Legislature(2003 - 2004)

03/11/2003 03:35 PM Senate STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                 SB  99-CORRECTIONAL FACILITIES                                                                             
SENATOR CON BUNDE, bill sponsor, advised some Whittier residents                                                                
asked him to offer the bill as one possible alternative of doing "if                                                            
not more, at least the same for less." He paraphrased from the                                                                  
sponsor statement:                                                                                                              
          Senate  Bill  99  authorizes  the  Department  of                                                                     
          Corrections to enter  into an  agreement with the                                                                     
          City  of  Whittier  for   a  1,200  bed  [medium]                                                                     
          security correctional facility and services for a                                                                     
          period of 25 years.                                                                                                   
          Alaska  needs  a  new  prison  and  the  ultimate                                                                     
          question is  whether the prison  is in  Alaska or                                                                     
          another state. Currently the  state prison system                                                                     
          is operating over capacity  and the population is                                                                     
          projected to rise.                                                                                                    
          Given the current fiscal  challenge in the state,                                                                     
          a private prison offers the best value for scarce                                                                     
          dollars.   In   addition  to   being   the   only                                                                     
          economically  viable  choice, building  a  prison                                                                     
          will   bring   benefit   to   the   state,   both                                                                     
          economically  and  socially.  Previous  testimony                                                                     
          demonstrates  the  benefit  of  having  prisoners                                                                     
          closer to their families and other support.                                                                           
          SB 99 will provide investment for future economic                                                                     
          growth  by  creating  more than  500  direct  and                                                                     
          indirect union  scale construction jobs  and more                                                                     
          than 450 permanent, direct and indirect, jobs for                                                                     
          Alaskans  associated with  prison  operations for                                                                     
          the 25 year lease authorized by the legislation.                                                                      
          By  locating   the   prison  in   Whittier,  that                                                                     
          community  will   have  an  anchor   industry  to                                                                     
          generate   vital   economic   benefits   for   an                                                                     
          economically disadvantaged rural community.                                                                           
          A majority  of Whittier residents, maybe  not the                                                                     
          most vocal  but the  majority, have  indicated at                                                                     
          least to me their support for a private prison in                                                                     
          their community.                                                                                                      
          I think  SB 99  makes sense for  Alaska's economy                                                                     
          and her citizens and would encourage your careful                                                                     
          scrutiny and support.                                                                                                 
SENATOR LYMAN HOFFMAN referred to the construction cap placed on                                                                
SB 65 and asked why there was no such cap in SB 99.                                                                             
SENATOR BUNDE wasn't  sure why a cap would  be placed on private                                                                
SENATOR  JOHN COWDERY  asked  if the  prison  would be  financed                                                                
through bonds.                                                                                                                  
SENATOR BUNDE replied that's his understanding.                                                                                 
SENATOR COWDERY  noted bonds  are carefully scrutinized  to make                                                                
sure they would be paid back.                                                                                                   
SENATOR BUNDE  said  the question  is moot  if the  bonds aren't                                                                
There were no further questions asked of Senator Bunde.                                                                         
MR. FRANK  PREWITT advised he  was a former  commissioner of the                                                                
Department of Correction with about  20 years in public service.                                                                
SB 99  proposes a  city owned,  but privately managed  1,200 bed                                                                
prison  that  is  founded   upon  the  same  sound  correctional                                                                
practices as  the  state run  facility proposed by  SB  65. Both                                                                
capture efficiency through design and  economy of scale and both                                                                
are located  where construction costs are  relatively low, where                                                                
wages and  benefits are the lowest  in the state,  and within 50                                                                
miles  of  the  most  sophisticated and  plentiful  fire,  life,                                                                
safety, program, housing and human resources in the state.                                                                      
Management and cost are  the substantive differences between the                                                                
proposals. Private  contractor, Cornell Companies,  would manage                                                                
the Whittier prison while Sutton would be operated by the state.                                                                
Daily capital and operating costs  at Sutton are estimated to be                                                                
$110 per  prisoner while  Whittier costs would  be just  $94 per                                                                
prisoner  per  day.  The  $94  includes inmate  programs,  major                                                                
medical,  staff  recruiting  and  training, equipment,  facility                                                                
maintenance and  all other  capital and operating  expenses. The                                                                
only cost above the  $94 would be transportation of prisoners to                                                                
the prison and the  cost to monitor the contract. The Department                                                                
of Corrections  transports prisoners between facilities  and the                                                                
State Troopers take prisoners to court.                                                                                         
The  perception that  SB 65  and SB  99 are  competing  bills is                                                                
incorrect and neither bill standing  alone will solve the prison                                                                
bed  shortage issue.  The Department  of Corrections  projects a                                                                
need for over  1,600 prison beds by 2006. For  the last 20 years                                                                
there has been need for  an additional 200 prison beds each year                                                                
and there  is nothing to  suggest that  will change in  the near                                                                
If the Whittier prison is  authorized this year, the doors could                                                                
open in two years while the Sutton prison wouldn't open for four                                                                
or five  years. "It's a  simple matter of  timing and inflation.                                                                
The two bills don't  compare; nor do they compete." The Whittier                                                                
proposal is the only  immediate in-state solution, but a project                                                                
such as the  Sutton proposal and a  modest expansion of regional                                                                
jails needs to be in place to fix the long-term shortage.                                                                       
Governor Murkowski said his primary  mission is good paying jobs                                                                
and reducing government spending and growth. The Whittier prison                                                                
accomplishes all those objectives. Wages  and benefits are lower                                                                
than with  the state, but  they are "good,  solid private sector                                                                
wages and benefits." The facility costs less because the private                                                                
sector  has a  different overhead  structure and  can  build for                                                                
He referred to the cost comparison table  in tab 3 of the "State                                                                
of Alaska Projected Prison Bed  Demand & Cost Analysis" booklet.                                                                
After comparing the costs, he  asked members to review the March                                                                
6,  2003 "Whittier  Prison  Project Economic  Impact" report  by                                                                
economist, David Reaume. Mr. Reaume argues the economic stimulus                                                                
and  benefit  to the  state  exceeds  the  extra expenditure  of                                                                
housing Alaska prisoners in state.                                                                                              
Alaska  Natives represent  close  to 40  percent  of the  prison                                                                
population in  Alaska yet  SB 99  is the only  bill that  has an                                                                
express provision in  the body of the  law to provide culturally                                                                
relevant  programs for  Natives.  Cornell Companies  has made  a                                                                
commitment to  team with  the Native  community to  provide this                                                                
type of programs for Native offenders                                                                                           
SENATOR HOFFMAN said Native inmates in the Arizona prison report                                                                
the  culturally  relevant programs  were  not  working. To  have                                                                
potlatches, they are  required to raise private  funds, but they                                                                
receive no  cooperation when they  ask for an  accounting of the                                                                
funds raised. He  asked if such practices would take  place if a                                                                
private facility were built in Alaska.                                                                                          
MR. PREWITT replied  Corrections Corporation of America operates                                                                
the facility  in Arizona  and Cornell  Companies is  a different                                                                
company. Cornell Companies recognizes that nothing has been done                                                                
to  curb  the   incarceration  and  recidivism  rate  of  Native                                                                
Alaskans. It is their  intention to involve the Native community                                                                
by teaming with Native corporations to explore new ways of doing                                                                
business because the old ways have not worked.                                                                                  
SENATOR COWDERY  asked if Cornell Companies  would be interested                                                                
in bidding  for the  design, construction  and operation  of the                                                                
prison proposed in SB 65.                                                                                                       
MR. PREWITT  replied, "If you're suggesting  that the Department                                                                
of Corrections  could put  out a  competitive bid to  design and                                                                
operate a  facility at Sutton  rather than having that  be state                                                                
operated,   that's   something   that  Cornell   Companies   and                                                                
Corrections Corporation  of America and  several other companies                                                                
most assuredly would respond to it."                                                                                            
4:50 pm                                                                                                                         
CHAIR GARY  STEVENS noted members had other  commitments at 5:00                                                                
pm and announced the hearing would be continued on Thursday.                                                                    
SENATOR GUESS asked whether pharmaceuticals were included in the                                                                
major medical program.                                                                                                          
MR.  PREWITT  replied pharmaceuticals  were  included; there  is                                                                
confusion over  the cost and  "the fiscal note  attached to this                                                                
House  [Senate]  bill is  the  result  of  their [Department  of                                                                
Corrections] analysis of the  contract between Cornell Companies                                                                
and the City  of Whittier as well as the  intent language in the                                                                
bill itself where the intent language says, 'similar services to                                                                
Arizona'  when Arizona  major  medical  pharmaceuticals are  not                                                                
included in  that. It is our  intent that they  are included. We                                                                
tried  to address  that  in the  'not  to exceed  $94' per  diem                                                                
language.  As for  the  contract with  Whittier,  that's in  the                                                                
process. That  particular contract  was  based upon  last year's                                                                
legislation, which was different."                                                                                              
SENATOR GUESS  referred to  language in Section  2, subparagraph                                                                
(A) regarding  adjusting per diem  cost that states,  "costs not                                                                
incurred  until  full  occupancy;"  and  asked  whether  he  was                                                                
familiar with that clause.                                                                                                      
MR. PREWITT  said that is  a "ramp  up" provision and  Mr. Wiebe                                                                
from Cornell Companies could provide an explanation.                                                                            
CHAIR GARY STEVENS asked Mr. Prewitt, Mr. Wiebe, Mr. Butler, Mr.                                                                
Wilson, Mr. Burnett and Mr. Wright whether they would be able to                                                                
attend the  Thursday hearing. After  receiving affirmative nods,                                                                
he announced there was time for a few more questions.                                                                           
SENATOR GUESS  said her previous  question could wait.  She then                                                                
asked,  "Who decides  which  type  of prisoners  would  be in  a                                                                
private  facility   and  which  type   would  be  in   a  public                                                                
[facility]?" She was  more concerned with how  and where inmates                                                                
with significant and critical medical conditions such as HIV and                                                                
cancer would be assigned.                                                                                                       
MR. PREWITT wanted Mr. Wiebe to respond.                                                                                        
SENATOR GUESS said she could wait for an answer until Thursday.                                                                 
MR. PREWITT  replied it is  up to the  Department of Corrections                                                                
when prisoners  are assigned to  and removed from  the facility,                                                                
but certainly a contractor wouldn't want a population with a 100                                                                
percent disability.                                                                                                             
SENATOR HOFFMAN asked whether he had reviewed the 3/10/03 fiscal                                                                
note provided with SB 99.                                                                                                       
MR. PREWITT replied  they had reviewed the fiscal  note from the                                                                
Department of Corrections that had  a number "somewhere over $50                                                                
SENATOR HOFFMAN asked if they agree with the findings.                                                                          
MR. PREWITT  replied they do not  agree. "The $94  per diem rate                                                                
includes  all  costs  to  the  Department of  Corrections  as  I                                                                
testified except for the cost to  bring the prisoner to the door                                                                
and monitor the contract. $94 a day times 1,200 times 365 is $41                                                                
million." The  Department of  Corrections  and the  bill sponsor                                                                
need to dialog.                                                                                                                 
SENATOR  HOFFMAN advised  he could  save his  questions  for the                                                                
Finance Committee if that was the wish of the Chair.                                                                            
CHAIR  GARY  STEVENS replied  he  would  prefer  that he  direct                                                                
finance questions to that committee.                                                                                            
There were no further questions of Mr. Prewitt.                                                                                 
MR.  MARVIN  WIEBE,  Senior  Vice  President Cornell  Companies,                                                                
introduced his  company as a  partner with state  departments of                                                                
correction. They  compete for  contracts with  their competitors                                                                
and, as in this  instance, with state correction departments. As                                                                
a company they try to meet the particular needs of each state.                                                                  
Cornell Companies  has been  in business a  number of  years, is                                                                
traded  on  the   NYSE,  and  has  about   16,000  people  under                                                                
supervision in 14 different states and the District of Columbia.                                                                
They  have operated  in Alaska  since  1998 and  have  160 staff                                                                
members  that  supervise  nearly  600  offenders  in  prison  or                                                                
community residential  centers. They  have been  working closely                                                                
with the  Alaska Native  Brotherhood to  focus on  Native Alaska                                                                
programs. Alcoholism  is much more  difficult to solve  than any                                                                
other addiction problems and is particularly difficult in Native                                                                
cultures. It is  a major issue and they need  the help of Alaska                                                                
Natives to provide  meaningful, helpful, and culturally relevant                                                                
There was no further testimony on SB 65.                                                                                        
CHAIR GARY STEVENS held SB 65 in committee.                                                                                     

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