BILL ANALYSIS
SENATE COMMITTEE ON Public Safety
Senator John Vasconcellos, Chair S
1999-2000 Regular Session B
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SB 1978 (Hayden) 8
As Introduced February 25, 2000
Hearing date: April 25, 2000
Public Contracts Code and Uncodified Law
SH:mc
DEPARTMENT OF CORRECTIONS/DEPARTMENT OF YOUTH AUTHORITY:
CONTRACTS FOR INMATE/WARD TELEPHONE SERVICES
HISTORY
Source: Author
Prior Legislation: SB 1149 (1991) - relevant provisions
deleted before Governor's veto
AB 3434 (1990) - failed passage, Assembly Ways
and Means Comm.
Support: Unknown
Opposition:California Correctional Peace Officers
Association
KEY ISSUE
SHOULD THE LAW PROVIDE THAT ANY CONTRACT TO PROVIDE
TELEPHONE SERVICES TO WARDS OF THE DEPARTMENT OF THE YOUTH
AUTHORITY OR TO INMATES IN STATE PRISONS SHALL BE
NEGOTIATED AND AWARDED IN A MANNER TO PROVIDE FOR THE
LOWEST POSSIBLE COSTS TO WARDS AND INMATES, AND TO PAY FOR
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ANY EXPENSES OF THE DEPARTMENT OF CORRECTIONS AND THE
DEPARTMENT OF THE YOUTH AUTHORITY, AND TO PROVIDE THAT
PROFITS TO THESE DEPARTMENTS OR THE STATE SHALL NOT BE A
BASIS FOR AWARDING A CONTRACT?
SHOULD LEGISLATIVE FINDINGS AND DECLARATIONS BE ENACTED
PERTAINING TO SUCH CONTRACTS, AS SPECIFIED?
CONTINUE
PURPOSE
The purpose of this bill is to enact legislative findings
and declarations pertaining to prison inmate and youth
authority access to telephone services and to require any
state contracts for such access to be negotiated and
awarded in a manner to provide for the lowest cost, as
specified.
Existing law provides that the Department of General
Services may acquire, install, equip, maintain, and operate
new or existing communications systems and facilities. To
accomplish that purpose, it may, in the name of the state,
enter into contracts, obtain
licenses, acquire property, install necessary equipment and
facilities, and do such other acts as will provide adequate
and efficient communications systems. Any system
established shall be available to all public agencies in
the state on such terms as may be agreed upon by the agency
and the department. (Government Code section 14931)
Existing law states that the director of the Department of
Corrections is vested with the supervision, management and
control of the state prisons and is responsible for the
care, custody, treatment, training, discipline, and
employment of a person confined in those prisons. The
director may prescribe rules and regulations for the
administration of the prisons. (Penal Code Sections 5054
and 5058)
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Existing law creates the Department of the Youth Authority
under the direction of the Director of the Youth Authority.
(Welfare and Institutions Code sections 1700 et seq.)
Existing law provides that except as otherwise provided by
law, all money belonging to the state received from any
source whatever by any state agency shall be accounted for
to the Controller at the close of each month, or more
frequently if required by the Controller or the Department
of Finance, in such form as he prescribes, and on the order
of the Controller be paid into the treasury and credited to
the General Fund, provided that amounts received as partial
or full reimbursement for services furnished shall be
credited to the applicable appropriation. (Government Code
section 16301)
This bill would enact legislative findings and declarations
and the following provision in law:
Any contract to provide telephone services to wards of
the Department of the Youth Authority or to inmates in
state prisons shall be negotiated and awarded in a
manner to provide for the lowest possible costs to
wards and inmates, and to pay for any expenses of the
Department of Corrections and the Department of the
Youth Authority, and profits to these departments or
the state shall not be a basis for awarding a
contract.
COMMENTS
1. Need for this Bill
Background provided by the author includes the following:
The problem SB 1978 attempts to address is this: A
person making a 15-minute collect phone call from a
phone booth outside San Quentin state prison to
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Oakland across the San Francisco Bay would cost about
$2.55. An inmate making the same call from inside the
prison would pay about $5 (Deborah Soloman, SF
Chronicle, Aug. 17, 1999). The cost charged to the
inmate goes well beyond what is necessary to provide a
profit for the service provider and for security
measures associated with the phone call. So why are
inmates, or more accurately the inmates' families or
loved ones who are billed for the collect call, paying
such a steep price?
...Why are these calls so expensive? Unlike pay
phones for public use where the caller can choose what
long-distance provider to use and has access to
various rate-reducing options, calls from state prison
are handled exclusively by companies contracting with
the state. In California, those companies are MCI and
GTE.
Currently, the long-distance rate for collect calls
from prison is about 50 cents per minute with a $3
surcharge. Local calls can range from 15 to 30 cents
per minute with a $2.65 surcharge. Rates are the same
regardless of the day and time the call is placed.
The rates are inflated, in large part, because of a
commission the state collects by the phone service
providers MCI and GTE. For each dollar MCI collects
from prison calls, it pays the state 44 cents. GTE
pays 33 cents. (Deborah Soloman, SF Chronicle, Aug.
17, 1999).
There are more than 160,000 inmates in California's
prison system with institutions from the Mexican to
Oregon borders. For many prisoners so far removed
from their families, the phone is often their only
direct means of personal communication. With the
state racking in commissions up to 43 percent for each
call, it doesn't take a CPA to figure out this is a
real moneymaker.
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According to the Family Council (Family Members and
Friends of State Prisoners), the state made $16
million last year from prison calls. The money went
into the General Fund. Prison calls are expected to
generate even more this year.
The current contracts with MCI and GTE have expired.
Extensions have been granted. The RFP for the new
contracts recognizes the state's obligation to assure
fair rates for the consumers. "The State wishes to
strike a balance between the Contractor's right to
charge market rates and the State's public policy
responsibility to ensure that its constituents,
consumers and inmate families and friends are not
subject to price abuse?" it states.
Yet, the RFP offers no hope of relief from the price
abuse currently suffered inmates' families and loved
ones. The RFP clearly states that the major objective
that must be met by the new service provider is "to
maximize the economic return to the State and
participating agencies from this pay telephone
concession arrangement."
Studies have repeatedly shown that inmates who remain
in contact with their families and loved ones are less
likely to reoffend. The state of California has an
interest in encouraging communication between its
prisoners and their families as a matter of public
safety. SB 1978 is an attempt to remove an economic
barrier to this communication.
2. Legislative Findings in This Bill
The following legislative findings are included in this
bill:
(a) The California prison system is comprised of 33
institutions that are often located in remote
locations, making it difficult for family and friends
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to visit inmates.
(b) Studies, advocates, and incarceration experts have
concluded that inmates who remain in contact with
family and loved ones are less likely to pose a threat
to prison staff or to reoffend once released.
(c) Collect phone calls are often the only means by
which the more than 160,000 inmates confined in the
California prison system can directly communicate with
family, friends, and loved ones.
(d) The State of California contracts with vendors
through a prescribed bidding process to provide
telephone service to prisons while maximizing its
economic return through telephone concessions
agreements.
(e) Billing rates for collect telephone calls from
prisons include a 33 to 43 percent commission beyond
the provider's costs, which in 1998 generated $16
million for the General Fund of the state.
(f) The excessive rates resulting from the state
commission for collect telephone calls made from
prisons makes it difficult, if not impossible, for
inmates to remain in regular contact with family
members and loved ones.
(g) Therefore, it is the intent of the Legislature to
assure that affordable telephone services are
available for inmates within the custody of the
Department of Corrections and wards of the California
Youth Authority, and their families and loved ones.
3. Brief History of the Inmate Phone Contracts
The history of revenues from inmate phone call contracts in
California began over a decade ago. At the same time that
the state began to collect revenues from such phone
services, counties began to do much the same in jails.
The following paragraph appears in the Senate Judiciary
Committee analysis of SB 1149 (Presley), as amended April
24, for an April 30, 1991, hearing:
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In current practice, telephone companies enjoying a
concession to provide services to the inmates of the
Department of Corrections return a commission as a
percentage of revenue to the Department of Corrections
for the receipts they receive as a consequence of
monopolistic service to over 100,000 individuals.
These commissions have traditionally been deposited in
the Inmate Welfare Fund for the provision of
educational and recreational services to prisoners
whose families are the source of the revenue, though
in budget deliberations last year a portion of the
proceeds were diverted to the General Fund.
Subsequent budgetary decisions resulted in all of the
revenues from the state inmate phone contract being
deposited in the state General Fund. It also appears that
the Department of General Services was urged to maximize
those revenues. For example, the Department of Corrections
responded in a 97/98 Supplemental Report to the Legislature
on Inmate Pay Telephone Access that increasing the number
of phones would not result in greater revenue. The
Legislative Analyst's Office was the source of the
recommendation that the Department of Corrections respond
to that issue. The Department of General Services has
traditionally dealt with the inmate/ward phone contract as
similar to any other concession contract where the state
attempts to maximize its receipts from vendors who provide
services on state property.
Last year, the LAO informed committee staff that the
Department of General Services indicated that actual
payphone revenues from CDC were $18.1 million in 1997-98.
Projections for 1998-99 and 1999-00 were $19.6 million each
year. An additional increment - but much smaller amount -
is received each from the Youth Authority ward phones and
the same contract also includes public phones at other
state facilities, such as state parks.
The Department of General Services administers the
inmate/ward telephone through the Public Access
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Telecommunications System (PATS). The contract which
includes the inmate/ward system also includes pay phones at
other state locations, although at other locations callers
may choose not to make collect calls and they may dial
other phone service providers.
The correctional phone system which has evolved involves a
private company installing and maintaining pay phone
equipment - to specifications which include such items as
tamper-resistant housings - which may be used for inmate
and ward collect calls; each call is preceded by a notice
to the recipient that the call is originating in a
correctional or Youth Authority institution and there is an
ongoing "overlay" recording repeated during the call that
the call is being recorded; all calls are recorded and they
may be reviewed by state employees who also may monitor
calls as they are made. For example, calls may be
triangulated so that if one phone number in a given
location is receiving multiple calls from numerous state
facilities, law enforcement may target those calls.
The current Department of General Services Request for
Proposal - RFP MSA-8003 - for the inmate phone system
originally included the following objectives:
1.to ensure the provision of high quality service;
2.to maximize the economic return to the state and
participating agencies from this pay telephone
concesson arrangement;
3.to make the benefits of new, but proven, technology
from the public communications industry available to
its pay telephone users, clients, and consumers; and
4.to provide secure and reliable inmate/ward telephone
services throughout the state correctional
facilities.
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Addendum #16 dated December 21, 1999, revised the
objectives by deleting "2.", above, and revising "1." as
follows:
1.to ensure the provision of high quality service at
competitive prices.
NOTE: This short history does not mention the complicated
and sometimes confusing issues of telephone tariffs; the
role of the PUC and the FCC; deregulation in the delivery
of telephone services; surcharges and usage rates; and
Local, Intralata, Interlata, and Interstate and Intrastate
rate structures. Nor did it discuss in detail that concern
sheriff's and counties may express if the state inmate/ward
system is restructured since local entities do benefit from
a state contract which maximizes revenues since pursuant to
Public Contract Code section 12110 those local entities may
participate in the state's Master Contract (without instead
negotiating their own deal.)
4. Recent Developments Relating to the RFP
Over the past year, several legislators have written to and
met with representatives of the Administration, including
the Department of General Services and the Department of
Corrections.
For example, the Chair of this committee wrote to the
director of the Department of General Services on March 21,
1999, and asked for background information about the
then-new Request for Proposals for the inmate/ward
telephone system.
On August 23, 1999, the Chair of this committee and others
wrote again to the director of the Department of General
Services in a letter that included the following:
We strongly encourage you to step into this issue and
direct DGS to alter its bid criteria so the winning
bidder will be determined not by the level of
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commission it provides to the state, but rather on who
provides the lowest overall prices for a collect call.
Obviously, it would be inappropriate for the prison
phone rates to be so low that they fail to cover the
state's expenses associated with the program, but
equally obvious is that it is inappropriate for the
rates to be so high that the state reaps a windfall.
Subsequently, the DGS did revise the objectives of the RFP
as discussed in Comment 3, above. Further discussions
indicated the likelihood that the new RFP might lower
collect call phone rates somewhat, but that the assumption
was that collect calls would still be utilized and that the
commissions on such calls would perforce be far higher than
would be the case using a system primarily based on
something other than solely a collect call option.
On February 2, 2000, a letter was sent to the secretary of
the Youth and Adult Correctional Agency that included the
following:
After studying the issue for some time, we believe the
best way to reduce the cost of these calls would be to
allow inmates to make pre-paid station-to-station
calls. Under this concept, inmates would pre-pay for
their calls either by using calling cards or by
charging calls to an inmate phone account or to their
inmate trust account from which they also draw funds
to make purchases at the canteen.
In addition to that alternative to the existing "collect
call only system," it would be possible for the state to
capitalize the security costs (monitoring
equipment/monitoring) and go to a debit system (get rid of
the surcharge). While a collect call option would likely
still be needed for some inmates in any system adopted, a
debit-card system with pre-approved numbers to call would
appear to address some of the concerns expressed about
ensuring that debit cards or numbers do not themselves
become valuable prison commodities.
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Another alternative which has been suggested is to modify
the current RFP to eliminate the commission as an element
in the state contract for telephone service for California
Department of Corrections (CDC) prisoners and California
Youth Authority (CYA) wards. (The DGS has indicated that
doing that without changing from a collect call-only system
would not likely result in a "lower price per call" new
contract assuming phone companies concerned about contracts
with other states and within California would not be
willing to make collect calls for inmates cost as little as
direct dial calls in general.)
Regardless, the Administration is currently considering a
response to the latest legislative inquiries and the RFP
process has not been closed.
5. National Discussion on the Issue
The discussion about the costs of inmate phone services has
not been limited to California. In the January 23, 2000,
Sunday, Final Edition of the Washington Post , reporter Paul
Duggan wrote a lengthy article that includes the following:
In the fiercely competitive long-distance business,
telephone companies bombard the public with aggressive
ads for calling plans, inviting customers to chat with
faraway friends and relatives for pennies a minute.
But despite the variety of low-cost options, one
segment of the calling market remains shackled with
high rates: prison inmates.
In a little-known but increasingly controversial
practice, state corrections agencies and private
prison companies have been garnering tens of millions
of dollars annually in recent years in what critics
call "monopolistic" deals with MCI, AT&T, Sprint and
numerous smaller phone service providers. The revenue
comes at the expense of those who want to stay in
touch by phone with imprisoned friends or family
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members, and can do so only by accepting collect calls
from them.
Specifics of the deals vary. But generally, in return
for giving a service provider an exclusive contract to
handle outgoing pay-phone calls from a prison, a state
corrections agency or private prison company gets a
lucrative share of the revenue from the calls,
sometimes 60 percent. The contract typically goes to
the bidder who is willing to give back the biggest
percentage or "commission." Phone companies agree to
such terms because they can pass the cost to their
captive customers: prisoners whose collect calls are
billed at rates often far exceeding what the free
market would bear.
Phone companies say commission-based contracts were a
moneymaking innovation conceived by prison
administrators a decade ago, when inmate populations
were growing rapidly. States say most of the phone
revenue is spent on programs for inmates that
otherwise would have to be scrapped or funded by
taxpayers. And private prison companies say contract
prices for housing inmates would be higher without the
revenue.
In Florida, where the state prison system collected
$13.8 million in commissions in fiscal 1997-98, a
legislative committee found that big prison systems in
10 other states took in more than $115 million in the
same budget year. New York topped the list with $20.5
million. In Virginia, MCI gave the state $10.4
million, or 39 percent of the revenue from prison
calls. Maryland receives a 20 percent commission on
local calls by inmates, which must be made through
Bell Atlantic, and gets 42 percent of revenue from
long-distance calls, all of which are handled by AT&T.
Maryland officials said they could not immediately
provide information on the amount of money the state
receives annually.
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6. Technical Issue Regarding This Bill
This bill would allow for the state telephone contract "to
pay for any expenses of the Department of Corrections and
the Department of the Youth Authority, and profits to these
departments or the state shall not be a basis for awarding
a contract." However, this bill does not refer to any
costs to the Department of General Services to administer
the contract. The Department of General Services has
indicated that it does incur costs for administering the
contract.
SHOULD THIS BILL BE AMENDED TO ALSO ALLOW THE STATE
CONTRACT TO INCLUDE "REASONABLE COSTS INCURRED BY THE
DEPARTMENT OF GENERAL SERVICES FOR ADMINISTERING THE
CONTRACT"?
NOTE: Addendum #16 RFP MSA-8003, December 15, 2000, page
V-15, does state that "Two percent (2%) of concession fees
from the total program revenues will be deducted each month
and forwarded to DGS by check or electronic deposit as an
administrative fee to cover the DGS Telecommuniciations
Division program management responsibilities and services
provided to non-State agencies under the program." That
percent may be adjusted, not to exceed 5%. It is unclear
to committee staff whether that fee is used for an outside
contract consultant or solely for reimbursement for DGS
direct costs. However, staff is informed that this
"administrative fee" amounts to close to $1 million per
year and, under a similar provision in the current
contract, has been paid to an out-of-state consultant. One
half of that $1 million has come from the inmate/ward's
concessions. Whether or not that amount is "reasonable" or
not is not discernable by committee staff.
7. Telephone Access - Is It a Right or a Privilege?
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Corrections representatives generally refer publicly to
access to phones at any level of the custodial ladder as a
privilege, not a right.
In a recent United States 9th Circuit decision, Garrison S.
Johnson v. State of California, Gomez and Rowland, USCA 9th
Circuit, filed March 21, 2000, 2000, Daily Journal D.A.R.
3033, the court was faced with several issues, including
telephone access, and indicated the following, albeit in
dicta:
Johnson's primary allegations are ... (2) that warden
Rowland was engaged in
a conspiracy to extort money from inmates through
charges for telephone calls.
The same allegations are made against the current
Director, James Gomez, for the
period covering 1991 to the present ... Johnson
alleges that respondents conspired with telephone
companies to overcharge inmates in exchange for
"kickbacks." He claims that a comparison of phone
bills reveals that "phone calls plaintiff made to
[friends and family members] cost them . . . more than
a non-incarcerated person who made a call from the
same area where plaintiff is incarcerated."
... Although prisoners have a First Amendment right to
telephone access , this right is subject to reasonable
limitations arising from the legitimate penological
and administrative interests of the prison system.
See Strandberg v. City of Helena, 791 F.2d 744, 747
(9th Cir. 1986). There is no authority for the
proposition that prisoners are entitled to a specific
rate for their telephone calls and the complaint
alleges no facts from which one could conclude that
the rate charged is so exorbitant as to deprive
prisoners of phone access altogether. ...The district
court properly dismissed this aspect of the complaint
with prejudice. (Emphasis in dicta added.)
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8. Opposition to This Bill
The California Correctional Peace Officers Association
writes in opposition to this bill that the existing state
funds derived from the inmate phone system should be
maintained but that those funds:
...should be earmarked for use directly within the
Department of Corrections and the Department of the
Youth Authority for the inmate welfare fund, victim
services and additional correctional officer training.
Just such a proposal was passed by the Legislature,
but was vetoed by former Governor Pete Wilson in 1991.
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