State Correctional Spending Increased Despite Significant Population Reductions

State Correctional Spending Increased Despite Significant Population Reductions Summary Over the past decade, the state has taken various actions that have significantly reduced the number of inmates and parolees under the supervision of the California Department of Corrections and Rehabilitation (CDCR). Most notably, legislation was enacted in 2011 that shifted (or realigned) the responsibility for certain offenders from the state to counties. This was done to help the state comply with a federal court order to reduce prison overcrowding, as well as reduce state costs. Voters have also approved a series of ballot measures that have impacted the inmate population, such as reducing penalties for certain offenders convicted of nonserious and nonviolent property and drug crimes. Since the implementation of the these and other policy changes, the state’s inmate population declined by nearly one-quarter and the parolee population declined by nearly one-half. However, over the same period, CDCR spending increased by over $3 billion, or more than one-third. Major Reasons for Spending Growth Despite Population Decline. In this brief, we describe the major reasons why CDCR’s costs did not decline in line with the substantial decrease in the populations. Specifically, while CDCR did experience some reduced costs associated with the decline in the populations, they were more than offset by increased costs primarily associated with three factors: • Compliance With Court Orders. Despite the decline in the inmate population, the state had to maintain existing prison capacity, as well as take steps to actually expand capacity, in order to meet the federal court’s overcrowding limit. The state also made substantial improvements to inmate medical and mental health care to comply with court orders, particularly in terms of increased staffing. • Increased Employee Compensation Costs. Increases in pension costs and raises given to employees caused employee compensation costs to grow substantially. • Spending on Costs Deferred During Fiscal Crisis. The state is now paying for costs that were deferred during the fiscal crisis, such as furloughing of correctional officers. Population Decline Allowed State to Avoid Significantly Higher Costs. We note that had the inmate population not declined over this period, CDCR spending would have increased by significantly more than it actually did. This is because the state would have had to finance the construction of several new prisons or contract for tens of thousands of prison beds. Accordingly, despite the growth in spending on CDCR, the state is likely spending billions of dollars less than it otherwise would be had it not taken actions to reduce the inmate and parolee populations. GABRIEL PETEK LEGISLATIVE ANALYST FEBRUARY 2020 analysis full gutter AN LAO REPORT VARIOUS ACTIONS HAVE policy changes that significantly reduced the inmate population in recent years. Some of the major REDUCED STATE CORRECTIONAL changes include: POPULATIONS • 2011 Realignment. The Legislature adopted Federal Courts Required State to Improve a package of legislation that limited who could Inmate Health Care and Limit Prison be sent to state prison. Specifically, it required Overcrowding. In December 1995, after finding that certain lower-level offenders serve their the state failed to provide constitutional mental incarceration terms in county jail. Additionally, health care to inmates, a federal court in the case the legislation required that counties, rather now referred to as Coleman v. Newsom appointed than the state, supervise certain lower-level a Special Master to monitor and report on CDCR’s offenders released from state prison. progress towards providing an adequate level • Proposition 36 (2012). Voter-approved of mental health care. In February 2006, after ballot measure that changed the state’s finding the state failed to provide a constitutional “Three Strikes” law by generally eliminating level of medical care to inmates, a federal court life sentences for offenders with two or more in the case now referred to as Plata v. Newsom prior serious or violent felony convictions appointed a Receiver to take control over the direct whose most recent offenses are nonserious, management of the state’s prison medical care nonviolent felonies. The measure also allowed delivery system from CDCR. offenders who were serving these sentences In November 2006, plaintiffs in Coleman v. at the time to apply for reduced sentences. Newsom and Plata v. Newsom filed motions for • Proposition 47 (2014). This measure reduced the federal courts to convene a three-judge panel penalties for certain offenders convicted of pursuant to the U.S. Prison Litigation Reform Act nonserious and nonviolent property and drug to determine whether (1) prison overcrowding was crimes from felonies to misdemeanors— the primary cause of CDCR’s inability to provide resulting in some offenders serving terms constitutionally adequate inmate health care and in county jail rather than state prison. The (2) a prisoner release order was the only way to measure also allowed certain offenders who remedy these conditions. In August 2009, the had been previously convicted of such crimes three-judge panel declared that overcrowding to apply for reduced sentences. was the primary reason that CDCR was unable to • Proposition 57 (2016). This measure reduced provide adequate health care. Specifically, the court the amount of time inmates serve in prison ruled that in order for CDCR to provide such care, primarily by expanding inmate eligibility for overcrowding would have to be reduced to no more release consideration and increasing CDCR’s than 137.5 percent of the design capacity of the authority to reduce inmates’ sentences due prison system. (Design capacity generally refers to to good behavior and/or the completion of the number of beds that CDCR would operate if it rehabilitation programs. housed only one inmate per prison cell.) The court ruling applies to the number of inmates in prisons Inmate and Parolee Populations Have operated by CDCR and does not preclude the state Declined Significantly. As shown in Figure 1, from holding additional inmates elsewhere, such the state’s inmate and parolee populations have as conservation camps—which are generally jointly declined significantly over the past several years, operated by CDCR and the California Department primarily as a result of the above policy changes. of Forestry and Fire Protection—and other publicly Specifically, between June 30, 2011 and June 30, or privately operated facilities. 2019, the inmate population declined from about State Implemented Several Policy Changes to 162,400 to 125,500 (23 percent) and the parolee Reduce Prison Overcrowding. In order to reduce population declined from about 90,800 to 50,800 prison overcrowding, the state implemented various (44 percent). 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT DESPITE POPULATION REDUCTION, operational changes to comply with various federal court orders, (2) increased employee compensation CDCR SPENDING INCREASED costs, and (3) the payment of costs that were Although the state’s inmate and parolee deferred during the fiscal crisis. Below, we discuss populations have declined significantly in each of these factors in further detail and how recent years, the level of spending on CDCR some of the increased costs are the result of more has increased. As shown in Figure 2 (see than one factor. page 4), expenditures increased by $3.6 billion Various Court Orders Have Driven (37 percent)—from about $9.7 billion in 2010-11 to an estimated $13.3 billion in 2019-20. Costly Operational Changes While many factors have contributed to the Despite Population Decline, State Was increase in CDCR spending over the past decade, Not Able to Reduce Prison Capacity Given we have identified three main factors: (1) costly Overcrowding Limit. As discussed above, the Figure 1 Inmate and Parolee Populations Declined Significantly Over Past Several Years As of June 30 Each Year 180,000 Inmates 160,000 Parolees 140,000 120,000 100,000 80,000 60,000 40,000 20,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 www.lao.ca.gov 3 analysis full gutter AN LAO REPORT federal court ruled that prison overcrowding had capacity and the number of available inmate beds to be reduced to no more than 137.5 percent of in order to meet the court’s overcrowding limit. the design capacity of the state’s prison system. Otherwise, the state would have still exceeded the As such, although the number of individuals in limit. Specifically, the state: state prison significantly declined, the state had • Leased and Staffed California City to maintain its existing number of facilities—but Correctional Facility. Chapter 310 of 2013 house fewer inmates in them—to help meet the (SB 105, Steinberg) gave CDCR the authority court order. Accordingly, the state did not realize a to lease the California City Correctional substantial reduction in staffing or costs because Facility from a private entity and operate the a large amount of prison operational costs are facility with state staff (similar to state-owned generally only eliminated when an entire prison or prisons). The facility houses about 2,400 male section of a prison is closed. We also note that the inmates who are not counted toward the state continued to house inmates in out-of-state prison overcrowding limit. The state annually contract prisons in order to maintain compliance spends about $30 million to lease the facility with the overcrowding limit. and $100 million to operate it. State Also Activated New Capacity to • Constructed and Staffed Three New Comply With Overcrowding Limit. In addition Facilities at Existing Prisons. Chapter 42 of to maintaining existing prison capacity, the state 2012 (SB 1022, Committee on Budget and also had to take steps to actually expand prison Figure 2 CDCR Expenditures Have Generally Increased Over Past Several Years (In Billions) $14 12 10 8 6 4 2 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 (Estimated) CDCR = California Department of Corrections and Rehabilitation. 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT Fiscal Review) authorized $810 million in spending on inmate health care increased by about lease revenue bond authority for CDCR to $1.4 billion (66 percent)—from about $2.2 billion in construct three inmate housing facilities at 2010-11 to an estimated $3.6 billion in 2019-20. existing prisons. These facilities, which were Much of this increase is due to increased staffing. activated in 2016, allow CDCR to house For example, the number of health care positions 3,267 additional inmates. The state annually per inmate has nearly doubled—from 0.06 in spends over $70 million to operate these 2010-11 to 0.11 in 2018-19 (the most recent facilities and $58 million in debt service to complete data available). We note, however, that repay the bonds. As of June 2019, the state the number of non-health care staff declined over had about $755 million in remaining debt to the same time period. As shown in Figure 3, this pay for the construction of these facilities. resulted in overall staffing at CDCR being similar to • Constructed New Health Care Facility. The its pre-realignment level, but with a greater share state constructed and activated in 2013 the being health care staff. California Health Care Facility (CHCF) in One of the most significant expansions of inmate Stockton, which allowed CDCR to house health care during this period was the activation 4,057 additional inmates. CHCF provides of CHCF. To operate CHCF, the 2019-20 budget medical and mental health treatment to includes a total of about 4,000 positions, including inmates who have the most severe and about 2,600 health care and 900 custody positions. long-term needs. The state spends $58 million The state spends roughly $480 million annually in debt service annually for the facility. As we to operate CHCF. Another significant expansion discuss in more detail below, the state also in inmate health care costs resulted from shifting incurs significant costs to operate CHCF. responsibility for operating inpatient psychiatric • Created Reentry Facilities. In 2014, CDCR programs in prisons from the Department of State began contracting with residential facilities Hospitals to CDCR. This change, adopted as part in the community, which now house and provide Figure 3 rehabilitative programming Growth in Health Care Staffing (such as educational Has Offset Staffing Declines in Other Areas services, substance use disorder treatment, job training, and computer skills Non-Inmate Health Care Positions workshops) to male inmates 70,000 within 12 months and female Inmate Health Care Positions inmates within 30 months of 60,000 completing their sentence. The 2019-20 budget includes 50,000 about $48 million to house about 1,100 inmates in such 40,000 facilities. 30,000 Improvements to Inmate Health Care Have Been Costly. In 20,000 order to comply with court orders in the Plata and Coleman cases, 10,000 the state substantially expanded inmate medical and mental health 2010-11 2018-19 care services over the past several years. As a result, CDCR www.lao.ca.gov 5 analysis full gutter AN LAO REPORT of the 2017-18 budget package, was intended to established in labor agreements that also increased improve care primarily by streamlining the process employee contribution rates to fund retirement of transferring inmates into the program. The benefits.) shift resulted in a roughly 1,400 position increase Spending on Costs Deferred in CDCR health care staffing and a $260 million increase in CDCR spending between 2016-17 and During Fiscal Crisis 2017-18. Between 2008-09 and 2012-13, California faced annual budget shortfalls exceeding several Cost Per CDCR Employee Has billion dollars. The state took various actions Increased to close these shortfalls, including reducing Although the total number of positions in expenditures and shifting costs to the future. (For CDCR is currently similar to its level prior to more information on this topic, see our report The the 2011 realignment, the cost per position Great Recession and California’s Recovery.) This has increased—contributing to over $3 billion made CDCR’s budget artificially low in these years in increased CDCR spending. Whereas each and resulted in greater spending in future years. position cost CDCR an average of $110,000 in One significant example of this type of action was 2010-11, each position cost CDCR an average the furloughing of correctional officers. Between of $158,000 in 2018-19, a 43 percent increase— 2008-09 and 2012-13, many state workers— nearly triple the rate of inflation. including CDCR correctional officers—were given Increased Pension Benefit Costs. One of the increased leave time in exchange for reduced primary elements of employee compensation that pay, known as “furloughs.” While this temporarily has increased CDCR costs over the past decade reduced CDCRs budget, it significantly increased is rising pension contribution rates. For example, correctional officer leave balances. This increased the state’s contributions to pensions for CDCR’s future costs in two ways. First, as these employees correctional staff have grown from 29 percent of subsequently take vacation with leave time earned pay in 2010-11 to 49 percent of pay in 2019-20. through furloughs, the state must pay other staff— Pension contribution rates are established by the often through overtime—to cover their positions. California Public Employees’ Retirement System Second, the state must pay off any remaining board. The board has increased contribution rates leave when these employees separate from state to pay for unfunded pension liabilities that grew service. Accordingly, some amount of CDCR’s during the fiscal crisis through a combination of employee compensation spending since furloughs (1) lower-than-assumed market returns and (2) new ended in 2012-13 is tied to these payments. (For actuarial assumptions (specifically, the pension more information on this topic, see our report After system now assumes that future returns will be Furloughs: State Workers’ Leave Balances.) lower and that retirees will live longer than was previously assumed). POPULATION DECLINE Increased Employee Salaries. Growth in ALLOWED STATE TO AVOID salaries has also been a major contributor to CDCR SIGNIFICANTLY HIGHER COSTS employee compensation costs. Since 2012-13, the state’s labor agreements with the various As mentioned above, the state complied with bargaining units that represent CDCR employees the federal court’s overcrowding limit by both have generally provided annual pay increases. reducing the inmate population and expanding For example, correctional staff—which make up prison capacity. However, if the inmate population half of CDCR employees—received pay increases did not decrease and the state complied exclusively ranging from 3 percent to 5 percent in all but one by expanding prison capacity, CDCR spending of the past seven fiscal years. (We note that many would be significantly higher than it is today. This of the pay increases during this time period were is because the state would have had to finance the 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT construction of several new prisons or contract for of inmates. In total, these additional costs could tens of thousands of prison beds. To the extent the have been in the billions of dollars annually. state chose to construct additional prison capacity, Accordingly, despite the growth in spending on it would have incurred increased operational costs state corrections, the state is likely spending to staff and operate the new facilities. Similarly, the significantly less than it otherwise would be had it state would have faced higher costs to increase not taken actions to reduce the inmate and parolee the quality of health care for a greater number populations. www.lao.ca.gov 7 analysis full gutter AN LAO REPORT LAO PUBLICATIONS This report was prepared by Caitlin O’Neil, and reviewed by Drew Soderborg and Anthony Simbol. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 8 LEGISLATIVE ANALYST’S OFFICE