beds at community correctional facilities pending the resolution of legal problems that could delay activation of these beds. In the interim, we recommend that the California Department of Corrections (CDC) provide the Legislature with additional justification for the number of CDC personnel it proposes at new and existing community facilities. The Legislature should also carefully consider how the construction of such facilities should be financed in the future.

The Governor's budget includes $29.9 million from the General Fund to lease 2,000 community correctional facility beds from private vendors. The plan to contract for these beds, which will be established as four separate 500-bed facilities, had been approved by the Legislature as part of the 1996-97 Budget Act. However, repeated delays in the bidding and contracting process have delayed their activation until 1997-98.

The CDC housing plan assumes that the 2,000 beds for which contracts are pending would begin to be activated starting in October 1997. That is in conflict with the level of funding provided in the Governor's budget, which assumes that activation of the new beds would commence in August 1997. Thus, the budget request should be reduced to reflect the revised schedule.

Legal Issues May Result in More Schedule Delays. However, even the October timetable is now in doubt because of significant and unresolved legal questions raised by the state Department of Justice as to the legality of the CDC's proposed contracts with the private vendors who won the bids. The Attorney General has questioned a provision under which the state would pledge to make payments to fully cover the cost of the construction of the private facilities within the ten-year term of the contract. The Attorney General contends this may violate a state constitutional requirement (Article XVI, Section 1) that no major state debts be incurred absent a statewide public vote.

Although we are advised that the courts have recognized certain exceptions to this requirement, such as the issuance of lease-payment bonds, the Attorney General notes that such exceptions have been done to build state-owned facilities--not facilities that would remain in the possession of a private vendor. In consultation with the Attorney General and other state officials, the CDC is now examining whether it can renegotiate the terms of the contracts to avoid any conflict with state law. They are also attempting to determine whether state statutes could and should be changed, in keeping with the California Constitution, to permit the type of financing arrangements contemplated in the pending lease contracts.

If the CDC is not able to quickly resolve the legal questions holding up the pending contracts, it is likely that the CDC housing plan will need to be further revised and the funding requested in the Governor's budget further reduced to reflect a revised timetable for activating community correctional facility beds.

Privatization Effort Has Merit. We concur with the CDC's efforts to resolve these legal questions in order to carry out a privatization proposal that we believe has merit. Based upon our analysis of the pending contracts, the state would obtain medium-security community correctional facilities at a rate that is less expensive than existing community correctional facilities initially established for minimum-security inmates. Moreover, even after the additional costs of CDC medical and security staffing have been taken into account, the community correctional facilities would be less costly to the state than an equivalent number of beds in a state prison housing a similar inmate population.

Another provision in the community correctional facility proposal makes the transaction even more financially beneficial to the state. The pending contracts require that all inmates at the new community correctional facilities receive work or education programming. This provides inmates with an opportunity to earn credits to reduce the length of their prison stays, thereby eventually lowering state incarceration costs. Many inmates held at regular prison institutions are eligible for work and education programs but are idle because the CDC does not have enough assignments available for them.

Thus, we believe that even though the state has experienced slower than expected inmate population growth, the proposal to establish the 2,000 new beds should proceed if legally permissible.

The CDC Staffing of Community Facilities Is Excessive. About $25.6 million of the $29.9 million requested in the budget year for operating the community correctional facilities consists of direct payments to the private operators of the facilities. The remaining $4.3 million would cover the cost to the CDC to provide medical services for inmates housed at the private facilities and for CDC security staff to supervise community correctional facility operations. The CDC security staff would administer the inmate discipline system, control the awarding of work and education credits to inmates, and perform other duties.

We believe the funding proposed for medical services is reasonable but believe that the 42 positions proposed in the budget for security purposes are excessive considering that 302 private custody staff would also be assigned to the community correctional facilities. The budget proposal would result in an overall level of custody staffing (six inmates for each custody staff position) that is much more intense than for prisons with comparable inmates (about nine inmates for each custody staff position). We recommend that the CDC report at budget hearings regarding (1) the personnel assigned to such facilities, (2) their projected workload, and (3) the justification for the intense level of staffing at new and existing community correctional facilities.

Future Privatization at Stake. In our view, the resolution of the pending legal issues described above could be critical not only to the contracts for the 2,000 beds contained in the housing plan, but also to efforts under discussion in the Legislature to further privatize the prison system. We believe the Legislature should carefully consider how community correctional facilities are financed in the future.

The Legislature may wish to consider alternatives to the present approach by which the vendor provides the capital for construction of new beds and recovers the cost through regular contract payments from the state (a financing approach known as amortization). For example, the state could directly finance the construction of community correctional facility beds while contracting with private firms to operate the new facilities. This approach would provide the state with assurances that it would retain the community correctional facility beds it has added to the prison system. The state would be free to regularly rebid the contract for operation of a facility at regular intervals without any loss of its capacity to house state inmates--an advantage that could help hold down their operating cost over time.

However, this approach also has its disadvantages: The state, rather than a private vendor, would have to directly appropriate the funding to construct additional facilities. Moreover, a private vendor would have less incentive to properly maintain a prison facility if it was essentially a state tenant rather than the owner of the facility.

Analyst's Recommendation. We withhold recommendation on the proposed $29.9 million in funding to activate the community correctional facilities. We will monitor CDC's efforts to resolve the legal issues surrounding the new facilities and anticipate that the department will revise its housing plan in the May Revision to take into account any delays caused by legal problems. We also believe the Legislature should carefully consider how privatized prisons should be financed in the future.

Uncertainties Regarding Leased County Jail Bed Proposal

We withhold recommendation on $30.1 million requested to place 1,400 state prison inmates in jail beds leased from Los Angeles County, pending further review of the request and receipt of revised prison inmate population projections.

The Governor's budget includes $30.1 million to lease 1,400 beds at the Peter Pitchess Detention Center in Los Angeles County to house parole violators who are awaiting parole revocation hearings. As discussed earlier in this analysis, the CDC plans to begin using the county jail for this purpose commencing March 1, 1997, to house 900 inmates there by the end of the current year. Although more jail beds are not included yet in the CDC housing plan, the budget provides funding for an additional 500 jail beds that would be used for state inmates during the budget year. (The pending contract with Los Angeles County provides a somewhat different timetable.)

Jail Lease Must Meet Budget Act Requirements. We would also note that any jail lease agreement must by law meet the test set forth in the 1996-97 Budget Act. The budget act mandates that such a contract "shall not reimburse counties more than the average amount it costs the state to provide the same services in comparable state institutions" exclusive of one-time and capital outlay costs.

Fiscal Analysis of Pitchess Proposal. We have reviewed the Pitchess jail lease proposal and have concluded at the time this analysis was completed that it raises several significant fiscal and policy issues that should be considered by the Legislature.

The CDC has not provided the Legislature with fiscal analysis of the proposed lease. Based on our fiscal analysis of the terms of the proposed contract with Los Angeles County, it appears that it would be more expensive to the state to house 1,400 parole violators at Pitchess than under the present arrangements . The state now holds these parole violators at the California Institution for Men (CIM) at Chino and in various Los Angeles County jails under an ongoing local assistance program.

We estimate that the state will incur $10.6 million in additional housing costs per year for the same number of parole violators, as described below.

The CDC is proposing to shift to Pitchess about 900 parole violators now housed in the reception center at CIM where we currently incur costs of about $31 per day. (The low cost to house inmates at CIM is due to the high level of overcrowding at the facility.) The CDC also proposes to shift to the Pitchess jail parole violators now housed in various Los Angeles County jails under the local assistance beds program at a state cost of $51.40 per day. The Pitchess proposal--including both direct lease payments to Los Angeles County ($51.62 per bed) and ancillary CDC staffing and operational expenditures ($7.38 per bed)--would result in a total state cost of $59 per day.

The proposed lease agreement for Pitchess does provide one significant fiscal benefit to the state that would partly offset these housing costs. The state could save as much as $2 million annually by requiring the county to pay any medical costs of the 1,400 parole violators placed in county custody. Thus, accounting for these savings, we estimate that the state would experience a net cost of $8.6 million annually in the short term.

This benefit to the state would be greater except for another provision in the proposed contract which authorizes the county to deny admission to Pitchess of any parole violator requiring inpatient medical care. Thus, the county would only be liable to pay the medical costs of parole violators who become sick after they are sent to Pitchess. Because the vast majority of parole violators will spend only a few weeks at Pitchess before they are either sent to prison or released, the provision of the contract allowing Los Angeles County to screen out sick inmates will reduce the potential medical savings the state would otherwise enjoy.

Long-Term Impact of Leasing Proposal. We have also examined the long-term fiscal consequences of the Pitchess plan. If the state does not contract for the Pitchess beds, it will run out of space for parole violators more quickly. The Pitchess contract would probably allow the state to avoid building 1,400 more beds in the future and thus save about $5 million a year in debt-service costs. Even considering added debt-service costs, it would still be at least $3.6 million less expensive per year to not contract for the Pitchess beds and instead build 1,400 more reception center beds.

Need for Beds in Budget Year Not Clear. It is not clear that the CDC needs to acquire any jail beds during the budget year. The CDC's revised housing plan for the current year indicates that, as it adds beds at the Pitchess jail, it intends to simultaneously reduce state prison overcrowding by deactivating 1,372 beds at existing CDC institutions.

The CDC currently estimates that the state has sufficient prison space overall to last until January 2000. Moreover, the current inmate count is running about 2,000 inmates below the latest CDC projections, meaning that the date when the state runs out of beds will probably be even later.

Potential Benefits of Proposal. Leasing of the Pitchess beds could produce several important offsetting benefits. The proposal would relieve the overcrowding pressure on the CIM reception center, making the prison safer for both inmates and staff. It also would produce the savings in local assistance medical costs and future facility construction costs as described above. Finally, adoption of the proposal would help provide Los Angeles County with the resources to help support the downtown Twin Towers jail complex which opened in early February 1997.

Analyst's Recommendation. For these reasons, we withhold recommendation on the proposed $30.1 million for the lease of the Pitchess beds until the Legislature has reviewed the significant fiscal and policy issues raised by the proposal and until the CDC releases its revised projections of the inmate population in the spring.

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