BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
467 (Dutton)
Hearing Date: 04/27/2009 Amended: As introduced
Consultant: Jacqueline Wong-HernandezPolicy Vote: G.O. 12-0
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BILL SUMMARY: SB 467 authorizes state agencies and departments
to award contracts of $25,000 or less for goods or services by
California certified small businesses, microbusinesses, or
Disabled Veteran Business Enterprises (BVBEs) without seeking an
exemption of the Prison Industry Authority (PIA) mandate.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Potential loss of $23,800*
$23,800 $23,800 General
revenue due to loss
of contracts
*In 2008, there were approximately $99,000,000 total in PIA
contracts with state agencies and departments under $25,000. The
California Performance Report found that a competitive bid
process would result in a 24% reduction in PIA sales.
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
The cost of this bill depends primarily on the number of
contracts under $25,000 that state agencies and departments
enter into with the specified private businesses, instead of the
PIA. Therefore, it is difficult to determine the precise loss of
revenue, and it will likely vary annually. 48% of the PIA's
revenue is from contracts under $25,000. In 2008, these
contracts totaled $101 million. 98% of those sales contracts
were with state agencies and departments. By jeopardizing all
contracts under $25,000, the loss of revenue could total up to
$99 million annually.
The PIA is a self-sufficient program that provides vocational
training to CDCR inmates, and raises its own revenue to fund its
operations. Under current law, state agencies and departments
must contract with the PIA for goods and services it can
provide, regardless of price, unless the PIA gives the agency an
exemption. According to various Bureau of State Audits reports,
this often results in state agencies paying more for goods and
services than would be charged in a competitive bid, even while
patronizing California establishments and small businesses. The
California Performance Report estimates that a competitive bid
process would result in a 24% reduction to PIA sales. Based on
this estimate, it is likely that PIA revenues would be reduced
by up to $23.8 million.
There are likely mitigating savings, but not enough to fully
off-set the revenues lost. By allowing state agencies to give
contracts to specified private businesses, there will likely be
some General Fund and Special Funds savings by those agencies,
because their
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SB 467 (Dutton)
purchases will cost less. There is, however, a direct General
Fund cost to CDCR for every savings. Because PIA generates its
own budget through sales, a decrease of sales will result in
decreased programming for inmates. Even a 24% decline in sales
would result in a 720 person decrease in inmate participation.
It would cost CDCR $3,500,000 GF to provide alternate vocational
training to those inmates. If CDCR did not provide alternate
vocational training, those inmates would lose their "good time"
credits, which directly reduce their sentences for participation
in vocational and educational training. The increased sentences
also result in GF costs to CDCR. Housing 720 inmates for one
year longer than otherwise would occur with current levels of
PIA participation, will cost more than $20,000,000 GF.