BILL ANALYSIS                                                                                                                    




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                           552 (Solorio)
          
          Hearing Date:  04/26/2010           Amended: 04/06/2010
          Consultant:  Jacqueline Wong-HernandezPolicy Vote: Public Safety  
          5-0
          _________________________________________________________________ 
          ____
          BILL SUMMARY:  This bill makes technical and substantive changes  
          to the requirements of the Department of Corrections (CDCR)  
          construction projects authorized by AB 900 (Solorio, 2007).  
          Specifically, this bill: 
             1)   Expressly includes the development of medical and mental  
               health beds and treatment space, as specified, in the and  
               expressly states that these beds will be supported with  
               rehabilitative programming;
             2)   Authorizes the renovation of existing buildings for  
               approved beds and reentry program facilities;
             3)   Expressly includes ancillary improvements to provide  
               dental, medical and mental health treatment, in specified  
               construction authority; 
             4)   Changes Phase II conditional language requiring that at  
               least 4,000 beds from Phase I be "under construction" to  
               instead require that at least 4,000 beds be "established by  
               the by State Public Works Board."
          _________________________________________________________________ 
          ____
                            Fiscal Impact (in thousands)

           Major Provisions         2010-11      2011-12       2012-13     Fund
           Phase II conditional               ***No cost; possibly  
          significant savings***          Bond*
          language change                                        General

          Receiver costs averted     ***Substantial savings. See Staff  
          Comments***   General
          
          Renovation authorization  ***Potentially significant cost  
          avoidance***             Bond*

          *Lease-revenue bonds for prison construction are ultimately  
          repaid by the General Fund.     
          _________________________________________________________________ 
          ____










          STAFF COMMENTS: 

          This bill alters existing statutes that authorize CDCR prison  
          construction project, enacted in 2007 by AB 900 (Solorio). The  
          most substantive effect of these changes is to allow greater  
          flexibility in the use of bonds authorized by the statute.  
          While, often, changes that allow previously authorized bonds to  
          be issued for a wider variety of projects and/or expedite their  
          issuance are considered by this committee to create additional  
          bond pressure (to expend the full amount of approved bond  
          funding), the changes proposed in this bill will likely result  
          in substantial cost savings because of external factors  
          governing prison construction decisions.
          
          AB 900 authorized multiple project types, with bond funding  
          amount distinguished for each general project category, and  
          construction phase.  "Infill" funding for construction of new  
          beds in state prisons was enacted to help reduce overcrowding,  
          and specified that the new beds created are intended to replace  
          temporary beds, and not to house additional inmates.  Existing  
          law generally authorizes $6.2 billion in lease-revenue bond 
          Page 2
          AB 552 (Solorio)

          financing for the construction of 40,000 new state prison beds,  
          phased-in over time and contingent upon a series of construction  
          and rehabilitation program implementation benchmarks.  
          (Government Code 15819.40 et seq.) 

          CDCR prison health care is currently in federal receivership. In  
          2005, the United States District Court for the Northern District  
          of California established a Receivership to take control of the  
          delivery of medical services to all CDCR inmates. In its order,  
          the Court set forth comprehensive duties for the Receiver,  
          including leadership and executive management of the California  
          prison medical health care delivery system.. The Court expressly  
          ordered the Receiver to "exercise all powers vested by law in  
          the Secretary of the CDCR as they relate to the administration,  
          control, management, operation, and financing of the California  
          Medical health care system."  The Court suspended the  
          Secretary's exercise of these powers for the duration of the  
          Receivership. Moreover, the Court's order expressly provides  
          that, "(a)ll costs incurred in the implementation of the  
          policies, plans, and decisions of the Receiver relating to the  
          fulfillment of his duties under this Order shall be borne by  
          (the state). (The state) shall also bear all costs of  










          establishing and maintaining the Office of Receiver, including  
          the compensation of the Receiver and his staff."

          This bill would expressly allow medical and mental health beds  
          to be constructed with infill money, in order to give the  
          Receiver access to authorized bond funding to build medical and  
          mental health beds to satisfy the Court. CDCR and the Receiver  
          have established a plan to construct sufficient beds, with the  
          specified bond funding, to fulfill the court order without using  
          any current General Fund. In an April 5, 2010 letter to the  
          Committee, the Receiver indicated that the negotiated plan "will  
          fully satisfy the need for medical/mental health/dental  
          construction within the original AB 900 allocation and  
          subsequent funding will not be necessary."

          In the absence of this bill, CDCR has existing statutory  
          authority to build general population (Level 4) beds from these  
          bonds, in order to ease general overcrowding, and intends to do  
          so. The Receiver, simultaneously, has the authority to demand  
          funding for this project to be paid from the General Fund, if  
          other funding is not made available by the state. If CDCR and  
          the Receiver are not given authority to implement their  
          compromise, the state will likely be required to spend  
          additional money on medical and mental health construction from  
          the General Fund. Furthermore, to the extent that the Court's  
          requirements are fulfilled more quickly, prison health care  
          authority can be returned to CDCR, and current costs to operate  
          the Office of the Receiver will be eliminated.

          In addition to the bond flexibility previously discussed, this  
          bill specifically authorizes bond expenditure for the renovation  
          of properties, rather than only new construction, to build  
          additional approved beds. Renovating existing facilities is  
          typically less expensive than new construction, and CDCR  
          believes intends to utilize renovation projects as a cost  
          savings measure. CDCR has existing facilities, primarily its  
          vacant juvenile facilities, and plans to convert them to adult  
          facilities because it would be less expensive to use land and  
          basic infrastructure already owned by the state to convert to  
          new beds 

          Page 3
          AB 552 (Solorio)

          for adult inmates than to build new facilities. On its own, the  
          authority granted in this bill would likely produce savings over  










          new construction. In real world implementation, CDCR already has  
          construction plans that assume this authority. In the absence of  
          that authority, CDCR would have to (at least partially) start  
          over and establish new plans that fall within the original AB  
          900 authority, which would result in additional costs.

          This bill also changes a condition for the release of specified  
          Phase II funding. Current law specifies that Phase II funding  
          for CDCR construction may not be released by the Public Works  
          Board until a three-member panel verifies that specifically  
          enumerated conditions have been met.  (Penal Code 7021.) One of  
          those conditions is that "at least 4,000 beds authorized in  
          subdivision (a) of Section 15819.40 of the Government Code  
          (Phase I) are under construction."  (Penal Code 7021(a)(1) This  
          bill would revise this language to instead require that at least  
          4,000 beds "have been established by the by State Public Works  
          Board."

          If the Public Works Board has established the project, a loan  
          will be issued from the Pooled Money Investment Account (PMIA),  
          and CDCR will be functionally committed to that project. (If  
          CDCR were to stop the project, it would be responsible for  
          repaying the PMIA loan from its operations budget). Allowing  
          Phase II funding to be released at that point, instead of  
          waiting for construction to end, would begin Phase II projects  
          more quickly. CDCR estimates that those projects could be  
          completed 12-18 months earlier than if the funding was not  
          available until after Phase I construction has begun.