January, 18, 2004 - The Associated Press

[California] Prisons Overspent by $1.4 Billion

The Corrections Department perennially runs the largest deficit among state agencies.

By Bob Porterfield, Associated Press

SACRAMENTO - Gov. Arnold Schwarzenegger's initial efforts to tame California's out-of-control spending are unlikely to impose fiscal control on the state's prisons, which have overspent their budgets by $1.4 billion in the past five years, according to an Associated Press analysis.

The new governor did include $400 million in unspecified cuts for the Corrections Department in his first budget proposal, along with an almost $900 million cut in Medi-Cal and steep fee increases for higher education.

But Schwarzenegger also quietly diverted $453 million from the general fund to cover overtime pay for prison guards and other budget overruns, continuing a practice that has made Corrections one of the state's most profligate departments.

Schwarzenegger has provided no details on where the $400 million in cuts to prisons might be made, and Greg Jolivette, who evaluates the criminal-justice budget for the Legislative Analyst's Office, said it is "highly questionable" that the prison system will achieve those savings.

"I think people should be outraged," said Lark Galloway-Gilliam, who directs the nonprofit Community Health Councils in Los Angeles.

Corrections has overspent its budget each of the past five years, perennially underestimating the costs of housing California's prisoners, which totaled 161,000 at last count.

And each year, using a process that largely escapes public scrutiny, prison officials have returned to the Department of Finance pleading for ever-increasing amounts to cover costs already incurred.

Overall, the state agreed to pay nearly 90 percent of the $1.58 billion in extra bills the prison system ran up since 1999, the AP analysis showed.

In the past, top prison officials have largely blamed the overspending on poor personnel management practices, such as losing control of guards' overtime and sick leave. Now, this is the new administration's problem.

When confronted this month with data showing the extent of the prison system's overspending, Schwarzenegger's new corrections chief, Roderick Hickman, said "We're establishing a process where management is held accountable for its spending."

Hickman's task is considerable: Last year, the prisons ran up their largest deficit yet on their way to spending a total of $5.3 billion, 10 percent over the $4.8 billion they had been promised for 2002-2003.

Most of the extra money has gone to compensate prison staffers, according to an examination of Form 580s, documents submitted to the Department of Finance during the past five years and obtained by the AP under the California Public Records Act.

The costs, detailed in 20 separate requests for more money, included:

Unanticipated labor-related expenses of $272 million, including $136 million for "unexpected overtime," underbudgeted leave costs and additional compensation required under the contract and nearly $86 million for increased workmen's compensation.

About $169 million in additional expenses resulting from unanticipated inmate population increases.

Nearly $63 million in increased health-care services to inmates prompted by a series of court decisions.

Corrections' largest-ever "deficit spending" request, for $544.8 million it overspent in 2002-2003 fiscal year - was made just two weeks before former Gov. Gray Davis left office. That bill mostly covered increased compensation for prison staff that Davis had agreed to in the latest contract with the politically powerful prison guards' union.

Schwarzenegger's finance officials ultimately approved $453.6 million of that request, and accounted for it in the current 2003-2004 budget year. That raised actual spending on corrections this year to $5.72 billion - about 9 percent more than what was budgeted - with five months still to go.

And that's what makes finding $400 million to cut from the $5.6 billion 2004-2005 prisons budget so unrealistic, analysts say.

"I feel a little like Alice in Wonderland. It gets weirder and weirder by the moment," said state Sen. Gloria Romero, D-Los Angeles. She heads the Senate Select Committee on the California Correctional System, which will be deeply involved in prison budget reform.

Corrections actually is second to Medi-Cal when it comes to deficit spending - but that program is a federal entitlement that requires the state to pay its share of spiraling health care costs.

Prison spending is, by contrast, completely subject to state control.

In either case, such deficit spending requests would be impossible if voters approve the balanced-budget amendment on the March ballot. Proposition 58 would require spending to match revenues and prohibit carrying deficits over from one year to another.

Money for the cost overruns is ultimately appropriated by the Legislature, usually during the annual May budget revise. But the point of the revise is to respond to unforeseeable changes in revenues, not budget overruns that could have been anticipated.

The documents show the prisons' biggest budget-buster is the spiraling costs associated with a generous labor contract Davis signed with the California Correctional Peace Officers Association, which donated more than $3.4 million to the governor's campaigns since 1998.

A top-scale prison guard can now earn more than $100,000 annually under the contract. That's "if he wants to spend most of his life in prison," says Lance Corcoran, head of the union, who conceded that overtime pay can double the average salary of $55,000-plus for a seven-year veteran guard.

The five-year agreement, which expires in July 2006, will provide for an overall 37 percent pay increase for the guards and eventually add about $518 million to the cost of running California's prisons, according to the state auditor. The Davis administration challenged the auditor's estimates as "speculative."

California's practice of aggressively returning parolees to prison for offenses as minor as driving without a license contributes heavily to the yearly deficits. In 2002, more than 102,000 parole violators were returned, costing the state $1.3 billion. At any given time, more than half the adults in state prison are parole violators.

Corrections spending increased 31 percent from 1999 to 2003, an expansion that was accomplished mostly through the deficit appropriation process, which tends to be little understood outside Sacramento. Including the $453.6 million added to the current budget year, the Department of Finance has approved $1,408,139,000 in additional funding.

Not only is the department a perennial budget-buster, it's also the state's biggest deadbeat.

Last year the department paid nearly $3 million in penalties for overdue bills, more than half of the $4.9 million in such penalties paid by state government.

According to statistics compiled by the Department of General Services for the 2002-2003 fiscal year, Corrections paid $2,982,805 in penalties for making late payments on 11,589 invoices.

California's second biggest deadbeat, the Department of Transportation, paid $688,578 last year.

For Corrections, these overdue bill penalties have gotten bigger each year, totaling more than $4 million over the past five years.

Hickman says he'll reduce costs and eliminate deficit spending throughout prisons.

But some legislators are furious over his planned first move - saving about $7 million by abolishing the inspector general's office, which investigates allegations of corruption within the prison system.

That move will be scrutinized this week when two state Senate panels - Romero's Corrections committee and the government oversight committee led by state Sen. Jackie Speier, D-Hillsborough, look into allegations that misconduct probes were stymied by top department officials.