STATEMENT OF KATHLEEN HAWK SAWYER

DIRECTOR, FEDERAL BUREAU OF PRISONS AND

CHIEF EXECUTIVE OFFICER, FEDERAL PRISON INDUSTRIES

BEFORE THE

SUBCOMMITTEE ON CRIME

HOUSE JUDICIARY COMMITTEE

JUNE 25, 1998

Mr. Chairman and Members of the Subcommittee, I appreciate the opportunity to appear before you today to discuss two bills which propose to reform prison industries, HR 4100, entitled "Free-Market Prison Industries Reform Act of 1998," and HR 2758, entitled "Federal Prison Industries Competition in Contracting Act of 1997." I am testifying today on behalf of the Department of Justice, the Bureau of Prisons (BOP), and Federal Prison Industries (FPI). The views expressed in this testimony are not necessarily those of the Administration. The Administration's position on these bills is currently under review.

At the outset, let me say how much we appreciate the continuing efforts of the Chairman, other Members of the Subcommittee, and the staff of this Subcommittee to seek practical ways to maintain FPI's ability to fulfill its statutory responsibilities while reducing adverse impact on domestic industry and labor. We were also most honored when the Chairman attended and spoke at the recent National Prison Industries Forum, the purpose of which was to explore a new paradigm for correctional industries - namely, what it would take to consider inmate labor as a national economic asset and to support its participation throughout the domestic economy. We are working with the other co-sponsoring agencies to follow-through on the many thought-provoking ideas generated during the forum, some of which are similar to the provisions of HR 4100.

We believe that FPI has been the most successful prison industries model in American history. It employs the greatest number and percentage of inmates of any jurisdiction; it has fairly applied and liberally waived its mandatory source; its Board of Directors has administered elaborate procedures to diversify production and minimize impact on the private sector; it costs the taxpayers nothing to operate; and, it has a proven record of reducing recidivism.

Nonetheless, there is always room for improvement. We are not here to defend the status quo, but rather to advocate for measured, responsible change.

In my remarks today, I would like first to address what I believe are three fundamental public policy objectives embodied in the current federal statute on prison industries and which appear to carry over into HR 4100. They are: (1) To employ as many inmates as practicable in prison industry programs; (2) To minimize any adverse impact such inmate employment may have on private sector industry and labor; and, (3) To reduce the taxpayer burdens associated with incarceration. We believe there is strong public support for these objectives. Since these objectives provided the context for our review of both bills, I want to briefly amplify on each one.

1. Employ as many inmates as practicable in prison industry programs. FPI currently employs 25 percent of the sentenced, medically-able inmates in the BOP. This is four times the national average and is the highest employment percentage, by far, of any jurisdiction in the United States. I should note, however, that the proportion of inmates employed has actually declined over the past decade because FPI has not been able to expand fast enough to keep pace with the overall inmate population growth.

FPI employment directly contributes to the orderly, safe management of federal prisons, and reduced inmate idleness. This has become increasingly important as our inmate population continues its relentless growth. Further, research conducted over more than a decade by the BOP demonstrates conclusively that inmates employed by FPI are substantially less likely to be involved in misconduct while incarcerated and substantially more likely upon release to be employed, and remain crime free (as compared to inmates with similar backgrounds and characteristics who did not work in FPI). Similar research has been conducted by several states, including Utah, New York, Florida, and Wisconsin, with equally positive findings. Thus, we appreciate that HR 4100 articulates as a high priority the employment of as many inmates as reasonably possible.

2. Minimize any adverse impact on private sector industry and labor. Prison industries programs, at the federal or state level, do not have a net adverse impact on the private sector. In fact, independent economic studies recently conducted by several states, including Ohio and New York, and by Canada, on the impact of prison industries programs have reached just the opposite conclusion. Without exception, the studies have concluded that these programs have a net positive gain, both economically and in the creation of civilian jobs.

Critics have offered occasional anecdotes to support their contention of adverse impact. In fact, publicly available data regarding the two most vocal industries, office furniture and clothing/textiles, helps put their protestations in perspective.

With the exception of the recession of 1991, the office furniture industry has enjoyed annual increased sales for the past 20 years. The past 2-3 years have seen record sales, with some companies reporting increases in excess of 20 percent per year. Profits and employment levels have also increased. To suggest that FPI is adversely impacting this industry is simply not true.

The clothing/textiles industry has not had the good fortune of the furniture industry. Their nemesis, however, is not FPI but foreign imports. Virtually every major company in the clothing/textiles industry has some or all of its production done outside the United States. It is understandable that under this pressure, the dwindling number of domestic clothing/textile manufacturers would like to produce the items currently made by FPI. It is, however, not accurate to suggest that FPI is responsible for this underlying plight.

Many critics argue that FPI's principal adverse impact is its mandatory source. This argument is flawed for several reasons. First, it focuses on the process by which FPI achieves its sales rather than the type of products, quantity of sales or market share. The ultimate purpose of mandatory source is to ensure sufficient sales are realized (taking into consideration the type, quantity and market share) to employ as many inmates as practicable. If this first public policy objective mentioned previously is to be maintained, then the same level of sales will need to be generated.

As the individual responsible for managing both the spiraling inmate population and the FPI corporation, I appreciate the Chairman's efforts through HR 4100 to first reduce and then eliminate reliance on mandatory source only if this can be achieved without sacrificing the priority of maintaining inmate employment.

It has also often been suggested that FPI has an adverse impact on private industry and labor because of low inmate wages. Actually, just the opposite is true. Low wages provide FPI the opportunity to operate in a labor intensive manner and to employ more inmates with less output of finished goods. The sales per inmate in FPI is one-third to one-fourth that of the private sector worker. If inmate wages increased significantly, sales would have to increase as well. The alternative would be to decrease inmate employment, thereby defeating the first public policy objective outlined previously.

In the spirit of free trade, and in the interest of lower consumer prices and net domestic job creation, our country imports tens of billions of dollars of products made in countries where the prevailing wage is equal to or lower than what FPI pays its inmate workers. In light of this broad international economic policy and the apparently net positive effects of such agreements as NAFTA and GATT, we do not believe that FPI's sales, which in 1997, represented only 6/1000 of one percent of the national gross domestic product, represent an adverse impact.

When FPI's statute was enacted in 1934, the concerns about the impact of low inmate wages on the domestic economy were very real. Considering the current global economic situation, characterizing today's impact as insignificant would be an overstatement especially in light of the influx of foreign made goods produced with low cost labor.

3. Reduce the taxpayer burdens associated with incarceration. This very important objective is currently achieved three ways. First, by statutory obligation and operational practice, FPI pays all operating costs from its sales. If this requirement were mitigated or eliminated, additional appropriated funds would be necessary to pay for replacement programs. Currently, FPI's self-sustaining operation saves taxpayers approximately $150-200 million per year. Thus,

we appreciate that HR 4100 retains the requirement that the prison industries program be financially self-sustaining.

Second, FPI also requires its inmate workers to pay 50 percent of their earnings toward court-ordered obligations such as fines, victim restitution and child support. Last year, FPI inmates paid nearly $2 million toward these obligations, generating funds which might otherwise have been foregone and which reduced public assistance costs. We believe that HR 4100's focus on maximizing these types of prisoner contributions from their earnings is very appropriate.

Third, as mentioned before, research has proven that inmates who work in FPI more successfully re-integrate into society upon release. As indicated by Harvard University Professor Richard Freeman at the recent National Prison Industries Forum, even modest recidivism reductions have huge cost benefits for society.

We believe strongly that no matter how contentious the debate, and no matter how creative the alternatives, each proposal for prison industries change must be "reality checked" against the

three public policy objectives articulated above. These objectives should represent the foundation upon which successful change is built.

Regrettably, in our view, HR 2758 does not meet this reality check. It advocates the wholesale elimination of mandatory source, but provides nothing offsetting the loss of inmate jobs that loss of mandatory source may cause. Unlike HR 4100, HR 2758 provides for FPI to absorb all the pain and the private sector to realize all the gain. There are no provisions in HR 2758 that monitor the inmate employment levels of FPI and ensure that the impact of the bill will not decrease current levels. As the Director of BOP, I must stress that I cannot support any legislation which would cause a decrease in the percentage of inmates employed by FPI, our most significant correctional program. I am supportive of HR 4100 in this respect because it allows FPI to pursue new initiatives while ensuring that inmate employment levels are protected.

Having discussed these three public policy objectives, I would also like to address two apparent underlying premises of HR 4100: (1) if offered sufficient incentive, the private sector would

employ substantial quantities of inmate labor; and (2) a private, non-profit company could more successfully manage the Federal prison industry program.

Regarding the first premise, there is obviously a very limited track record of private sector employment of inmate labor anywhere in this country. We believe that the venture is certainly worth undertaking. Our confidence level in the prospects for success will depend, in part, on the nature of the feedback this Subcommittee receives from private sector businesses and associations regarding the incentives the bill provides for their employment of inmates.

Provided that sufficient incentives are included in this bill, we recognize that prison industry officials have a responsibility to re-orient their efforts from marketing their products and services to marketing their inmate labor as a prospective private sector economic asset. We agree with this strategy and are committed to do our full share in making such a venture successful.

Regarding the second premise, that a non-governmental entity could more successfully manage our prison industry programs, there is experience and data available; however, neither is compelling. As currently drafted, HR 4100 seems to be modeled after the Florida State prison industries program operated by PRIDE Enterprises, a private, non-profit corporation responsible for all state inmate employment. The PRIDE program has been operational since 1981 and is very well respected throughout the correctional industry community. They sell prison made products and services both to state agencies in Florida and other states, and in the commercial market. Inmates providing products to state agencies and services in the commercial market are paid $.20-.55 per hour. (By comparison, FPI inmate wages range from $.23 -1.15 per hour). PRIDE inmates also manufacture products for sale in the commercial market under the Prison Industries Enhancement Certification Program (PIECP). Under this program, inmates are paid minimum to prevailing wages. As of

June 30, 1997, PRIDE had 13 inmates (½ of 1 percent) working in the PIECP program, earning approximately $5.45 per hour.

Despite the perceived advantages of private sector management and the broader market access afforded by the PIECP program, PRIDE employs less than 5 percent of the total eligible prison population (in some Florida prisons, there are no prison industry programs). Thus, it is only one-fifth as successful as FPI (which employs 25 percent of the inmate population) at achieving this high priority public policy objective.

Mr. Chairman, for these reasons, I must admit that I have reservations about FPI not retaining the management of federal prison industry programs as an integral part of the BOP. In my dual role as Director of the BOP and CEO of FPI, I take seriously my responsibility for balancing the various priorities in order to achieve success. To a significant degree, FPI's success can be attributed to its integral relationship to the BOP, which, in turn, has generated strong support among all levels of the agency. We are proud of FPI's track record to date and believe that FPI is absolutely capable of successfully implementing the new authorities outlined in your bill. If ultimately, a different form of prison industry management is adopted, it should be done carefully and strategically so as to not erode our potential for successfully employing inmates and managing the burgeoning inmate population.

We are also concerned that the time schedules proposed in this bill may be too aggressive, given the number of new activations the BOP has planned in the next few years. We need to further evaluate the time schedules proposed in the bill in light of these new activations.

Finally, I want to indicate that we have no objection to a change in the size or composition of the FPI Board of Directors. We think it is very important, however, that no matter the Board's size nor what constituency interest the members are selected to represent, it must remain clear that they have a fiduciary responsibility to the corporation and an administrative

responsibility to the BOP for employing the greatest number of inmates practicable.

Mr. Chairman, I appreciate the hard work which went into crafting your bill. Not everything is as we would have written it and it represents a major challenge for FPI. Taken as a whole, however, we believe that it provides important opportunities to mutually address the concerns of the private sector and the public policy objectives of prison industry programs. Again, since we do not believe HR 2758 will successfully balance these priorities, we are opposed to its adoption.

Mr. Chairman, that concludes my remarks. I appreciate the opportunity to provide comments and we look forward to working further with you and your staff on this important initiative. I would be happy to answer any questions you or the other

Subcommittee Members may have.

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