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.