The 2024-25 Budget: California Department of Corrections and Rehabilitation

2024-25 BUDGET The 2024-25 Budget: California Department of Corrections and Rehabilitation GABRIEL PETEK | LEGISLATIVE ANALYST | FEBRUARY 2024 SUMMARY In this brief, we provide an overview of the total amount of funding in the Governor’s proposed 2024-25 budget for the California Department of Corrections and Rehabilitation (CDCR), as well as assess and make recommendations on several specific budget proposals. Below, we provide a summary of some of our major recommendations. Prison Capacity Reduction. The Governor proposes reductions to CDCR’s funding to account for previous capacity reductions and for the planned deactivation of a prison in March 2025. In addition, the budget reflects operation of nearly 15,000 empty beds in 2024-25, which is projected to grow to about 19,000 by 2028. This means the state could deactivate around five additional prisons. However, the administration indicates that doing so could create challenges, such as reducing the availability of treatment and reentry programs. We find that, while mitigating such challenges could create some new costs, these would be far less than the nearly $1 billion needed to continue operating five prisons. Accordingly, we recommend that the Legislature direct CDCR to begin planning to reduce capacity by deactivating prisons and report on how to mitigate any resulting challenges. COVID-19 Health Care Costs. The Governor proposes $38 million ongoing General Fund for CDCR COVID-19 health care costs. We find that the department’s proposed methodology to estimate its funding need is flawed because it does not factor in recent trends in COVID-19 prevalence or projected declines in the prison population. Additionally, CDCR has not explored options to reduce costs by leveraging employee health insurance. Accordingly, we recommend the Legislature withhold action on the budget-year request and direct CDCR to update the proposal to address our concerns. We also recommend that the Legislature reject the funding proposed for the future years. Prison Medical Care Budget Shortfall. The Governor proposes a $40 million one-time General Fund augmentation in 2024-25 to cover projected overspending in the prison medical care budget. We find that, in recent budget years, CDCR has been able to address its overspending without an augmentation by using savings elsewhere in its budget. However, the proposal does not make it clear why the department cannot continue to do so. In addition, the department did not provide adequate justification on how it projected the shortfall. Accordingly, we recommend the Legislature reject the Governor’s proposal. Contract Medical Services. The Governor proposes various changes to the budgeting methodology used in the biannual adjustment process that would result in a net increase of $24 million for contract medical services in 2024-25. We find that some of the proposed changes appear reasonable and would better align the department’s budget with its actual needs. However, we find that other changes are lacking because they would not account for changes in the size or makeup of the prison population. Accordingly, we recommend the Legislature withhold action on the proposal and direct CDCR to submit a revised proposal at the May Revision that addresses our concerns. www.lao.ca.gov 1 2024-25 BUDGET OVERVIEW Roles and Responsibilities. CDCR is declining prison population and deactivation of responsible for the incarceration of certain adults facilities, various proposed General Fund budget convicted of felonies, including the provision solutions, and expiration of previously authorized of rehabilitation programs, vocational training, one-time spending. These reductions are partially education, and health care services. As of offset by various proposed augmentations, such January 17, 2024, CDCR was responsible for as funding for increased costs associated with incarcerating about 93,900 people. Most of these providing medical care to people in prison and people are housed in the state’s 32 prisons and paying for workers’ compensation claims. (The 34 conservation camps. The department also proposed $493 million decrease does not reflect supervises and treats about 35,300 adults on anticipated increases in employee compensation parole and is responsible for the apprehension of costs in 2024-25 because they are accounted those who commit parole violations. In addition, for elsewhere in the budget.) The proposed the department operates the Pine Grove Youth budget would provide CDCR with a total of about Conservation Camp to provide wildland firefighting 61,200 positions in 2024-25, a decrease of about skills to justice-involved youth from counties that 1,000 (2 percent) from the revised 2023-24 level. have entered into contracts with CDCR. Capital Outlay Spending Proposed for Operational Spending Proposed for 2024-25. The Governor’s budget proposes total 2024-25. The Governor’s January budget proposes expenditures of $83.3 million ($959,000 General a total of about $14.5 billion to operate CDCR in Fund) for capital outlay projects in 2024-25. 2024-25, mostly from the General Fund. Figure 1 This amount includes (1) $82.4 million in previously shows the total operating expenditures estimated authorized General Fund lease revenue bonds in the Governor’s budget for the prior and current for various counties to construct or renovate years and proposed for the budget year. As the correctional facilities and (2) $959,000 in additional figure indicates, the proposed spending level General Fund proposed for the preliminary plans reflects a decrease of $493 million (3 percent) from phase of a project to construct a potable water the revised 2023-24 level. This decrease primarily treatment system at the California Health Care reflects proposed reductions associated with the Facility in Stockton. Figure 1 Total Expenditures for Operation of CDCR (Dollars in Millions) Change From 2023-24 2022-23 2023-24 2024-25 Actual Estimated Proposeda Amount Percent Adult Institutions $12,597 $13,243 $12,923 -$321 -2.0% Adult Parole 695 703 701 -2 — Administration 842 956 789 -167 -18.0 Juvenile Institutionsb 212 — — — — Board of Parole Hearings 70 79 76 -3 -4.0 Totals $14,415 $14,982 $14,488 -$493 -3.3% a Does not reflect anticipated increases in employee compensation costs because they are accounted for elsewhere in the budget. b Legislation approved as a part of the 2020-21 budget package realigned responsibility for youths previously housed in state institutions to the counties. CDCR = California Department of Corrections and Rehabilitation. 2 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET STATE PRISON AND PAROLE POPULATION AND OTHER BIANNUAL ADJUSTMENTS Background Governor’s Proposal Adjustments Proposed Biannually Based Net Increase in Current-Year Adjustments. on Projected Population Changes and Other The Governor’s budget for 2024-25 proposes, Factors. As part of the Governor’s January budget largely from the General Fund, a net increase proposal each year, the administration requests of $20.4 million in current-year adjustments. adjustments to CDCR’s budget based on projected The current-year net increase in costs is primarily changes in the prison and parole populations in due to both a higher total prison population the current and budget years. The adjustments and increased pharmaceutical costs relative to are made both on the overall populations and what was assumed in the 2023-24 Budget Act. various subpopulations (such as people housed This increase in costs is partially offset by various in reentry facilities and sex offenders on parole). factors, including projected decreases in costs In addition, some adjustments include factors related to a lower-than-expected parole population other than population trends, such as inflation and population receiving substance use disorder adjustments. The administration then modifies both treatment in prison. types of adjustments based on updated information Net Increase in Budget-Year Adjustments. each spring as part of the May Revision. The budget also proposes a net increase of Prison and Parole Population Projected to $8.4 million in adjustments in the budget year. Decrease in 2024-25. As shown in Figure 2, The budget-year net increase is primarily the average daily prison population is projected due to increases in (1) pharmaceutical costs; to be 91,700 in 2024-25, a decrease of about (2) reimbursements to local governments for costs 2,500 people (3 percent) from the estimated they incurred in connection with state prisons, current-year level. The average daily parole population is projected to be 35,500 in 2024-25, Figure 2 a decrease of 1,000 people State Prison and Parole Populations (3 percent) from the estimated Projected to Decrease current-year level. The projected decrease in the prison population 140,000 is primarily due to the estimated impact of various sentencing Prison 120,000 Parole changes enacted in recent years. The projected decrease in the 100,000 parole population is primarily due 80,000 to recent policy changes that have reduced the length of time 60,000 people spend on parole by allowing them to be discharged earlier 40,000 than otherwise. 20,000 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 (Estimated) (Proposed) www.lao.ca.gov 3 2024-25 BUDGET such as by providing coroner services; and (3) the until the May Revision. We will continue to number of voice calling minutes used by people monitor CDCR’s populations and the other in prison. This increase in costs is partially offset factors affecting the proposed adjustments and by various factors, including projected decreases make recommendations based on the updated in costs related to declines in the prison and information available at the May Revision, including parole populations. the administration’s revised population projections. However, we have specific recommendations Recommendation on adjustments related to voice calling, utilities, Withhold Recommendation Until May contract medical services, and parole support Revision. We withhold recommendation on the staffing, which we discuss elsewhere in this brief. administration’s overall biannual adjustments PRISON CAPACITY REDUCTION Background while people housed in lower-security yards generally live in open dormitories. In some State Currently Operating 32 Prisons. cases, people with the same security level As of January 17, 2024, CDCR was must still be housed separately due to safety responsible for incarcerating a total of about concerns. For example, this can be the case 93,900 people—89,100 men, 4,200 women, and for members of opposing gangs who may try 600 nonbinary people. Most of these people— to harm each other. about 90,800—are housed in 1 of 32 prisons owned and operated by the state. This includes 30 men’s • Health Care Treatment. Health care prisons and 2 women’s prisons. (People who are needs can affect which prisons people are transgender, nonbinary, or intersex are generally housed in. For example, people with higher required to be housed in a men’s or women’s facility medical needs are typically placed at prisons based on their preference.) The remaining people designated as Intermediate Health Care are housed in various specialized facilities outside institutions. This generally means that they of prisons, such as conservation camps and are closer to community hospitals to facilitate community reentry facilities. access to specialty care. In addition, people receiving mental health care services are not Many Factors Affect Prison Housing housed at certain prisons located in desert Placements. Prisons are typically composed regions of the state as they are more likely of multiple facilities (often referred to as “yards”) to be taking heat-sensitive medications. where people live in housing units, recreate, and Health care needs can also affect the access certain services (such as dental care). specific yard within a prison that people are CDCR typically clusters people with similar needs placed in. For example, people receiving (such the amount of security they require) in the the highest level of outpatient mental health same yard. Accordingly, prisons differ in their ability care—referred to as the Enhanced Outpatient to meet specific needs based on the types of yards Program—are generally housed together they are composed of. Some of the key needs that in dedicated yards. These yards generally CDCR staff consider in identifying an appropriate include housing units with medication housing placement for each person include: distribution rooms that allow nurses to prepare • Security. CDCR categorizes most of its and distribute medications inside the housing men’s yards into a range of security levels. unit to improve medication compliance. In (Women’s yards are not classified into contrast, other people are typically expected different security levels as they generally to go to a centralized medication dispensary have similar levels of security.) People to receive their medications. housed in higher-security yards live in cells, 4 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET • Other Needs. Various other factors can affect such as completion of a high school where people are housed. For example, nine equivalency program, people can receive up prisons have restrictions to mitigate the impact to 180 days of credit. of Valley Fever—an infection caused by a • Treatment and Reentry Programs. CDCR fungus in the soil that enters people’s lungs provides cognitive behavioral treatment when inhaled. Accordingly, people who have programs intended to help people change certain medical conditions that put them at negative patterns of behavior, such as anger higher risk of getting very sick or dying from management or substance use disorder Valley Fever are not housed at these prisons. programs. In addition, CDCR offers courses In addition, certain prisons do not have the focused on workforce readiness and financial necessary physical features to accommodate literacy that are intended to help people people in wheelchairs. prepare for reentry into their communities. People also receive credits for completing People in Prison Are Typically Assigned these treatment and reentry programs. to Work, Education, and/or Treatment and Reentry Programs. When people arrive in prison, Assignments are reevaluated on a regular they receive various assessments. These include basis and can change throughout people’s time assessments for substance use disorder, literacy, in prison. For example, someone may begin their risk of recidivism (meaning their likelihood of prison sentence with an assignment to adult reoffending after release), and criminal risk factors basic education so that they can improve their that contribute to their potential for recidivism (such literacy skills to help make future education or as having challenges with anger management or treatment programs more accessible to them. a need for employment skills). Results of these After completing adult basic education classes, assessments and other considerations—such as they may choose to work in the prison laundry in people’s interests and time before release—help order to earn money. Finally, as they approach their CDCR staff match people to assignments, which fall release date they may be assigned to a cognitive into three general categories: behavioral treatment program to address their • Work. Some jobs assigned to people in identified need for anger management skills. prison—such as cleaning, maintaining, and CDCR Planning to Convert Majority of repairing facilities; providing clerical support; Full-Time Work Assignments to Half Time. and grounds keeping—are focused on CDCR is in the process of promulgating regulations supporting prison operations. Other jobs— to convert about three-quarters of full-time such as manufacturing traffic signs and work assignments to half-time assignments. license plates—provide goods or services The department indicates that this will create purchased by state agencies. Jobs typically more flexibility in scheduling and allow people to pay between $0.08 and $1.00 per hour participate in both work and education or treatment depending on various factors, such as the and reentry programs at the same time. In addition, amount of skill required. because this change will mean that many people • Education. CDCR provides academic who currently have jobs in prison will spend less education classes ranging from adult basic hours working, the regulations would increase education to college as well as technical wages for most jobs so that their total pay is not education in a variety of career fields. Upon reduced. These changes are expected to go into completion of a class, people receive credits effect in April 2024. that reduce the amount of time they must Prisons Subject to Court-Ordered Population serve in prison. For example, people can Limit. State-owned and operated prisons are earn one week of credit for completing a high subject to a federal court order related to prison school algebra course. In addition, upon overcrowding that limits the total number of people completion of certain educational milestones, they can house to 137.5 percent of their collective design capacity. Design capacity generally refers www.lao.ca.gov 5 2024-25 BUDGET to the number of beds CDCR would operate if it the state to avoid funding infrastructure repairs that housed only one person per cell and did not use would otherwise have been needed to continue bunk beds in dormitories. Currently, this means operating these facilities. For example, with the that the state is prohibited from housing more deactivation of DVI in Tracy, the state was able than a total of 103,853 people in state-owned to avoid a water-treatment project—estimated in prisons. It also means that when prisons or yards 2018 to cost $32 million—that would have been are activated or deactivated, this population limit necessary to comply with drinking water standards. is increased or decreased by 137.5 percent of the The administration currently plans to deactivate design capacity of the affected prison or yard. Chuckawalla Valley State Prison (CVSP) in Blythe Prison Population Decline Allowing for by March 2025. Capacity Reductions. As shown in Figure 3, Administration Has Cited Concerns With the prison population has declined significantly in Further Capacity Reductions. Despite the above recent years and is expected to remain low through capacity reductions, CDCR projections have June 2028. In 2021, CDCR completed a multiyear consistently showed that the population will remain drawdown of people housed in contractor-operated well below the court-ordered limit in future years. prisons made possible by the declining prison However, in response to suggestions that further population. Since 2021, the administration has capacity reductions should be considered, the deactivated (1) two state-owned prisons—the administration has cited the following concerns: Deuel Vocational Institution (DVI) in Tracy and • Increased Risk of Violating the the California Correctional Center in Susanville, Court-Ordered Population Limit. Prison (2) eight yards at various state-owned prisons, population projections are fairly uncertain in and (3) the California City Correctional Facility—a out-years. If the state does reduce capacity leased prison that was operated by CDCR staff. but the population increases unexpectedly CDCR estimates that these deactivations resulted in the future, the administration is concerned in ongoing General Fund savings totaling about that this could put the state at increased risk $620 million annually. Deactivation also allowed of violating the court-ordered population limit. • Increased Complexity in Housing Placement. Figure 3 As discussed above, CDCR Prison Population Projected to Decline Through 2028 typically clusters people Population as of June 30 Each Year with similar security, health care, or other needs in the 140,000 same yard. Further capacity reductions would reduce the 120,000 overall number of yards in operation. The administration 100,000 is concerned that this could 80,000 make it more challenging for CDCR to find appropriate 60,000 housing placements, particularly for people with 40,000 multiple complex needs. 20,000 • Reduction in the Number of Assignments. Further reductions in prison capacity 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Actual Projected would mean that, if use of the department’s remaining physical space and staffing 6 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET levels remain unchanged, a smaller portion needed for quarantine or natural disasters, and of the population would be able to have a space needed to comply with court requirements full-time or two half-time assignments. This is (such as the court-ordered population limit). because, in addition to reducing the number Analysis Inventoried Certain Types of of beds in operation, capacity reductions Assignments. To prepare the report required remove physical space (such as classrooms by PC 5033, CDCR inventoried the number of or workshops) that is used for assignments. full-time and full-time equivalent program and work The administration argues such a reduction assignments in operation at each prison as of is a concern because assignments provide June 30, 2023. (Two part-time assignments were people in prison with a meaningful way to counted as one full-time equivalent assignment.) occupy their time. The administration also As shown in Figure 4, these assignments include cites potential for a reduction in assignments jobs, treatment and reentry programs, career to cause an increase in recidivism. This could technical education, adult basic education, occur if the reduction in assignments causes community college, and high school equivalency more people than otherwise to leave prison courses. In total, CDCR identified 52,955 such without having their assessed criminal assignments. We note that this does not include risk factors addressed through effective the 10,249 full-time or full-time equivalent interventions, such as treatment and assignments that on June 30, 2023 were budgeted reentry programs. but not in operation—such as due to an instructor vacancy or a classroom being under construction. 2023-24 Budget Package Required In addition, the inventory did not include various Administration to Conduct Analysis of Prison Capacity Needs. In response to the above concerns cited by Figure 4 the administration, the 2023-24 Actual Full-Time or Full-Time Equivalentª Assignments budget package added Penal Code As of June 30, 2023 Section (PC) 5033 to state law, which required CDCR to submit an assessment of its capacity High School 6% needs by November 15, 2023 Community Total: 52,955 College 8% to help inform decisions related to further prison capacity reductions. PC 5033 states that it is the intent of the Legislature to deactivate additional prisons and that maintaining prison capacity Adult Basic Education 9% beyond what is necessary for safety, operational flexibility, and Jobs 52% to support rehabilitation is not cost Career Technical Education 10% effective. PC 5033 also directed the department to report, by prison, on the capacity needed to operate Treatment and in a manner that is rehabilitative, Reentry Programs 16% safe, and cost efficient. In doing so, the statute specified CDCR shall include an assessment of available space for rehabilitative programming, health care services, specialized bed needs, space a A full-time equivalent assignment is two part-time assignments. www.lao.ca.gov 7 2024-25 BUDGET other educational and/or rehabilitative activities Governor’s Proposal that people may engage in while in prison, such as Adjust Funding for Centralized Services to grant-funded or volunteer-led programs and college Account for Previous Capacity Reductions. The correspondence courses. Governor’s budget reflects a reduction in 2024-25 Analysis Calculated Percent of the Population of $9.6 million from the General Fund and 57 That Can Receive Assignments. The analysis positions (increasing to $11.1 million and 65 positions calculated, for each prison, the percent of the annually beginning in 2025-26) to reflect reduced population that could have one of the above administrative support needs resulting from previous assignments if the prison were occupied at capacity reductions. For example, the reduction 120, 110, and 100 percent of its design capacity. includes two positions in CDCR’s Office of Fiscal This calculation was done with the following two Services that are no longer needed to provide budget different methodologies: support to individual prisons as the total number of prisons has decreased. • Under the first methodology, the calculation only included the 52,955 assignments that Adjust CDCR Funding to Account for were actually in operation on June 30, 2023. Planned Deactivation of CVSP. To reflect the This methodology found that, if the prison planned deactivation of CVSP by March 2025, the system is occupied at 120 percent of design Governor’s budget reflects a reduction in 2024-25 capacity, there would be enough assignments of $33.2 million (largely from the General Fund) and to serve 62 percent of its population based 190.4 positions (increasing to $132.3 million and on the number of staff and classrooms in 743.2 positions annually beginning in 2025-26). operation on June 30, 2023. In contrast, if the Continue Operating About 15,000 Empty Beds. system was at 100 percent of design capacity, The budget reflects operation of nearly 15,000 empty there would be enough assignments to serve beds in 2024-25. The department indicates that, 77 percent of its population on June 30, 2023. while it intends to continue monitoring the issue, it is • Under the second methodology, the not planning further capacity reductions at this time. calculation used budgeted assignment Assessment capacity instead of actual capacity as of June 30, 2023. Accordingly, it included No Concerns With Adjustments Related to the additional 10,249 full-time or full-time Previously Approved Deactivations. We have equivalent assignments that were budgeted no concerns with the proposal to reflect savings but not in operation for various reasons for centralized services to account for previous (such as staff vacancies) as of June 30, 2023. deactivations. Similarly, we have no concerns with This methodology found that if the prison the proposal to reflect savings associated with the system was occupied at 120 percent of its planned deactivation of CVSP by March 2025. design capacity, there would be enough Number of Empty Prison Beds in Operation budgeted assignments to serve 74 percent of Projected to Grow to About 19,000 by 2028. As its population. In contrast, if the system was discussed above, the Governor’s proposals would at 100 percent of its design capacity, there leave about 15,000 empty beds in the near term. would be enough budgeted assignments to As shown in Figure 5, the projected long-term serve 91 percent of its population. decline in the prison population suggests that, after the proposed deactivations are completed, the The report did not reach a conclusion about state could have nearly 19,000 empty prison beds— what percent of the population should have an comprising about one-fifth of the state’s total prison assignment. We note that there could be various capacity. This means that the state could be in a reasons why it would not be reasonable to maintain position to deactivate around five additional prisons assignments for 100 percent of the population. by 2028 while still remaining roughly 2,500 people For example, some people cannot participate in below the court-ordered population limit. assignments due to age or health reasons. 8 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET levels to be reduced, prisons Figure 5 have many centralized staffing costs—such as for Governor’s Proposals Leave Nearly administration and perimeter 19,000 Empty Beds in Operation by 2028 security—that must be As of June 30 Each Year maintained regardless of the number of yards in operation. 120,000 As discussed above, after Empty beds Occupied beds the planned deactivations, 100,000 the state is projected to have enough excess capacity to 80,000 allow for the deactivation of 60,000 around five additional prisons. Deactivation of five prisons 40,000 could generate nearly $1 billion in annual ongoing operational 20,000 cost savings, depending on which prisons are deactivated. 2023 2024 2025 2026 2027 2028 • Prison Infrastructure (Actual) Costs. As of January 2024, CDCR identified 44 deferred maintenance or capital outlay Further Prison Capacity Reductions Would projects across 23 prisons Create Significant Savings. Reducing the number at an estimated total cost of $2 billion that are of empty beds in operation by deactivating additional expected to be needed over the next ten years. prisons or yards would allow for significant savings in The majority of these projects are focused on three different areas: issues related to safety (such as replacement • Prison Operational Costs. As the prison of fire suppression systems) and critical population declines, the state is able to spend infrastructure (such as kitchen renovations). less on certain things—such as food and Further capacity reductions would avoid the clothing—that are directly tied to the number need to fund these projects at the prisons of people that need to be housed in state and/or yards that are deactivated. prisons. Specifically, the state saves roughly • Staff Training Costs. CDCR’s staffing needs $15,000 per year each time one fewer person are affected by various factors, including the needs to be housed in a prison. These savings number of facilities being operated. Deactivating accrue as the population declines—regardless additional prison capacity would temporarily of whether prison capacity is reduced. reduce the need for new correctional officers. However, there are many other types of costs— This is because existing officers at the facilities including most staffing costs—that are only that are deactivated would have the opportunity saved when capacity is reduced. Specifically, to fill vacancies throughout the prison system when a whole prison is deactivated, the that would otherwise be filled by new officers. state can save several tens of thousands of The Governor’s 2024-25 budget maintains dollars per capita annually in addition to the $140 million General Fund for CDCR to continue population-driven savings. Per capita savings training new officers at the department’s associated with yard deactivations are generally 13-week academy and delivering other training somewhat less than those associated with to existing officers. Accordingly, capacity prison deactivations. This is because, while reductions could allow the state to temporarily individual yard deactivations do allow staffing scale back these staff training costs. www.lao.ca.gov 9 2024-25 BUDGET These opportunities for savings are particularly CDCR in the past. If the unexpected increase notable given that the state is projected to face in the population is sustained, CDCR could significant structural shortfalls—around $30 billion reactivate yards or prisons as deactivated each year—in 2025-26 through 2027-28. Deactivating state-owned facilities are typically placed additional prison capacity would help the state avoid on “warm shutdown,” meaning they are still needing to reduce General Fund spending in other owned and being maintained by the state. areas of the budget the Legislature prioritizes. Accordingly, deactivating prisons or yards and Administration’s Concerns With Further maintaining them on warm shutdown allows Capacity Reductions Could Be Mitigated. the state to save money on an annual basis As discussed above, the administration has cited without foreclosing the possibility of reactivating concerns with further reductions in prison capacity. capacity if it is needed in the future. However, we find that, with some advance planning • Housing Placement System and/or and potential one-time spending, these concerns Infrastructure Could Be Modified to Increase could likely be mitigated as follows: Flexibility. To the extent that further capacity reductions would create challenges for CDCR in • State Can Take Steps to Reduce Risk of identifying appropriate housing placements, the Violating Population Limit. As discussed department could consider changing housing above, the administration’s population placement policies to create more flexibility. projections indicate that the state could be in CDCR has made such changes at various times a position to deactivate around five additional in the past to accommodate shifts in population prisons by 2028, while still maintaining a roughly needs and reduce complexity. For example, 2,500 person “buffer” below the court-ordered CDCR recently promulgated regulations to population limit. This would be the same size as consolidate its six types of restricted housing the buffer typically maintained by CDCR prior to units into three types. (Restricted housing units the COVID-19 pandemic. (During the pandemic, can be used to temporarily house people as the need for physical distancing in prisons punishment for certain serious rule violations temporarily necessitated a larger buffer.) This or who constitute a particular threat to prison is notable because the population at that time security.) In addition, with advance planning, was larger, meaning it was subject to potentially the department could build infill housing greater unexpected population swings. units at existing prisons and/or construct key Nonetheless, the administration felt that a 2,500 infrastructure (such as specialized medical person buffer was adequate. Moreover, in the beds) to offset any losses in housing flexibility event the population unexpectedly increases by resulting from capacity reductions. more than 2,500 people, the state would have various options to avoid violating the population • Existing Assignment Infrastructure Could limit. For example, CDCR could contract with be Used More Effectively and/or More county jails to temporarily delay transfers of Assignments Could be Created. The state new prison commitments (according to data could mitigate the effect of capacity reductions collected by the Board of State and Community on the number of assignments available by Corrections, jails had a total population of using its remaining assignment infrastructure about 59,700 in the first three quarters of 2023 more effectively. For example, as discussed and a total capacity of about 81,600); expand above, vacancies and other and factors that eligibility for people to be housed outside of prevent budgeted assignments from operating state prisons, such as in conservation camps can substantially reduce the actual number or community reentry facilities; and/or award of assignments available at a given time. credits in order to release certain people (such Accordingly, CDCR could pursue strategies— as those identified as posing a low risk to such as recruitment efforts—to address these public safety) earlier than otherwise. We note factors. In addition, CDCR could eliminate that all of these steps have been used by assignments associated with unproven or 10 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET ineffective programs and use the freed-up Recommendations space to expand the number of assignments for Direct CDCR to Deactivate Prisons. programs known to be effective. Alternatively, We recommend that the Legislature direct CDCR the state could take steps to increase the to begin planning to reduce capacity by the end number of assignments. For example, the of 2028. Deactivating whole prisons would create state could create more assignments that do greater savings than deactivating yards at various not require classrooms (such as gardening prisons. We estimate that deactivating five prisons, or activities done through tablets) or it could for example, could allow the state to save nearly construct new classrooms. $1 billion in ongoing General Fund costs. This would While mitigating the administration’s concerns not only help reduce the state’s structural budget associated with capacity reductions could create shortfall in the years to come but would bring CDCR some new costs for the state, these costs are largely into compliance with PC 2067. temporary and would be far less than the nearly Direct CDCR to Report on Strategies $1 billion dollars it would cost annually to operate to Mitigate Any Concerns. We recommend around five prisons on an ongoing basis. Accordingly, that the Legislature direct CDCR to report by we find that significant ongoing savings from pursuing January 10, 2025 on (1) which specific prisons it plans further prison capacity reductions would likely far to deactivate, (2) any specific concerns it identifies outweigh any costs associated with mitigating the with these deactivations, as well as (3) strategies for potential negative effects of capacity reductions. and estimated costs of mitigating those concerns. State Law Arguably Requires CDCR to Direct CDCR to Plan for Reductions to Staff Accommodate Population Declines Through Training Costs. Deactivation of multiple prisons Capacity Reductions. PC 2067 requires CDCR by 2028 would likely reduce CDCR’s need for new to accommodate projected population declines correctional officers over the period when the prisons by reducing capacity in a manner that maximizes are being deactivated. To ensure savings associated long-term savings, leverages long-term investments, with this reduced need are captured, we recommend and maintains sufficient flexibility to comply with that the Legislature direct CDCR to report by January the court-ordered population limit. PC 2067 also 10, 2025 on (1) the projected impact of deactivations requires CDCR to consider certain factors—such as on its need for new correctional officers and (2) plans operational cost and subpopulation-specific housing to scale back academy operations accordingly. needs—in determining how to reduce capacity. Approve Adjustments Related to Previously In view of the opportunity for significant savings Approved Deactivations. We recommend the and the possibility of mitigating negative effects on Legislature approve the proposed adjustments housing flexibility, PC 2067 arguably requires CDCR related to the previously approved deactivations, to further reduce capacity. including the savings related to centralized services and the planned deactivation of CVSP by March 2025. This will help address the state’s budget problem in the budget and future years. VOICE CALLING Background calls, and electronic messages. Voice calls can be made from standard, hardwired telephones located Various Ways for People in Prison to at all prisons and portable tablet devices issued to Communicate With Friends and Family. In addition each person. The department regulates the use of to in-person visiting and writing letters, there are telephones and tablets among the prison population, various ways that people in prison can maintain such as the times of day when calls can be made. contact with friends and family through electronic communication. These include voice calls, video www.lao.ca.gov 11 2024-25 BUDGET CDCR Is Required to Provide Free Voice In addition, the proposed budget retains the Calling to People in Prison. Chapter 827 of provisional language allowing DOF to augment 2022 (SB 1008, Becker) specifies that CDCR or reduce the funded amount after the budget shall provide accessible, functional voice calls is enacted. free of charge. On January 1, 2023, CDCR began Assessment implementing this requirement by paying all charges accrued for voice calls. Though CDCR does not Funding Adjustment Methodology Does Not directly limit the number of minutes people can use, Account for Population Decline. As discussed it does continue to restrict when calls can be made above, the proposed $8.2 million augmentation in for operational reasons. 2024-25 assumes that the August 2023 calling level persists through June 2025. However, the prison 2023-24 Budget Act Provided $28.5 Million population is projected to decline over this period. General Fund Augmentation for Voice Calls. Specifically, on August 16, 2023, the population Based on calling data from January through March was about 95,700 and CDCR currently projects of 2023, CDCR estimated that about 93 million the average daily population in 2024-25 to be minutes would be used per month in 2023-24. about 91,700—a 4,000 (4 percent) person decline. Based on this estimate, the budget included Assuming that each person uses roughly the same $28.5 million General Fund in 2023-24 to pay for number of calling minutes per month, the decline voice calls. This funding was authorized on an in the population will reduce the total number of ongoing basis with the understanding that CDCR minutes used. Accordingly, by not accounting for would adjust the level of funding for calling charges this population decline, the Governor’s budget likely through the department’s biannual adjustment over estimates the number of calling minutes and process. In addition, the budget act included associated funding that will be used in 2024-25. provisional language allowing the Department of Finance (DOF) to augment or reduce this Recommendations funding amount based on actual or estimated Withhold Action and Direct CDCR to Update expenditure data. Methodology to Account for Population Governor’s Proposal Changes. As discussed above, the administration plans to update its estimate of the 2024-25 funding $8.2 Million General Fund Augmentation in 2024-25. CDCR reports that the prison population need at the May Revision based on additional used about 119 million voice calling minutes in months of actual calling usage. Accordingly, July 2023 and 125 million minutes in August. Based we recommend the Legislature withhold action on the assumption that the August minute usage on the proposal until that time. Additionally, we level will hold flat throughout the remainder of recommend that the Legislature direct CDCR to 2023-24 and 2024-25, CDCR estimates it will need incorporate the effects of projected changes in the an additional $7.4 million in the current year and population into its methodology at the May Revision $8.2 million in the budget year to pay for this higher and in future biannual adjustments for voice calling than anticipated level of voice calling. CDCR will costs. This methodology change would (1) help update these estimates at the May Revision promote more accurate budgeting and (2) likely based on additional months of actual calling reduce the overall cost of the proposal in the usage data. To address any current-year shortfall, budget year, freeing up General Fund resources the administration intends to use the authority that could be used to address the fiscal difficulties provided by the provisional language in the 2023-24 facing the state. budget to augment the amount available for voice calls. To address the budget-year shortfall, the Governor’s budget includes an $8.2 million General Fund augmentation, which would bring the total amount for voice calling to $36.7 million in 2024-25. 12 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET UTILITIES Background However, due to fiscal pressures currently facing the state, the administration is requesting $22 million, Utility Funding Currently Adjusted Based on which is half of the anticipated need. Should actual California Consumer Price Index (CPI). CDCR 2024-25 utilities costs surpass the budgeted amount, facilities use various types of utilities such as natural CDCR indicates that it would attempt to pay for the gas, electricity, and water. The 2023-24 budget unfunded costs with savings in other areas of its provides about $140 million to pay for utilities. budget, such as from staff vacancies, or request a This funding level was established in 2022-23 based supplemental appropriation if sufficient savings are on a three-year average of CDCR’s actual utility not available. expenditures and is updated annually through a technical adjustment using CPI. Prior to 2022-23, Assessment utility funding was adjusted in proportion to increases Proposed Augmentation and Methodology or decreases in the prison population. However, for Ongoing Adjustment Appear Reasonable. this methodology was found to be inadequate after Given that utility prices are outpacing CPI, it appears recent large declines in the population left CDCR that CDCR’s current methodology for adjusting underfunded for utilities. its utility funding is not adequate. We find the Utility Prices Have Outpaced CPI. CDCR administration’s proposal to adjust utility funding reports that while its utility usage has remained based on recent actual spending to be reasonable. relatively constant, total costs have outpaced their We also find that making these adjustments through funding level. This is because utility rate increases the biannual adjustment process will add transparency set by utility providers have generally outpaced CPI. compared to adjusting funding through a technical The department currently projects a $44 million adjustment as is currently done. In addition, while our shortfall for utility costs in 2023-24. It intends to office has recommended that the Legislature set a pay for this shortfall using a combination of savings very high threshold for approving new spending, we from staff vacancies and facility deactivations that find that the proposed $22 million augmentation meets occurred earlier in the current year than anticipated. this threshold. This is because utilities are closely Governor’s Proposal linked to maintaining the health and safety of people who live and work in CDCR facilities. Adopt New Methodology for Adjusting CDCR If Actual Utility Costs Are Less Than Budgeted, Utility Funding. The Governor proposes to budget Funding Could Be Redirected. If actual utility for CDCR’s utility costs based on actual prior costs are lower than budgeted in a given year, the expenditures through CDCR’s biannual adjustment administration would be able to redirect the excess process. Under the proposed methodology, the funding to other purposes. This is because CDCR’s adjustment reflected in the Governor’s budget utilities funding is budgeted in an item of appropriation would be based on the prior fiscal year’s actual that includes funding for various other purposes expenditures. The adjustment reflected in the related to supporting the prison population. May Revision would be based on expenditures from January through June of the prior fiscal year and Recommendations July through December of the current year. Approve Proposal and Adopt Budget $22 million General Fund Augmentation for Provisional Language Limiting Use of Funding to Increased Utility Costs. CDCR’s actual utility Utilities. We recommend that the legislature approve expenditures in 2022-23 were about $184 million. the Governor’s proposed methodology and $22 million As mentioned above, this is $44 million higher augmentation for utilities funding. However, to prevent than the department’s current funding level of potential excess funding from being redirected to $140 million. Accordingly, under the proposed other purposes, we recommend that the Legislature methodology, the Governor’s budget would reflect adopt budget provisional language to require any a $44 million increase relative to the enacted level. excess funding to revert to the General Fund. www.lao.ca.gov 13 2024-25 BUDGET COVID-19 HEALTH CARE COSTS Background For example, January 2024 data shows that CDCR is testing about 400 people per week for COVID-19 Had Major Impact on CDCR. Between COVID-19, compared to about 3,600 per week the start of the pandemic and January 28, 2024, a in January 2023. total of about 96,000 COVID-19 cases have been reported by CDCR as occurring within prisons. CDCR Spending on COVID-19 Health Care There have been 263 incarcerated people and Costs Declining. By the end of 2023-24, CDCR 50 staff who have had COVID-19-related deaths. expects to have spent a total of $1.1 billion since During this time period, CDCR implemented several the beginning of the pandemic on COVID-19 restrictions and operational changes to reduce the health care costs, including on testing, spread of the virus within its institutions. For example, vaccinations, and cleaning. The majority of this the department initially suspended visiting and amount occurred in the 2020-21 ($416 million) rehabilitation programs, reduced the density of and 2021-22 ($407 million) budget years. dormitories by housing some people in open areas (We note that a portion of these costs were (such as gymnasiums), and suspended nonurgent supported by federal funding.) Figure 7 shows health care services. To reduce transmission, staff that, in subsequent years, COVID-19-related and people held in CDCR were generally required spending has declined significantly. to be masked and regularly tested. However, some For example, the 2023-24 Budget Act provided of these restrictions and changes are no longer in $97 million one-time from the General Fund effect as the severity of the pandemic has abated. for CDCR’s COVID-19 response, of which For example, the department has resumed visitation the department estimates it will spend and rehabilitation operations and face coverings are about $54 million. generally optional in most areas of prisons. Governor’s Proposal COVID-19 Prevalence Down in Recent Years. $38 Million Ongoing for COVID-19 Health Care According to data reported by CDCR, COVID-19 Costs. The Governor’s budget proposes $38 million continues to spread in prisons but at a lower rate than ongoing General Fund for CDCR COVID-19 health the initial years. Figure 6 shows CDCR’s reported number of new confirmed cases each month. As shown in the figure, Figure 6 new confirmed COVID-19 cases have declined over time and the Number of New Cases of COVID-19 Reported Has Declined spikes in new cases observed New CDCR COVID-19 Cases annually in the months of December and January have also decreased in 18,000 magnitude. For example, at its peak in the December to January period 14,000 of 2020-21, there were a total of about 23,500 new COVID-19 10,000 cases compared to a total of about 500 new COVID-19 cases reported 6,000 in the December to January period of 2023-24. The decrease in the 2,000 prevalence of COVID-19 in the prisons has resulted in reduced 2020 2021 2022 2023 2024 COVID-19-related workload. March - December January CDCR = California Department of Corrections and Rehabilitation. 14 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET care costs including testing, Figure 7 vaccination, staffing, treatment, and personal protective equipment. CDCR COVID-19 Health Care Spending Has Declined Figure 8 shows the requested (In Millions) level of funding for each activity. The requested level of funding $450 is based on the average amount 350 of expenditures the department has observed in certain 250 months in 2023. For example, the department is requesting 150 $20.6 million for statewide testing 50 for staff ($7.4 million) and the prison population ($13.2 million). CDCR 2019-20 2020-21 2021-22 2022-23 2023-24 Estimate arrived at this estimate by adding the average expenditures on testing CDCR = California Department of Corrections and Rehabilitation. for staff between April 2023 and September 2023 and the prison Figure 8 population between April 2023 and August 2023 and assuming that the department would continue Proposed Level of Ongoing Funding for spending at that monthly rate in 2024-25 and CDCR COVID-19 Response ongoing. CDCR applied a similar methodology Statewide testing $20,647,000 for estimating its funding need for state response State response operationsa 6,686,000 operations—which includes treatment, staff Vaccine distribution and administration 6,253,000 overtime costs, and wastewater testing—but used Personal protective equipment 4,802,000 average expenditures from a different range of Total $38,388,000 months in 2023. To estimate the funding needed a Includes treatment, staff overtime, and wastewater testing for vaccines and personal protective equipment in CDCR = California Department of Corrections and Rehabilitation. 2024-25 and ongoing, the department assumes it will spend the same amount it projects it will ongoing level of resources for testing of the prison spend in the current year. In addition to the population would be based on trends that do not requested funding, the Governor’s budget proposes reflect more recently available information given budget provisional language that would allow that CDCR indicates it will not update its request in DOF to reduce CDCR’s funding for COVID-19 the spring. This budgeting approach raises further health care costs based on actual or estimated concerns because it is not standardized to include expenditure data. the same months in the calculations for each of the expenditure categories. For example, it is unclear Assessment why the ongoing level of funding for testing of the Request Does Not Account for Recent prison population should be based on average Trends, Reflect a Standardized Methodology, expenditures between April 2023 and August 2023, or Projected Decline in Population. We find while the funding for testing of staff should be that the department’s proposed methodology to based on average expenditures between April estimate its funding need does not factor in recent 2023 and September 2023. Moreover, the proposal trends in COVID-19 prevalence, is not based assumes CDCR expenditures on COVID-19 health on a standardized methodology, and does not care costs will remain the same despite the fact reflect projected declines in the prison population. that the prison population is projected to decline For example, the department’s methodology to both in 2024-25 and future years, suggesting estimate its funding need for testing of the prison the department’s resource need will also decline population factors in expenditures between going forward. April 2023 and August 2023. As a result, CDCR’s www.lao.ca.gov 15 2024-25 BUDGET CDCR Has Not Explored Options to Reduce for and provide justification for why that set of State Spending by Leveraging Employee Health months is reflective of its costs. Additionally, the Insurance. The state offers employer-sponsored department should adjust the proposal to reflect health insurance to state employees, including the fact that the prison population is expected to CDCR. As such, CDCR staff are able to receive decline between 2023-24 and 2024-25. Finally, we vaccinations against COVID-19 from their recommend the Legislature direct CDCR to explore employer-sponsored health insurance. Notably, options to leverage the state’s employer-sponsored all employer-sponsored health insurance plans health insurance to reduce the funding needed for offered through the state provide COVID-19 employee vaccines and further adjust the proposal vaccinations at no-cost to the employee. When as necessary to reflect any resulting savings from asked whether the department could leverage doing so. These adjustments would likely reduce employee health insurance to offset the vaccine the overall cost of the proposal, freeing up General costs for employees, CDCR indicated that it had Fund resources that could be used to address the not explored such an option. This is noteworthy fiscal difficulties facing the state in the budget year. given that the department is requesting resources Reject Funding for Future Years. for staff vaccinations against COVID-19 on an We recommend that the Legislature reject the ongoing basis. funding proposed for the future and fund the department’s COVID-19-related health care Recommendations workload on a one-time basis. The department Withhold Action on Budget-Year Request has provided little reason to think that its and Direct CDCR to Provide Updated Proposal. COVID-19-related funding needs will remain at 2023 We recommend that the Legislature withhold levels in the future, particularly given the projected action on the Governor’s proposed resources decline in the prison population. Moreover, funding for COVID-19-related health care costs in CDCR such a request would increase the department’s in 2024-25. We also recommend the Legislature baseline spending in the future, and we find that it direct the department to update its 2024-25 is not prudent to make such a commitment given request in the spring to reflect more recent data. the fact that our office projects the state’s fiscal In doing so, the department should use a standard difficulties will continue in future years. snapshot of months when calculating its need for each of the activities it is requesting resources PRISON MEDICAL CARE BUDGET SHORTFALL Background related to workers’ compensation claims and lump sum payouts (payments made to employees to Department Consistently Overspends Prison compensate them for unused leave when they leave Medical Care Budget. Since 2018-19, CDCR state service) as contributing to the overspending in reports that it has exceeded its General Fund the prison medical care budget. prison medical care budget by tens of millions of dollars to hundreds of millions of dollars annually, Department Has Addressed Overspending as shown in Figure 9. According to the department, Without Additional Funding. CDCR indicates that this shortfall is the result of overspending on it has been able to address the overspending in personnel-related expenditures. Specifically, the prison medical care budget in previous years the department cites costs related to vacancies without requiring additional funding. According to including spending on overtime for staff that the department, it has been able to redirect savings must complete workload associated with vacant from vacancies elsewhere in the CDCR budget, positions and registry (contractors that provide including from mental health services, to cover the services on an hourly basis when civil servants overspending in the prison medical care budget. are unavailable). The department also cites costs 16 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET Governor’s Proposal Specifically, Item 9840-001-0001 includes $55 million to augment departments’ General Fund budgets $40 Million One Time to Cover Projected upon approval of the Director of DOF no sooner Overspending in the Prison Medical Care Budget. than 30 days after notification to the Joint Legislative The Governor’s budget proposes a $40 million Budget Committee. In the event that this $55 million one-time General Fund augmentation in 2024-25 is used for other contingencies and is unavailable to cover projected overspending in the prison to support the prison medical care budget, we note medical care budget. The department indicates that that Item 9840-001-0001 outlines a process through personnel-related cost pressures will continue in which the administration can request a supplemental the budget year and that the savings used to offset appropriation to address these costs. the overspending in previous years will no longer be available. We note that the department estimates that Inadequate Justification Provided for it will not overspend the prison medical care budget $40 Million. CDCR has not provided sufficient data in the current year. supporting its need for the requested $40 million. For example, the department has not provided a Assessment back-up calculation showing how it projected that Unclear Why Department Needs Additional $40 million in overspending would occur. As a result, Funding to Address Potential Overspending. it is difficult for the Legislature to assess whether In recent budget years, CDCR has been able to this is a reasonable estimate, particularly because address its overspending in the prison medical there is no discernable pattern in the department’s care budget within its existing budget authority overspending in previous years. In addition, the fact by using savings elsewhere in its budget. The that the department does not expect to overspend its department has not provided any information on prison medical care budget in the current year raises why redirected savings will not be available to questions about why it expects to do so in the budget do so in the budget year. Moreover, to the extent year. This lack of justification is particularly notable that the department does overspend in the prison given that the state is currently facing a budget medical care budget during the budget year problem. Accordingly, proposals for new spending and cannot redirect savings to address it, the should meet a higher threshold before being department can seek additional funding through Item approved. Given the lack of justification, the proposal 9840-001-0001 in the Governor’s proposed budget. does not meet this higher threshold in our view. Recommendation Figure 9 Reject. We recommend that the Overspending in the Prison Medical Care Budget Legislature reject the Governor’s (In Millions) proposal. We find that the proposal does not make it clear why CDCR $160 $151 needs additional funding to address $143 potential overspending in the prison 140 medical care budget and cannot redirect 120 funding from elsewhere in its budget as 100 $95 it has done previously. Moreover, even if overspending cannot be addressed 80 $73 by redirecting funding, the department 60 can seek additional funding through Item 9840-001-0001 or a supplemental 40 $32 appropriation. Finally, the proposal does 20 not provide adequate justification for the requested $40 million, particularly given 2018-19 2019-20 2020-21 2021-22 2022-23 the budget problem facing the state. We note that rejecting this proposal will help the state address its budget problem. www.lao.ca.gov 17 2024-25 BUDGET CONTRACT MEDICAL SERVICES Background improvements in their medical condition, the patient can be returned to prison. The department reports CDCR Uses Contract Medical Services When that, due to restrictions on the type of facilities it Health Care Needs Cannot Be Met. When CDCR places patients in, it is unable to qualify for federal is unable to provide necessary medical services to reimbursement through Medi-Cal for the care people held in prison because it lacks the needed provided to people on medical parole. As a result, equipment or specialist providers, the department the department pays for the cost of treating each contracts for these services with external providers. patient—about $261,000 annually—entirely from the These contract medical services are used in a General Fund contract medical services budget. number of circumstances ranging from trips to According to the department, there have been an emergency departments for physical injuries to average of 50 people on medical parole in the past chronic medical issues that require specialized three budget years and it has spent an average of treatment. In some cases, providers are brought $13 million annually on the program. into facilities to deliver treatment. However, in many cases, people are transported out of a prison to CDCR Reports Budgeting Methodology receive care in the community, including inpatient Does Not Accurately Reflect Costs. Through the care. Each time CDCR uses contract medical biannual adjustment process, CDCR is typically services, the department is charged the full medical budgeted for contract medical services based costs plus a $19 fee for administrative claims on the (1) size of prison population, (2) a fixed related to processing a CDCR patient through a rate of $2,763 per person, and (3) a set amount community specialty care provider network. CDCR of $54 million ongoing in federal reimbursement pays for most contract medical services from the authority. For example, in 2023-24, this General Fund. However, in specific circumstances, budgeting methodology would have resulted in such as when an eligible person receives services the department receiving about $337 million for outside of prison for more than 24 hours, the contract medical services, including $282 million department may offset a portion of these costs from the General Fund and $54 million in federal with federal reimbursements. These federal reimbursement authority. However, the department reimbursements are provided through Medi-Cal, a raised concerns that this methodology did not program partially funded by the federal government accurately reflect its costs for various reasons. that covers health care costs for low-income people First, CDCR reports that a decline in the prison and families, including certain costs for eligible population has led to reductions in the amount people in prison. being budgeted for contract medical services. However, the department has not observed CDCR Contracts With Medical Providers to corresponding reductions in the number of House People on Medical Parole. The medical people in its three highest medical risk categories parole program within CDCR allows medically (High-1, High-2, and Medium) who are more likely to incapacitated people to be placed in licensed health use contract medical services. This is because the care facilities that the department contracts with population reduction disproportionately occurred in the community instead of prison. To be eligible among people in the Low medical risk category. for medical parole, various criteria must be met. Furthermore, CDCR reports that the $2,763 per For example, CDCR medical staff must determine person fixed rate—which was established in 2012— the person is permanently medically incapacitated is insufficient because it does not fully reflect the and the Board of Parole Hearings must determine costs of medical parole or the $19 administrative that the person does not reasonably pose a claims fees. Finally, the department indicates it threat to public safety. Once in the community, has been receiving less in federal reimbursements CDCR parole agents and medical staff monitor than reflected in the budget in recent years. patients. In the event a patient shows significant 18 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET To temporarily address these issues, the 2023-24 each medical risk category. Specifically, budget provided CDCR with a one-time General the department would receive $21,168 Fund augmentation of $40 million and a one-time for each High-Risk 1 person, $6,323 for federal reimbursement authority reduction of each High-Risk 2 person, $2,230 for each $12 million, bringing the total budget for contract Medium-Risk person, and $1,009 for each medical services to about $364 million. Low-Risk person. These amounts were calculated using a five-year average of Governor’s Proposal per-person expenditures for each medical $3.9 Million Current-Year Augmentation risk category. This funding would be adjusted Based on Existing Budgeting Methodology. biannually based on the size and medical risk The department is projecting that the prison of the prison population. population in the current year will be larger than • $13 Million General Fund for Medical was assumed in the enacted 2023-24 budget. Parole Based on Medical Parole Accordingly, the Governor proposes a $3.9 million Population. The department is also proposing General Fund augmentation to the contract medical that it be funded for medical parole separately services budget based on the current budgeting based on projections of the medical parole methodology used in the biannual adjustment population. Under the proposed methodology, process. This would increase the budget from the department would receive $261,356 for about $364 million to $368 million. Given the every person expected to be on medical weaknesses in the methodology described above, parole. The amount per person was calculated CDCR indicates that this methodology would likely based on a three-year average of expenses for not fully fund the department’s contract medical the people on medical parole. In the budget service need for 2023-24. However, CDCR is year, the department projects 50 people will not requesting additional resources beyond the be on medical parole. This funding would be $3.9 million proposed in the current year. This is adjusted biannually based on the size of the because the $40 million one-time augmentation medical parole population. that the department received in the 2023-24 • $15 Million General Fund for Administrative Budget Act should minimize its need for such Claims Fees. In addition, the budget includes additional resources. funding to support the cost of administrative $24 Million Budget-Year Augmentation Based claims fees. Under the proposal, the on New Budgeting Methodology. The department department would receive ongoing funding is projecting a decline in the prison population in for the $19 administrative claims fees the budget year that would result in a $3.4 million associated with each contract medical reduction to CDCR’s contract medical services service used. CDCR projects that it will use budget under the current methodology. However, 800,000 contract medical services per year in the Governor proposes four changes to the the budget year and future years. This amount budgeting methodology used in the biannual would not be adjusted biannually. adjustment process that would result in a net • $12 Million Reduction in Federal increase of $24 million for contract medical services Reimbursement Authority. Lastly, the in 2024-25. This reflects a $36 million General department is requesting that its federal Fund augmentation and a $12 million decrease in reimbursement budget authority be federal reimbursement authority. This change is the reduced by $12 million on an ongoing basis. result of the following: The Governor’s proposal would reduce the • $8.2 Million General Fund Tied to New department’s federal reimbursement authority Budgeting Methodology Based on to $42 million, which it reports is more aligned Medical Risk. First, the department is with the actual level of federal reimbursements proposing to replace the fixed per-person it is currently receiving. This amount would not rate of $2,763 with a per-person rate for be adjusted biannually. www.lao.ca.gov 19 2024-25 BUDGET Assessment This is problematic as the total number of contract medical claims will also likely decrease below No Concerns With Proposed Current-Year 800,000, meaning the department will have more Funding Level. We do not raise any concerns funding than it needs for these claims. Similarly, with the proposed $3.9 million General Fund the department’s federal reimbursement authority augmentation to the contract medical services could provide it with more funding than it will be budget based on the current budgeting able to qualify for as the population declines. (We methodology in 2023-24. We acknowledge that note that adjusting the department’s reimbursement the weaknesses in the current methodology could authority downward to account for reductions result in the department receiving insufficient in the prison population would not exempt it funds for contract medical services. However, the from statutory requirements to maximize federal $40 million in one-time funding provided as part of reimbursements.) Moreover, the methodology for the 2023-24 Budget Act should minimize the extent these aspects of the contract medical services to which this occurs. budget is inconsistent with the population-driven Some Proposed Budget-Year Changes methodology proposed for the other portions of to Funding and Methodology Appear the budget. Reasonable… We find that the proposed methodologies used to arrive at the $8.2 million Recommendations General Fund requested based on the medical Withhold Action and Direct CDCR to Develop risk of the prison population and the $13 million Population-Based Budgeting Methodology for General Fund requested for medical parole appear Federal Reimbursements and Administrative reasonable and would better align the department’s Claims. We recommend the Legislature withhold budget with its actual needs for those services. action on this proposal until it is adjusted based Moreover, because this improved methodology on updated population projections as part of the would be part of the biannual adjustment process, biannual adjustment process at the May Revision. it would ensure the contract medical services In addition, given that the $15 million for budget remains tailored to the department’s needs administrative claims fees and the $42 million in going forward as the size and makeup of the prison reimbursement authority is not population-driven, population changes. we recommend that the Legislature direct CDCR to …Except Administrative Claims Funding develop a new methodology for those aspects of and Federal Reimbursement Authority, Which the contract medical services budget that account Would Not Be Adjusted for Population Changes. for changes in the size and/or makeup of the We find that the Governor’s proposed funding prison population. This revised proposal could be methodology for administrative claims and federal considered by the Legislature at the May Revision. reimbursement authority is lacking because it Given that the state is currently facing a budget would not change based on changes in the size or problem, we note that the Legislature will need to makeup of the prison population. For example, the weigh any potential increase in spending related to department would continue to receive $15 million this proposal against its other spending priorities General Fund to pay for 800,000 administrative as it will likely need to offset cost increases with claim fees and $42 million in federal reimbursement spending reductions elsewhere in the budget. authority each year despite the fact that the prison Accordingly, proposals for new spending should population is expected to decrease in future years. meet a high threshold before being approved. 20 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET PAROLE SUPPORT STAFFING Background the budget year and remain near this level in future years. As a result, the number of parole support Division of Adult Parole Operations (DAPO) staff is also declining. However, CDCR indicates that Employs Support Staff. In order to assist the work further decreases in the parole support staff budget that parole agents do in the field, DAPO—within and positions would be problematic. This is because CDCR—employs various support staff that do not CDCR reports that there are support staff positions involve the direct supervision of people on parole— that are eliminated when the population declines such as human resources analysts and office under the current methodology despite the fact that technicians. Some of these parole support staff the workload for these positions is not decreasing. are located at headquarters in Sacramento, while For example, the workload for support staff needed others are located across the state in one of DAPO’s to manage statewide contracts required for various 2 regional offices or 47 field offices. parole-related services remains the same even when Budget for Parole Support Staff Biannually the parole population declines. CDCR reports that Adjusted Based on Changes in Parole further reduction to these positions will mean it is Population. Since the 2019-20 fiscal year, CDCR unable to fully address such workload. has budgeted for parole support staff through the biannual adjustment process based on changes Governor’s Proposal in the parole population. This is because, similar New Proposed Budgeting Methodology for to most other parole positions, the need for many Parole Support Staff. The department is projecting parole support positions is driven by changes in a continued decline in the parole population that the parole population. For example, if the parole would result in reductions to CDCR’s parole support population increases, there is an increased need staff positions and budget under the existing for parole supervision staff (which includes parole budgeting methodology. Specifically, it would result in agents and their supervisors). This creates a greater about $200,000 less funding and 1.5 fewer positions need for parole support staff, such as human in the current year and about $430,000 less funding resource analysts, to process a potential increase and 4 fewer positions in the budget year. However, in the number of workers’ compensation claims the department proposes to change the budgeting resulting from the additional parole supervision methodology beginning in the budget year for staff. Conversely, if the parole population declines, parole support staff given its concerns about further CDCR needs fewer parole support staff due to the reductions to these positions. Under the proposed decline in the number of parole supervision staff. methodology, no downward or upward adjustments Under the current methodology, an increase or would be made to the parole support staff budget decrease of about 5,000 in the parole population or positions when the parole population is below would result in a corresponding increase or 42,222. This would roughly maintain parole support decrease of about 11 parole support staff positions staff at existing levels in the budget year and onward and about $1.4 million in funding. In the 2023-24 because the parole population is projected to remain Budget Act, CDCR received about $13 million and below 42,222 people during this time period. If the 99 parole support staff positions based on this parole population were to increase in the future above budgeting methodology. 42,222, then the budget for support staff would once Department Has Raised Concerns About again increase under the proposed methodology, Reduction in Parole Support Staff Caused by but would do so based on new ratios that would Parole Population Declines. The parole population budget for slightly more support staff than under the declined annually between 2020-21—when the current methodology. Specifically, every increase average daily parole population was 54,900—and of 5,000 people on parole—over 42,222—would 2022-23—when it was 39,200. Moreover, the average generate about 12 additional support staff and about daily parole populations is projected to continue to $1.5 million in funding. decline to 36,500 in the current year and 35,500 in www.lao.ca.gov 21 2024-25 BUDGET Assessment Recommendations While Existing Budgeting Methodology Needs Reject. We recommend the Legislature reject the Revision… We find that the existing budgeting Governor’s proposal. We agree with the department methodology for parole support staff requires a that the existing methodology needs revision to revision. We agree with the department that there account for some workload among parole support is some workload among support staff that does staff that does not change as the parole population not change as the parole population increases or changes. However, the proposed methodology is decreases, such as the managing of statewide also flawed. It not only fails to properly account for contracts required for various parole-related workload that does not change when the parole services. Accordingly, the current methodology population changes but also fails to account for is flawed and could lead to underbudgeting for workload that does change with changes in the some workload as the parole population continues parole population. to decline. Direct CDCR to Submit a New Proposal …Proposed Methodology Is Also Flawed. Based on Revised Budgeting Methodology. We However, we find that the Governor’s proposed recommend the Legislature direct CDCR to submit methodology for budgeting for parole support staff a new proposal in the spring based on a revised would continue to create a mismatch between budgeting methodology for parole support staff the level of resources the department needs and that properly accounts for both population-driven the amount it is budgeted for. Specifically, under workload and non-population-driven workload. the Governor’s proposal, if the parole population Specifically, the proposal should (1) identify the decreases further, the department would retain its number of support staff positions and associated funding for parole support staff whose workload funding needed to address workload that is not declines as the population shrinks. Similarly, if the tied to population changes, (2) provide workload population increases, then CDCR would receive justifications for those positions, and (3) include a additional funding for parole support staff whose methodology to fund the remaining workload based workload does not increase with growth in the on changes in the parole population. population. In either scenario, the methodology would result in the department being overbudgeted. 22 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET www.lao.ca.gov 23 2024-25 BUDGET LAO PUBLICATIONS This report was prepared by Orlando Sanchez Zavala and Caitlin O’Neil, and reviewed by Drew Soderborg. 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, California 95814. 24 LEGISLATIVE ANALYST’S OFFICE