SPEAKERS CONTENTS INSERTS Tables
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57–231
1999
PRISON INDUSTRY REFORM LEGISLATION
HEARING
BEFORE THE
SUBCOMMITTEE ON CRIME
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
ON
H.R. 4100 and H.R. 2758
JUNE 25, 1998
Serial No. 96
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Printed for the use of the Committee on the Judiciary
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
BILL McCOLLUM, Florida
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR SMITH, Texas
STEVEN SCHIFF, New Mexico
ELTON GALLEGLY, California
CHARLES T. CANADY, Florida
BOB INGLIS, South Carolina
BOB GOODLATTE, Virginia
STEPHEN E. BUYER, Indiana
ED BRYANT, Tennessee
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
ASA HUTCHINSON, Arkansas
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
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JAMES E. ROGAN, California
LINDSEY O. GRAHAM, South Carolina
MARY BONO, California
JOHN CONYERS, Jr., Michigan
BARNEY FRANK, Massachusetts
CHARLES E. SCHUMER, New York
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
STEVEN R. ROTHMAN, New Jersey
THOMAS E. MOONEY, Chief of Staff-General Counsel
JULIAN EPSTEIN, Minority Staff Director
Subcommittee on Crime
BILL McCOLLUM, Florida, Chairman
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STEPHEN E. BUYER, Indiana
STEVE CHABOT, Ohio
BOB BARR, Georgia
ASA HUTCHINSON, Arkansas
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LINDSEY O. GRAHAM, South Carolina
CHARLES E. SCHUMER, New York
SHEILA JACKSON LEE, Texas
MARTIN T. MEEHAN, Massachusetts
ROBERT WEXLER, Florida
STEVEN R. ROTHMAN, New Jersey
PAUL J. MCNULTY, Chief Counsel
GLENN R. SCHMITT, Counsel
DANIEL J. BRYANT, Counsel
NICOLE R. NASON, Counsel
DAVID YASSKY, Minority Counsel
C O N T E N T S
HEARING DATE
June 25, 1998
TEXT OF BILLS
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H.R. 4100
H.R. 2758
OPENING STATEMENT
McCollum, Hon. Bill, a Representative in Congress from the State of Florida, and chairman, Subcommittee on Crime
WITNESSES
Hawk Sawyer, Kathleen, Director, Federal Bureau of Prisons and Chief Executive Officer, Federal Prison Industries
Lorey, Len, Government Sales Manager, Kimball International
Martin, Larry, President, American Apparel Manufacturers Association
Reynolds, Morgan O., Ph.D., Director, Criminal Justice Center, National Center for Policy Analysis
Rostad, Knut, Co-Founder and President, the Enterprise Prison Institute
Sullivan, Michael J., Secretary of the Department of Corrections, State of Wisconsin
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LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Hawk Sawyer, Kathleen, Director, Federal Bureau of Prisons and Chief Executive Officer, Federal Prison Industries: Prepared statement
Lorey, Len, Government Sales Manager, Kimball International: Prepared statement
Martin, Larry, President, American Apparel Manufacturers Association: Prepared statement
Reynolds, Morgan O., Ph.D., Director, Criminal Justice Center, National Center for Policy Analysis: Prepared statement
Rostad, Knut, Co-Founder and President, the Enterprise Prison Institute: Prepared statement
Sullivan, Michael J., Secretary of the Department of Corrections, State of Wisconsin: Prepared statement
APPENDIX
Material submitted for the record
PRISON INDUSTRY REFORM LEGISLATION
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THURSDAY, JUNE 25, 1998
House of Representatives,
Subcommittee on Crime,
Committee on the Judiciary,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:15 p.m., in Room 2141, Rayburn House Office Building, Hon. Bill McCollum [chairman of the subcommittee] presiding.
Present: Representatives Bill McCollum, George W. Gekas, Howard Coble, Sheila Jackson-Lee, Martin T. Meehan, and Barney Frank.
Staff present: Paul J. McNulty, Chief Counsel; Glenn R. Schmitt, Counsel; Kara Smith, Staff Assistant, and David Yassky, Minority Counsel.
OPENING STATEMENT OF CHAIRMAN MCCOLLUM
Mr. MCCOLLUM [presiding]. This Subcommittee on Crime will come to order.
I apologize for being a little late starting the hearing today, but we had votes on the floor as some of you may be aware. We do things like that once in a while around here.
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Today, the subcommittee holds a hearing on two bills that would dramatically reform the prison industry programs in this country. Prison industry programs are a crucial part of both of State and Federal correctional programs. The principal purpose of these is to teach work skills to inmate so that on their release from prison, they will be more likely to find and hold jobs and be less likely to become repeat offenders. Studies have shown that inmates who participate in a prison industry program have a significantly lower recidivism rate than those who do not.
And there are other benefits to these programs. Through them prisoners can earn income to support their families and pay restitution and fines, and I believe that prison industries, if used correctly, can raise revenues to defray some of the costs of incarcerating prisoners. I believe it's crucial that the benefits of prison industries be given to the greatest number of inmates possible. In my view, it is in all our interests to help ensure that when an inmate is released from prison, he is less likely to commit crimes.
It's important to note that these benefits make America's prison industry programs so unique. I have visited prisons around the country and talked with dozens of inmates participating in these factories behind fences. Without exception, these offenders have expressed their appreciation for the opportunity to engage in meaningful labor. But I'm also very well aware that in many cases prison industries often compete for business with small struggling businesses and companies which employ American workers.
In the past, Congress has attempted to balance these interests by limiting the sale of goods made by Federal Prison Industries to Executive Branch agencies only. In return for this limitation, Congress has required these agencies to purchase a portion of the goods they need from FPI. State prison industry programs are similarly limited except for pilot programs, the so-called PIE Program, that allows prison-made goods to be sold in the commercial market under very limited conditions. In my view, that program has not been as successful as we would like.
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A wholesale restructuring of the prison industry program is needed. That's why I've introduced H.R. 4100, the Free Market Prison Industries Reform Bill of 1998. Under this bill, for the first time, the private sector will be encouraged to participate in Federal prison industry programs. The bill requires that the Bureau of Prisons invite private companies to bid for the right to operate a Federal industry program at all new Federal prisons.
These companies would employ inmate labor to make their goods and be permitted to sell these goods on the open market. The successful bidder would compensate the Bureau of Prisons for the opportunity to utilize the inmate labor at the facility. The Attorney General would determine the amount of this compensation to be distributed as wages to inmates working in the industry. The rest of the compensation would be used to be pay victim restitution, to support inmate families, and for the cost of room and board.
I believe this could be a model for all prison industry programs. The bill that I have introduced will also require the Bureau of Prisons to begin offering existing prison industries to the private sector to be operated in the same way. Under the bill, eventually, all prison industry programs at Federal prisons would be privately operated.
Until private companies could be found to run existing industries, however, FPI is authorized to continue to operate the industry. So, for the first time FPI will now be authorized to sell goods in the open market.
An important aspect of H.R. 4100 is the elimination of the mandatory source preference at all new facilities and at any existing facilities that choose to sell goods on the open market. The bill also begins to phase out the use of mandatory-source preference at all remaining facilities setting benchmarks for the reductions and the use of the preference which must be met until the preference is completely eliminated at all facilities.
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Further, the bill benefits State prison industries by lifting Federal restrictions on the interstate transportation goods made in these prisons. As a result of these changes, states may also invite private companies to operate their prison industry programs and sell the goods made there in the open market. To take advantage of these provisions however, states must eliminate any mandatory source preferences they impose on their state agencies and departments within 10 years.
The bill also repeals the existing PIE Program that authorizes some state industries to sell their goods in the open market, which as I've said I do not believe have lived up to its potential, but obviously we've replaced if this bill were to become law with something far more broadly based.
At today's hearing, we'll also consider a bill introduced by Representative Peter Hoekstra of Michigan and co-sponsored by several members, including Mr. Coble and Mr. Frank. As I read the bill, it will reduce the amount of work being performed at Federal Prison Industries and will preserve the status quo in the State prison industry program.
Obviously, if I am right in this speculation, I have some serious reservations about the bill, which is why I introduced one my self. But that's why we're here to today; to have a full and fair debate. There's no pretense that there is the exactly correct solution to the problems at hand in either of these bills. I take no particular pride of authorship about the one I introduced, but I do believe that the general direction we need to head is clearly laid forth in that bill, and we need to discuss it. We need to reduce recidivism in this country. We need to do that by engaging more prisoners in work. We need to engage more prisoners in work that's meaningful and we need to do it in a way that's fair, and a way that does not discriminate, and a way that does not unduly affect certain industries in the private sector of our Nation.
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And so, I want to take a moment to this time to thank the witnesses who are appearing today for their cooperation and attending the hearing on fairly short notice, and for allowing us to move it around a little bit. Today has become a very onerous day. I kind of anticipated it might be, and I want to express my appreciation to them for their willingness to move their schedules and accommodate this.
[The bills, H.R. 4100 and H.R. 2758, follow:]
105TH CONGRESS
2D SESSION
H.R. 4100
To amend title 18, United States Code, with respect to the employment of
Federal prisoners, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 19, 1998
MR. MCCOLLUM introduced the following bill; which was referred to the Committee on the Judiciary
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A BILL
To amend title 18, United States Code, with respect to the employment of Federal prisoners, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the 'Free Market Prison Industries Reform Act of 1998'.
SEC. 2. GENERAL PROVISIONS RELATING TO STRUCTURE AND FUNCTION OF FEDERAL PRISON INDUSTRIES.
Title 18, United States Code, is amended by striking sections 4121 through 4122 and inserting the following:
'' 4121. Definitions
''In this section—
''(1) the term 'industry' means an endeavor that utilizes incarcerated persons to produce one or more goods or provide one or more services, or both;
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''(2) the term 'product' includes services;
''(3) the term 'prisoner contributions' means an amount which shall be used for—
''(A) payment of fines and restitution owed by the prisoner pursuant to court order;
''(B) reasonable charges for room and board, as determined under rules made by the Attorney General;
''(C) allocations for support of the inmate's family pursuant to statute, court order, or agreement by the inmate; and
''(D) contributions, of not less than 5 percent but not more than 20 percent of the fee paid on account of the inmate, to any fund established by law to compensate the victims of crime;
''(4) the term 'assembled good' means a good which is the result of the assembly of fabricated goods, as such terms are defined in 19 CFR 10.11 et seq.; and
''(5) the term 'foreign-made good' means a good that the Director of Bureau of Labor Statistics determines is a product of which 95% or more of the amount sold in the United States is fabricated in a foreign place.
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'' 4122. Administration of Federal Prison Industries
''(a)(1) Federal Prison Industries is established as a Government corporation of the District of Columbia.
''(2) Federal Prison Industries shall be administered by a board of 7 directors appointed by the President to serve at the will of the President without compensation. The President, in appointing such directors, shall consider for appointment a person recommended by each of the following:
''(A) The Speaker of the House of Representatives.
''(B) The minority leader of the House of Representatives.
''(C) The majority leader of the Senate.
''(D) The minority leader of the Senate.
''(b) Federal Prison Industries shall provide industries operated as a Limited Sales Project, Private Sector Project, or a Prison Industry Enhancement Project. The goal of such industries shall be to generate the greatest amount of prisoner contributions as is reasonably possible and provide employment for the greatest number as is reasonably possible of those inmates who are eligible to work who are—
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''(1) in the custody of the Bureau of Prisons;
''(2) convicted by general courts martial and confined in any institution within the jurisdiction of any department or agency comprising the Department of Defense, to the extent and under terms and conditions agreed upon by the Secretary of Defense, the Attorney General, and Federal Prison Industries; or
''(3) confined in any penal or correctional institution of the District of Columbia to the extent and under terms and conditions agreed upon by the District of Columbia Department of Corrections, the Attorney General, and Federal Prison Industries.
''(c) Federal Prison Industries shall so conduct its operations so that it realizes annual positive net revenues.
''(d) Federal Prison Industries shall avoid capturing more than a reasonable share of the market among Federal departments, agencies, and institutions for any specific product of a Limited Sales Project.
''(e)(1) Any department or agency of the Department of Defense may, without exchange of funds, transfer to Federal Prison Industries any property or equipment suitable for use in performing the functions and duties covered by agreement entered into under subsection (b)(2).
''(2) The Department of Corrections of the District of Columbia may, without exchange of funds, transfer to the Federal Prison Industries any property or equipment suitable for use in performing the functions and duties covered by an agreement entered into under subsection (b)(3).
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''(f) Nothing in this chapter shall prohibit any industry from offering for sale on the open market—
''(1) assembled goods; or
''(2) foreign-made goods.''.
''(g) Federal Prison Industries is not required to comply with the Competition in Contracting Act of 1984 or with the Federal Acquisition Regulations.
''(h) Federal Prison Industries may provide vocational training for qualified inmates without regard to their Federal Prison Industries work or other assignments.''.
SEC. 3. EXISTING INDUSTRIES.
Chapter 307 of title 18, United States Code, is amended by adding at the end the following:
'' 4130. Limited Sales Projects
''(a) Any industry not operated as a Private Sector Project or a Prison Industry Enhancement Project shall be operated as a Limited Sales Project.
''(b) An industry operated as a Limited Sales Project shall—
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''(A) sell its products only to—
''(i) the Federal Government;
''(ii) State and local governmental entities; or
''(iii) outside the United States;
''(B) be operated directly by Federal Prison Industries; and
''(C) be located in a facility provided by the Bureau of Prisons.
SEC. 4. NEW INDUSTRIES.
(a) IN GENERAL.—Chapter 307 of title 18, United States Code, is amended by adding at the end the following:
'' 4131. Private Sector Projects
''(a) Except as provided in subsection (g), each industry located at a facility activated by the Attorney General on or after the date which is one year after the date of the enactment of the Prison Industries Reform Act of 1998 shall be operated as a Private Sector Project. Each industry located at a facility that was activated before that date may be operated as a Private Sector Project.
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''(b) An industry operated as a Private Sector Project shall—
''(1) sell its products generally on the open market;
''(2) be operated by a private person under a contract with Federal Prison Industries for the use of prison labor; and
''(3) be located in a facility operated by the Bureau of Prisons or a private person under a contract with the Attorney General, or elsewhere as may be determined by the Attorney General.
''(c) Except as otherwise provided in this section, Federal Prison Industries shall enter into a contract with a private person to operate the Private Sector Project on terms beneficial to the mission of Federal Prison Industries. The contract shall include a provision for payment of a fee for the use of the services of the inmates working in that Project.
''(d) Before entering into a contract with a private person under subsection (c), Federal Prison Industries shall prepare and make public a notice soliciting private persons to submit bids for the contract. Federal Prison Industries shall submit that notice to the committees on the judiciary of the House of Representatives and the Senate on or before the date such notice is made public.
''(e) When reviewing bids submitted by a private person to operate and manage a Private Sector Project, Federal Prison Industries shall give preferences to private persons who propose to use the Private Sector Project for operations that otherwise would be located in a foreign place, unless Federal Prison Industries determines that other bids are of greater benefit to the mission of Federal Prison Industries.
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''(f) The Attorney General may determine the portion of any compensation paid by the private person pursuant to a contract under subsection (c) that will be distributed as wages to inmates who work in the industry. The remainder of such compensation shall be retained by Federal Prison Industries and distributed as prisoner contributions in accordance with section 4133.
''(g) If Federal Prison Industries is unable to enter into a contract with a private person with respect to a Private Sector Project within 18 months after the latter of the date on which notice is given pursuant to subsection (d) or on which the Attorney General activates the facility at which the industry is to be located, Federal Prison Industries may operate that industry as a Prison Industry Enhancement Project.
'' 4132. Prison Industry Enhancement Projects
''(a) Each industry that is in operation on the day which is one year after the date of the enactment of the Prison Industries Reform Act of 1998 and located at a facility activated before such day may be operated as a Prison Industry Enhancement Project. Any industry described in section 4131(g) and which Federal Prison Industries determines will not be operated as a Private Sector Project shall be operated as a Prison Industry Enhancement Project.
''(b) An industry operated as a Prison Industry Enhancement Project' shall—
''(1) sell its products generally on the open market;
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''(2) be operated by Federal Prison Industries; and
''(3) be located in a facility operated by the Bureau of Prisons or a private person under a contract with the Attorney General.
''(c) The Attorney General may determine the portion of the net revenues of the Prison Enhancement Project to be distributed as wages to inmates who work in the industry. The remainder of such revenue shall be retained by Federal Prison Industries and distributed as prisoner contributions in accordance with section 4133.
''(d) Not later than 2 years after the date of the enactment of the Prison Industries Reform Act of 1998, Federal Prison Industries shall operate not less than 5 industries existing on such date as Private Sector Projects or Prison Industry Enhancement Projects. Not later than 3 years after such date, Federal Prison Industries shall operate not less than 20 such industries as Private Sector Projects or Prison Industry Enhancement Projects.'.
(b) ELIMINATION OF OLD PROVISION RESPECTING NEW INDUSTRIES.—Title 18, United States Code, is amended by striking section 4123.
SEC. 5. CONFORMING AMENDMENTS.
(a) MANDATORY SOURCE REQUIREMENT.—Section 4124 of title 18, United States Code, is amended—
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(1) in subsection (a)—
(A) by striking ''The'' and inserting ''Except as otherwise provided by law, the'';
(B) by inserting ''(in each of the executive, legislative, and judicial branches)'' after ''United States''; and
(C) by striking ''the industries'' and inserting ''Limited Sales Projects'';
(2) in subsection (d), by striking ''products and services'' and inserting ''products of Limited Sales Projects''; and
(3) by adding at the end the following:
''(e)(1) Subsection (a) does not require the purchase by Federal entities of any assembled goods.
''(2) Subsection (a) does not require the purchase by Federal entities of any foreign-made goods.''.
(b) PRISON INDUSTRIES FUND.—Section 4126(c) of title 18, United States Code, is amended—
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(1) by inserting ''(in an amount not greater than that provided in chapter 81 of title 5)'' after ''operations, and compensation'';
(2) by striking the period at the end of paragraph (4) and inserting a semicolon;
(3) by striking the matter in subsection (c) that follows paragraph (4) and inserting the following:
''(5) in paying, under rules and regulations promulgated by the Attorney General, prisoner contributions.''.
SEC. 6 CLERICAL AMENDMENTS.
The table of sections for chapter 307 of title 18, United States Code, is amended—
(1) so that the item relating to section 4121 reads as follows:
''4121. Definitions.''.
(2) by striking the item relating to section 4123; and
(3) by inserting after the item relating to section 4129 the following new items:
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''4130. Limited Sales Projects.
''4131. Private Sector Projects.
''4132. Prison Industry Enhancement Projects.''.
SEC. 7. MODIFICATION OF PROHIBITION ON SALES OF PRISONER-MADE PRODUCTS.
Section 1761 of title 18, United States Code, is amended by striking subsections (b) through (d) and inserting the following:
''(b)(1) This section does not apply to good, wares, or merchandise manufactured or produced, or services provided, by inmates at an industry—
''(A) provided by Federal Prison Industries; or
''(B) provided by a State, unless—
''(i) the industry is operated by a person other than the State; and
''(ii) after September 30, 2008, the State does not have in effect any requirement that the departments and agencies of the State purchase a portion of their requirements for products produced by any industry provided by that State.
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''(2) As used in this subsection, the term 'State' means a State of the United States and any commonwealth, territory, or possession of the United States.''.
SEC. 8. STUDY OF FOREIGN-MADE GOODS.
The Director of the Bureau of Labor Statistics shall make a initial determination of those goods (described by Standard Industrial Product Code published by the Office of Management and Budget) of which 95 percent or more of the amount sold in the United States are fabricated in a foreign place. The Director shall report that determination to Congress, not later than 180 days after the date of the enactment of the Prison Industries Reform Act of 1998.
SEC. 9. RESTRUCTURING.
(a) PLAN.—The Attorney General shall, not later than one year after the date of the enactment of this Act, develop and submit to Congress a plan, together with any recommendations for any necessary implementing legislation, for restructuring Federal Prison Industries. The plan shall provide—
(1) for the reduction in the use of Limited Sales Projects measured as a percentage of the total sales of Federal Prison Industries (or any successor) by 40 percent before the end of the 5-year period beginning on the date of the enactment of this Act;
(2) except as provided in subsection (b)—
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(A) for the phase out of the use of Limited Sales Projects by September 30, 2008; and
(B) for the phase out of the use of Prison Industry Enhancement Projects by September 30, 2013;
(3) the creation of a non-governmental entity to succeed to the rights and obligations of Federal Prison Industries;
(b) ALTERNATE PROVISIONS OF PLAN.—
(1) GENERALLY.—The plan may provide that if the number of inmates employed in industries provided by Federal Prison Industries 3 years after the submission date is less than the number of inmates so employed on the submission date, then—
(A) the 40 percent reduction described in subsection (a)(1) is not required and Limited Sales Projects may also be used to provide industries after September 30, 2008, but to no greater extent (measured as a percentage of the total sales of Federal Prison Industries (or any successor)) than used on the submission date; and
(B) Prison Industry Enhancement Projects may also be used to provide industries after September 30, 2013.
(2) DEFINITION.—as used in this subsection, the term ''submission date'' is the date the plan is submitted to Congress under subsection (a).
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(c) IMPLEMENTATION OF PLAN.—To the extent the plan may be implemented without the enactment of legislation, the plan shall go into effect 180 days after the date of its submission to Congress, unless Congress shall by law otherwise provide.
105TH CONGRESS
1ST SESSION
H.R. 2758
To amend title 18, United States Code, to minimize the unfair competition for Federal contracting opportunities between Federal Prison Industries and private firms (especially small business concerns), to provide to Federal agencies in their dealings with Federal Prison Industries the contract administration tools generally available to assure quality performance by their other suppliers, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 29, 1997
Mr. HOEKSTRA (for himself, Mr. FRANK of Massachusetts, Mr. COLLINS, Mrs. MALONEY of New York, Mr. HILLEARY, Mr. SCHUMER, Mr. COBLE, Mr. CLAY, Mr. BARTLETT of Maryland, Mr. HAMILTON, Mr. DEAL of Georgia, Mr. TORRES, Mr. MANZULLO, Mr. DEFAZIO, Mr. STUMP, Mr. EHLERS, Mr. OXLEY, Mr. HEFLEY, Mr. TAYLOR of North Carolina, Mr. EWING, Mr. UPTON, Mr. EVERETT, Mr. ENGLISH of Pennsylvania, Mr. CHAMBLISS, Mr. LINDER, Mr. NETHERCUTT, Mr. CRANE, Mr. RIGGS, Mr. HOSTETTLER, Mrs. EMERSON, Mr. BILBRAY, Mr. BURR of North Carolina, Mr. KNOLLENBERG, and Mr. BALLENGER) introduced the following bill; which was referred to the Committee on the Judiciary
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A BILL
To amend title 18, United States Code, to minimize the unfair competition for Federal contracting opportunities between Federal Prison Industries and private firms (especially small business concerns), to provide to Federal agencies in their dealings with Federal Prison Industries the contract administration tools generally available to assure quality performance by
their other suppliers, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ''Federal Prison Industries Competition in Contracting Act of 1997''.
SEC. 2. GOVERNMENT-WIDE PROCUREMENT POLICY RELATING TO PURCHASES FROM FEDERAL PRISON INDUSTRIES.
Section 4124 of title 18, United States Code, is amended to read as follows:
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'' 4124. Government-wide procurement policy relating to purchases from Federal Prison Industries
''(a) IN GENERAL.—Purchases from Federal Prison Industries, Incorporated, a wholly owned Government corporation, as defined in section 9101(3)(E) of title 31, may be made by a Federal department or agency only in accordance with this section.
''(b) SOLICITATION AND EVALUATION OF OFFERS AND CONTRACT AWARDS.—(1) When a procurement activity of a Federal department or agency has a requirement for a specific product or service that is authorized to be offered for sale by Federal Prison Industries (in accordance with section 4122 of this title) and is listed in the catalog referred to in subsection (h), the procurement activity shall solicit an offer from Federal Prison Industries, if the purchase is expected to be in excess of the micro-purchase threshold as defined by section 32(f) of the Office of Federal Procurement Policy Act (41 U.S.C. 428(f)).
''(2) A contract award for such product or service shall be made using competitive procedures in accordance with the specifications and evaluation factors specified in the solicitation (or other request for offers), unless a determination is made by the Attorney General pursuant to paragraph (3).
''(3) The procurement activity shall negotiate with Federal Prison Industries on a noncompetitive basis for the award of a contract if the Attorney General determines that—
''(A) Federal Prison Industries cannot reasonably expect to receive the contract award on a competitive basis; and
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''(B) the contract award is necessary to maintain work opportunities otherwise unavailable at the penal or correctional facility at which the contract is to be performed to prevent circumstances that could reasonably be expected to significantly endanger the safe and effective administration of such facility.
''(4) A contract award shall be made with Federal Prison Industries if the contracting officer for the procurement activity determines that—
''(A) the prison-made product or service to be furnished will meet the requirements of the procurement activity (including any applicable prequalification requirements and all specified commercial or governmental standards pertaining to quality, testing, safety, serviceability, and warranties);
''(B) timely performance of the contract can be reasonably expected; and
''(C) the contract price does not exceed a current market price.
''(5) A determination by the Attorney General pursuant to paragraph (3) shall be—
''(A) supported by specific findings by the warden of the penal or correctional institution at which a Federal Prison Industries workshop is scheduled to perform the contract;
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''(B) supported by specific findings by Federal Prison Industries regarding why it does not expect to win the contract on a competitive basis; and
''(C) made and reported in the same manner as a determination made pursuant to section 303(c)(7) of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 253(c)(7)).
''(6) If the Attorney General has not made the determination described in paragraph (3) within 30 days after Federal Prison Industries has been informed of a contracting opportunity by a procurement activity, the procurement activity shall conduct a procurement for the product in accordance with the procedures generally applicable to such procurements by the procurement activity.
''(c) COMPETITIVE OFFERS FROM FEDERAL PRISON INDUSTRIES.—A timely offer from Federal Prison Industries shall be eligible for award in accordance with the specification and evaluation factors specified in any competitive solicitation.
''(d) PERFORMANCE BY FEDERAL PRISON INDUSTRIES.—Federal Prison Industries shall be required to perform its contractual obligations under a contract awarded by a Federal department or agency to the same extent as any other contractor under such a contract.
''(e) FINALITY OF CONTRACTING OFFICER'S DECISION.—(1) A decision by a contracting officer regarding the award of a contract to Federal Prison Industries or relating to the performance of such contract shall be final, unless reversed on appeal pursuant to paragraph (2) or (3).
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''(2) The Chief Executive Officer of Federal Prison Industries may appeal to the head of a Federal department or agency a decision by a contracting officer not to award a contract to Federal Prison Industries pursuant to subsection (b)(4). The decision of the head of a Federal department or agency on appeal shall be final.
''(3) A dispute between Federal Prison Industries and a procurement activity regarding performance of a contract shall be subject to—
''(A) alternative means of dispute resolution pursuant to subchapter IV of title 5; or
''(B) final resolution by the board of contract appeals having jurisdiction over the procurement activity's contract performance disputes pursuant to the Contract Disputes Act of 1978 (41 U.S.C. 601 et seq.).
''(f) REPORTING OF PURCHASES.—Each Federal department or agency shall report purchases from Federal Prison Industries to the Federal Procurement Data System (as referred to in section 6(d)(4) of the Office of Federal Procurement Policy Act (41 U.S.C. 405(d)(4))) in the same manner as it reports to such System any acquisition in an amount in excess of the simplified acquisition threshold (as defined by section 4(11) of the Office of Federal Procurement Policy Act (41 U.S.C. 403(11))).
''(g) CATALOG OF PRODUCTS.—Federal Prison Industries shall publish and maintain a catalog of all specific products and services that it is authorized to offer for sale. Such catalog shall be periodically revised as products and services are added or deleted by its board of directors (in accordance with section 4122(b) of this title).''.
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SEC. 3. PUBLIC PARTICIPATION REGARDING EXPANSION PROPOSALS BY FEDERAL PRISON INDUSTRIES.
Section 4122(b) of title 18, United States Code, is amended—
(1) by redesignating paragraph (6) as paragraph (10); and
(2) by striking paragraphs (4) and (5) and inserting the following paragraphs:
''(4) A decision to authorize Federal Prison Industries to offer a new specific product or service or to expand the production of an existing product or service shall be made by its board of directors in conformance with the requirements of subsections (b), (c), (d), and (e) of section 553 of title 5, and this chapter.
''(5)(A) The corporation shall prepare and furnish to the board of directors for its consideration a detailed analysis of the probable impact on private sector firms and their employees of a proposal to authorize the sale of a new specific product or service or to expand production of a currently authorized product or service.
''(B) The analysis made pursuant to subparagraph (A) shall identify and consider—
''(i) the number of vendors that currently meet the requirements of the Federal Government for the specific product or service;
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''(ii) the proportion of the Federal Government market for the specific product or service currently furnished by small businesses during the previous 3 fiscal years;
''(iii) the share of the Federal market for the specific product or service projected for Federal Prison Industries for the fiscal year in which production or performance will commence (or expand) and the subsequent 3 fiscal years;
''(iv) whether the industry producing the product in the private sector—
''(I) has an unemployment rate higher than the national average;
''(II) has a rate of employment for production workers that has consistently shown an increase during the previous 5 years; or
''(III) has an import to domestic production ratio of 25 percent or greater;
''(v) the total volume of domestic production during each of the 5 previous years in the industry producing the specific product in the private sector;
''(vi) whether the specific product is an import-sensitive product;
''(vii) the requirements of the Federal Government and the demands of entities other than the Federal Government for the specific product or service during the previous 3 fiscal years;
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''(viii) the projected growth (or decline) in the demand of the Federal Government for the specific product or service;
''(ix) the capability of the projected demand of the Federal Government for the specific product or service to sustain both Federal Prison Industries and private vendors; and
''(x) whether authorizing the production of the new product or performance of a new service will provide inmates with the maximum opportunity to acquire knowledge and skill in trades and occupations that will provide them with a means of earning a livelihood upon release.
''(C)(i) The board of directors may not approve a proposal to authorize the production and sale of a new specific product (or continued sales of a previously authorized product) unless the product to be furnished is a prison-made product.
''(ii) The board of directors may not approve a proposal to authorize the production and sale of a new prison-made product or to expand production of a currently authorized product if the product is—
''(I) produced in the private sector by an industry which has reflected during the previous year an unemployment rate above the national average; or
''(II) an import-sensitive product.
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''(iii)(I) Federal Prison Industries is prohibited from furnishing construction services relating to buildings, structures, or other real property.
''(II) For purposes of this clause, the term 'construction' has the meaning given such term by section 36.102 of the Federal Acquisition Regulation (48 C.F.R. part 36.102), as in effect on July 1, 1997 (including the repair, alteration, or maintenance of real property in being).
''(6) To provide further opportunities for participation by interested parties, the board of directors shall—
''(A) give additional notice of a proposal to authorize the production and sale of a new product or expand the production of a currently authorized product in a publication designed to most effectively provide notice to private vendors and labor unions representing private sector workers who could reasonably be expected to be affected by approval of the proposal, which notice shall offer to furnish copies of the analysis required by paragraph (5) and shall solicit comment on the analysis;
''(B) solicit comments on the analysis required by paragraph (5) from trade associations representing vendors and labor unions representing private sector workers who could reasonably be expected to be affected by approval of the proposal to authorize the production and sale of a new product or expand the production of a currently authorized product; and
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''(C) afford an opportunity, on request, for a representative of an established trade association, labor union, or other representatives of private industry to present comments on the proposal directly to the board of directors.
''(7) The corporation shall provide to the board of directors its recommendation regarding action on the proposal taking into consideration the comments received.
''(8) The board of directors shall consider a proposal to authorize the sale of a new product or service (or to modify the volume of sales for a currently authorized product or service) and take any action with respect to such proposal, during a meeting that is open to the public, unless closed pursuant to section 5526 of title 5.
''(9) In conformity with the requirements of paragraphs (5) through (8) of this subsection, the board of directors may—
''(A) authorize the donation of products produced by Federal industries and available for sale; or
''(B) authorize the production of a new specific product for donation.''.
SEC. 4. FEDERAL PRISON INDUSTRIES REPORT TO CONGRESS.
Section 4127 of title 18, United States Code, is amended to read as follows:
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'' 4127. Federal Prison Industries report to Congress
''(a) IN GENERAL.—Pursuant to chapter 91 of title 31, the board of directors of Federal Prison Industries shall submit an annual report to Congress on the conduct of the business of the corporation during each fiscal year and the condition of its funds during the fiscal year.
''(b) CONTENTS OF REPORT.—In addition to the matters required by section 9106 of title 31, and such other matters as the board considers appropriate, a report under subsection (a) shall include—
''(1) a statement of the amount of obligations issued under section 4129(a)(1) of this title during the fiscal year;
''(2) an estimate of the amount of obligations that will be issued in the following fiscal year;
''(3) an analysis of—
''(A) the corporation's total sales for each specific product sold to the Federal departments and agencies;
''(B) the total purchases by each Federal department or agency of each specific product;
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''(C) the corporation's share of such total Federal Government purchases by specific product; and
''(D) the number and disposition of disputes submitted to the heads of the Federal departments and agencies pursuant to section 4124(e) of this title;
''(4) an analysis of the inmate workforce that includes—
''(A) the number of inmates employed;
''(B) the number and percentage of employed inmates by the term of their incarceration; and
''(C) the various hourly wages paid to inmates employed with respect to the production of the various specific products authorized for production and sale; and
''(5) data concerning employment obtained by former inmates upon release to determine whether the employment provided by Federal Prison Industries during incarceration provided such inmates with knowledge and skill in a trade or occupation that enabled such former inmate to earn a livelihood upon release.
''(c) PUBLIC AVAILABILITY.—Copies of an annual report under subsection (a) shall be made available to the public at a price not exceeding the cost of printing the report.''.
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SEC. 5. DEFINITIONS.
Chapter 307 of title 18, United States Code, is amended by adding at the end the following new section:
'' 4130. Definitions
''As used in this chapter—
''(1) the term 'assembly' means the process of uniting or combining articles or components (including ancillary finished components or assemblies) so as to produce a significant change in form or utility, without necessarily changing or altering the component parts;
''(2) the term 'current market price' means, with respect to a specific product, the fair market price of the product within the meaning of section 15(a) of the Small Business Act (15 U.S.C. 644(a)), at the time that the contract is to be awarded (verified through appropriate price analysis or cost analysis), including any costs relating to transportation or the furnishing of any ancillary services;
''(3) the term 'import-sensitive product' means a product which, according to Department of Commerce data, has experienced competition from imports at an import to domestic production ratio of 25 percent or greater;
''(4) the term 'labor-intensive manufacture' means a manufacturing activity in the private sector in which the ratio of the value of direct labor to the value of the product prior to shipment exceeds 20 percent;
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''(5) the term 'manufacture' means the process of fabricating from raw or prepared materials, so as to impart to those materials new forms, qualities, properties, and combinations;
''(6) the term 'prison-made products' means specific products that require labor-intensive manufacture or assembly employing Federal prison inmates for not less than 75 percent of the hours of direct labor required for the production of the product;
''(7) the term 'reasonable share of the market' means a share of the total purchases by the Federal departments and agencies, as reported to the Federal Procurement Data System for any specific product during the 3 preceding fiscal years, that does not exceed 20 percent of the Federal market for the specific product;
''(8) the term 'services' has the meaning given the term 'service contract' by section 37.101 of the Federal Acquisition Regulation (48 C.F.R. part 36.102), as in effect on July 1, 1997; and
''(9) the term 'specific product' means a product that is designed and manufactured to meet requirements distinct in function and predominant material of manufacture from another product, as described by—
''(A) the 7-digit classification for the product in the Standard Industrial Classification (SIC) Code (or any successor classification system) published by the Office of Management and Budget (or if there is no 7-digit code classification for a product, the 5-digit code classification); and
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''(B) for purposes of reporting on sales by Federal Prison Industries, the current National Stock Number assigned to such product under the Federal Stock Classification System (including group, part number and section), as determined by the General Services Administration.''.
SEC. 6. IMPLEMENTATION IN THE FEDERAL ACQUISITION REGULATION.
(a) PROPOSED REVISIONS.—Proposed revisions to the Government-wide Federal Acquisition Regulation to implement the amendments made by this Act shall be published not later than 60 days after the date of the enactment of this Act and provide not less than 60 days for public comment.
(b) FINAL REGULATIONS.—Final regulations shall be published not later than 180 days after the date of the enactment of this Act and shall be effective on the date that is 30 days after the date of publication.
(c) PUBLIC PARTICIPATION.—The proposed regulations required by subsection (a) and the final regulations required by subsection (b) shall afford an opportunity for public participation in accordance with section 22 of the Office of Federal Procurement Policy Act (41 U.S.C. 418b).
SEC. 7. RULE OF CONSTRUCTION.
Subsection (e) of section 4124 of title 18, United States Code, as amended by section 2, is not intended to alter any rights of any offeror other than Federal Prison Industries to file a bid protest in accordance with other law or regulation in effect on the date of the enactment of this Act.
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SEC. 8. EFFECTIVE DATE AND APPLICABILITY.
(a) EFFECTIVE DATE.—Except as provided in subsection (b), this Act and the amendments made by this Act shall take effect on the date of enactment of this Act.
(b) APPLICABILITY.—Section 4124 of title 18, United States Code, as amended by section 2, shall apply to any requirement for a product or service offered by Federal Prison Industries needed by a Federal department or agency after the effective date of the final regulations issued pursuant to section 6(b), or after June 30, 1998, whichever is earlier.
SEC. 9. CLERICAL AMENDMENTS.
The table of sections for chapter 307 of title 18, United States Code, is amended—
(1) by inserting in lieu of the item relating to section 4124 the following:
''4124. Government-wide procurement policy relating to purchases from Federal Prison Industries.'';
(2) by inserting in lieu of the item relating to section 4127 the following:
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''4127. Federal Prison Industries report to Congress.'';
and
(3) by adding at the end the following new item:
''4130. Definitions.''.
At this point in time, Mr. Frank, you are a special guest to the subcommittee, a full committee member who is an intricate part of all of this and I would yield to you if you wish to make an opening statement.
Mr. FRANK. Mr. Chairman, I thank you. You are deviating from the normal procedure to accommodate me and I am very appreciative of that.
It is, as you said, a very busy day and we often run into the problem on the last day before a recess of a great deal being crammed in. I've got a simultaneous markup in the banking committee. We have business on the floor, and I must confess that emotionally I wanted to recess about 10 a.m. yesterday morning. But, I appreciate the chance to be here.
I agree this is an important issue, and I must respectfully express my disagreement with the approach outlined in your bill. I must start by saying that I have been trying for a year now to get the answer to a question.
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American law forbids on the whole the importation of goods made with prison labor from overseas. I do not understand what it is about oceans that transforms a bad thing into a good thing. I do not understand why if goods made with prison labor in foreign countries are excludable from America because they are unfair competition and inappropriate, they become a very good thing here in America.
I very much appreciate the consensus that we should provide rehabilitative activities for people in prison. I strongly support that. It is my impression that the rehabilitative effects come mostly from the manufacturing. I assume that the people in the prisons do not do a great deal of marketing. Certainly, not door to door, one would hope, and even telemarketing raises some issues. I say that because one of the provisions in the bill I have cosponsored of the leader of the gentleman from Michigan, Mr. Hoekstra, explicitly allows for donations. We have a good many entities in this society that do charitable works; that provide shelters to the homeless; that provide daycare to very poor people. There are a variety of entities that we have who, in my judgement, benefit from the donation of furniture and of clothing. There are segments of our society that serve the below-market sector, and I believe we should be focusing there.
I have had very legitimate objections to the Prison Industry Program presented to me by the hardworking people in the garment and textile industries.
It has been one of those days. I picked one person's seat and he comes.
The people who work in garment and textiles—not high-wage industries—industries that have been decline quantitatively in this country because of international trade find themselves targeted. We talk about the State prison. I think it's the Oregon blues being widely advertised—the jeans made in prisons in Oregon—come as some disappointment to people who are working in the private sector. And I do not think you resolve that by saying ''well, they are going to pay them the minimum wage,'' but then deduct the cost of their room and board, etcetera. That would hardly be a comparable wage. It would be, I assume, no Social Security payments. It would be no special health benefits, and you would, in fact, be offsetting other costs.
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What you are talking about in the legislation that is the alternative to the bill I've cosponsored is a great expansion of prison labor that will come at the expense of people in the private sector working. So, I believe we should switch the emphasis so that we continue to provide rehabilitative work for people in prisons, but that we aim at giving away a great part of that product. And greatly to expand that and to increase the extent to which prison labor competes with private-sector labor, I think is counterproductive to our effort of keeping up employment in the private sector.
And, as I said, wholly inconsistent with this view that we would exclude the products of prison labor. I assume we are excluding the product of prison labor more than to give a comparative advantage to our prison labor. We are doing it for various morale and economic grounds which seem to me to be equivalent.
So, I am pleased to see the strong support of the AFL–CIO and many elements of the business community for the legislation we offer. Just in summary, I think we should be focusing on rehabilitative work, but that's the physical manufacturing.
And finally, if we are in fact facing financial crisis here and at the states because we have increased the number of prisoners, taking jobs away from working people in the private sector is not a way to resolve that issue. I think that is a mistake in notion. I think we ought to pay out of the public fisk for what we think ought to be done publicly. We should not be increasing competition from this sector which would have enormous advantages, particularly, since they will not be taking away the jobs of people in high tech. They will not be taking away high-end jobs. They will be taking away jobs of people in the furniture industry, in the garment and textile industry. People who cannot afford this further assault on their economic security.
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So, I appreciate your having this hearing, Mr. Chairman, and I look forward to our joining this issue at some future date before the end of this year in the House Judiciary Committee.
Mr. MCCOLLUM. Thank you, Mr. Frank.
Anyone else wish to make an opening statement; Mr. Chabot, Mr. Gekas? Mr. Chabot?
Mr. CHABOT. Yes, very briefly.
I want to thank the chairman for holding this particular hearing.
When I was on the city council back in Cincinnati and on the county commission in Hamilton County, the county within which Cincinnati is located, I was very active in working on programs to make it available for jail inmates to do cleanup work along the interstate highways; to pick up garbage in the parks; and paint guards rails; and all kinds of things. So, I'm a very strong advocate of programs that do have prisoners or inmates working.
Just a couple of points, maybe, in response to some of the points that Mr. Frank brought up about what difference do oceans makes, and you know, are we just as bad as China, for example, I guess by implication because they use prison inmate labor over there.
For one thing, we don't have political prisoners here in the United States, and I think many of the people in China that are working on these things are political prisoners. Also, my understanding is a lot of the prisoners where these folks are working, there in these programs because they want to be. They would rather be working than be sitting in a jail cell. They are also getting—some of them—getting skills that they might be able to take advantage of when they get out of jail and actually get a job. So, I think there are—and I'm sure there are many, many other differences between U.S. prison labor and China, for example.
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I yield back the balance of my time.
Mr. MCCOLLUM. Thank you, Mr. Chabot.
Mr. Meehan.
Mr. MEEHAN. Thank you, Mr. Chairman.
I want to commend you, first of all, for scheduling this hearing on a very important topic; your hard work on H.R. 4100; and for including H.R. 2758 in the scope of today's discussion.
Obviously, there are competing perceptions of what precisely is wrong with the Federal Prison Industries today and thus there are competing remedies for the supposed problems. I happen to believe that the motivations of both sides of this debate are noble, though I prefer the approach of my colleague from Massachusetts, Mr. Frank.
I do share the chairman's strong belief in the value of prison work and training, and I readily believe that this sort of experience would result in lower inmate recidivism rates and higher levels of post-prison employment. Nonetheless, there are clearly other considerations at stake.
Many of us represent districts which are in the midst of very difficult transitions from manufacturing-based to service-based economies. Manufacturing firms and their hard workers are less secure than they have been in a long time, and we simply haven't done a very good job of helping either group survive and prosper in this new information-age economy.
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Accordingly, Mr. Chairman, I'm skeptical of the idea that this is a good time to allow more and more goods manufactured in prisons to compete for market share with furniture and other items made by law-abiding citizens, whether the market be State or local governments, or foreign countries, or the private sector. I'm also skeptical of policies that would enable businesses to use inmate labor to produce their goods in place of union labor. Along these lines, let me add that I see no good reason to delay the demise of sole-source purchasing. If the goal is, indeed, free-market prison industries reform, sole-source purchasing should be abolished immediately.
Finally, I have to wonder whether the goal of increasing prison work and training actually requires greater sales of the products of prison labor to public and private entities, and thus, greater competition with private-sector firms. Surely, inmate labor can occur without exacerbating the economic insecurity experienced by workers and firms in so many of our areas of the country, particularly, older urban areas of our country.
With that, Mr. Chairman, I yield back the balance of my time.
Mr. MCCOLLUM. Thank you very much.
Mr. Gekas.
Mr. GEKAS. I thank the Chair.
My most substantial interest in this issue has to do with the possible answer that prison industries give us, or at least I know that they do, in fact, provide an answer toward the problem of recidivism. Putting the statistics aside for a moment which do verify that indeed prison industries does have an impact—a good impact—on the rates of recidivism, it makes common sense that if we have inmates who are adopting work habits, and ethics, and skills along the way of paying their debt to society, then indeed it is a program that has earned the support of the American public, and it has.
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For those reasons, I generally support the concept of prison industries. I aim to consult further with the chairman himself, who has had an abiding interest in this issue for a long time, on the total impact of the economy. Because I cannot stay for the remainder of this hearing, I will rely on the written statements and those consultations so I can flesh out my final position on these issues.
I thank the Chair.
Mr. MCCOLLUM. Thank you very much.
Mr. Coble.
Mr. COBLE. Thank you, Mr. Chairman.
Mr. Chairman, we've all expressed thanks to you for having conducted this hearing, and I will be no exception. I think this is a worthwhile hearing. Good to have the director back with us. Madam Director, I've talked to you about this. Mr. Chairman, I've talked to you about it. Let me just visit aloud for a moment or two, and then reiterate my concerns.
I think any time one speaks out against the FPI in this manner, ''Oh, he's opposed to rehabilitation.'' Well, that's not the case at all. I'm not unlike Mr. Frank, I'm all in favor of rehabilitation; for preparing inmates to enter the workforce upon their respective releases, and I have no doubt that this program does that. The problem that plagues me, Mr. Chairman, is that I believe that the Federal prison industry enjoys a preferential position compared to the private sector. And I'm concerned, primarily, about textile and furniture industries.
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I think the mandatory sourcing, Mr. Chairman, is a head that continues to rear itself, probably to the detriment of the private sector. When a certain percentage of goods, products manufactured by the Federal Prison Industry must be purchased by certain Federal agencies, no assemblance of competition involved, Madam Director, unless I'm wronged—I'd be glad to hear from you about that—but those are the concerns I have, Mr. Chairman.
I'm glad that you saw fit to include, not only your bill, but the other bill as well, and I look forward to hearing the testimony. I, too, will not be able to stay for the entire hearing because of another meeting, but I thank you again for having conducted this hearing.
Mr. MCCOLLUM. Thank you very much, Mr. Coble, and I thank the witnesses for being patient today.
We'll now hear from our first panel. It consists of Kathleen Hawk Sawyer and Steve Schwalb.
I want to introduce the Director of the Federal Bureau of Prisons, Mrs. Hawk Sawyer. On December 4, 1992, she became the Director of the BOP. She's a career public administrator at the Federal Bureau of Prisons and the sixth director of the bureau since it was established in 1930. As the Bureau of Prison director, Dr. Hawk Sawyer oversees 95 institutions, 30,000 staff members, and is responsible for the confinement of more than 120,000 offenders. She's held numerous positions within the BOP, including serving as warden of the Federal Correctional Institution in Butner, North Carolina, and is the Bureau's Chief of Staff trainee being responsible for the Bureau's three training centers. She received her bachelor's degree in psychology from Wheeling Jesuit College in Wheeling, West Virginia, and her Masters degree and Doctorate of Education degree in Counseling and Rehabilitation from West Virginia University. So we certainly welcome you, Dr. Hawk Sawyer.
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And accompanying you, I know that he's not making a statement, but being very involved with this process, is Steve Schwalb, the Assistant Director of the Federal Bureau of Prisons, and the Chief Operating Officer of the Federal Prison Industries. He's held these positions since 1993. He began his career in the Federal Bureau of Prisons in 1973, and has held numerous positions within the Bureau of Prisons including the Chief of the Office of Inspections and warden of the Federal Correctional Institution in Oakdale, Louisiana. He holds a Bachelors degree in Personnel Management and Labor Relations from the University of Washington. We welcome you too, Mr. Schwalb. And the full text, Dr. Hawk Sawyer, will be admitted into the record. Without objection. I hear none, and it is so ordered.
And please proceed to give us your summary of your thoughts on the legislation that's before us.
Thank you.
I don't believe the mic is on. There we go.
STATEMENT OF KATHLEEN HAWK SAWYER, DIRECTOR, FEDERAL BUREAU OF PRISONS AND CHIEF EXECUTIVE OFFICER, FEDERAL PRISON INDUSTRIES
Ms. HAWK SAWYER. Perhaps that's intentional. [Laughter.]
Mr. MCCOLLUM. I hope not. Thank you.
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Ms. HAWK SAWYER. Good afternoon, Mr. Chairman, and members of the Subcommittee. I certainly appreciate the opportunity to appear before you today to discuss these two bills, H.R. 4100 and H.R. 2758.
I'm testifying today on behalf of the Department of Justice, the Bureau of Prisons, and Federal Prison Industries. The views expressed in this testimony, though, are not necessarily those of the administration for the administration's position on these bills is still currently under review. We appreciate the continuing efforts of the Chairman and the members of the Subcommittee to seek practical ways to maintain our ability to fulfill our statutory responsibility with FPI while reducing the adverse impact on domestic industry and labor.
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's fairly applied and liberally waived its mandatory source. Our Board of Directors has administered elaborate procedures to diversify production and minimize impact on private sector. It costs the taxpayers nothing to operate, and it has a proven record of reducing recidivism. Nonetheless, there's always room for improvement. We're not here to try to defend the status quo, but rather to advocate for measured and responsible change.
In my remarks today, I'd like to first address what I believe are three fundamental public-policy initiatives or objectives that are embodied in the current Federal statute on prison industries and which appear to carryover in H.R. 4100.
The first is to employ as many inmates as practical in prison industries. FPI currently employs approximately 25 percent of the sentenced, medically-able inmates in the Bureau of Prisons. This is four times the national average, and is the highest employment percentage by far of any jurisdiction in the United States. FPI employment directly contributes to the orderly, safe management of Federal prisons and it does reduce inmate idleness.
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As you indicated, Mr. Chairman, research conducted over more than a decade by the Bureau of Prisons demonstrates conclusively that inmates employed in prison industries are substantially more likely upon release to be employed and remain crime-free. This research was also conducted similarly in Utah, New York, Florida, and Wisconsin with equally positive findings. Thus, we appreciate that H.R. 4100 articulates as a very high priority the employment of as many inmates as is reasonably possible.
The second public policy objective in the bill is to minimize any adverse impact on private-sector industry and labor. Prison industry programs at the Federal and state level do not have a net adverse impact on private sector. In fact, independent, economic studies conducted in Ohio, New York, and in Canada have concluded that these programs have a net positive gain, both economically and in the creation of civilian jobs. Critics have offered anecdotes, occasionally, to support their contention of adverse impact. In fact, publicly-available data regarding the two most vocal industries, which are office furniture and clothing textiles, helps to put their protests in perspective.
With the exception of the recession in 1991, the office furniture industry has enjoyed annual-increased sales for the past 20 years. The past 2 to 3 years has had record sales with some companies reporting increases in excess of 20 percent per year. Profits in employment levels have also increased. Thus, to suggest that FPI is adversely impacting the industry is simply not true.
The clothing and 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 and textiles industry has some, or all, of its production done outside the U.S. It's understandable that under this pressure, the dwindling number of domestic clothing and textile manufacturers would like to reduce the items currently made by FPI. It is, however, not accurate to suggest that FPI is responsible for the underlying plight.
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Many critics argue that FPI's principal adverse impact is mandatory source. This argument is flawed also 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 to employ as many inmates as possible. If such employment levels are to be achieved, then the same level of sales will need to be generated whether through mandatory source or some other source.
As the individual responsible for managing both the spiraling population and the FPI corporation, I appreciate the Chairman's efforts through H.R. 4100 to first reduce and then eliminate reliance on mandatory source, but only if this can be achieved without sacrificing the priority of maintaining inmate employment.
It has been suggested that FPI has an adverse impact on private industry and labor because of low-inmate wages. And actually, again, 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. If inmate wages increased significantly, sales would have to increase as well. The alternative would be to decrease inmate employment, thereby defeating the public policy objective that I articulated earlier.
In the spirit of free trade, and the 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 either equal to, or lower than, what FPI pays its inmate workers. In light of this broad international economic policy and the apparent positive effects of such agreements as NAFTA and GATT, we do not believe that FPI sales, which in 1997 represented only six-one thousandth of 1 percent of the National Gross Domestic Product, represent an adverse impact.
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The third public-policy objective is to reduce the taxpayer burdens associated with incarceration. This very important objective is currently achieved in three ways. First, FPI pays all its operating costs from its sales. It receives no appropriated funds. If the requirement were eliminated, additional appropriated funds would obviously be necessary. Currently, FPI's self-sustaining operation saves taxpayers approximately $150 million per year. Thus, we appreciate that H.R. 4100 retains the requirement that prison industries remain 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. Again, we believe that H.R. 4100's focus on maximizing these types of prisoner contributions is very appropriate.
Third, research has proven as has already been indicated, that inmates who work in FPI more successfully reintegrate into society. As indicated by Harvard University Professor Richard Freeman, even modest recidivism reductions have huge cost benefits for society. We believe strongly that no matter how contentious the debate or no matter how creative the alternatives, each proposal for prison industry's change must be balanced against these three public policy objectives.
Regrettably, in our view, H.R.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 the loss of mandatory source could cause. There are no provisions in H.R. 2758 that monitor inmate employment levels to ensure that the impact of the bill will not decrease current levels.
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As the Director of the Bureau of Prisons, I cannot support any legislation which would cause a decrease in the percentage of inmates employed by FPI. I'm supportive of H.R. 4100 in this respect because it does allow FPI to pursue new initiatives while still ensuring that inmate employment levels are protected.
I'd also like to address two apparent underlying premises of H.R. 4100. The first is, that if offered sufficient incentive, the private sector would employ substantial quantities of inmate labor. There's obviously a very limited track record of private-sector employment of inmate labor any where in this country. We believe that the venture is certainly worth undertaking. Our confidence level in the prospects for success would depend in part on the nature of the feedback that this Subcommittee receives from private-sector businesses and associations regarding the sufficiency of incentives the bill provides for their employment of inmates.
Regarding the second premise of H.R. 4100, that a non-government entity could more successfully manage our prison industry program there's some experience and data available here; however, neither is compelling. As currently drafted, H.R. 4100 seems to be modelled after the Florida State Program operated by PRIDE Enterprises. It's a private nonprofit corporation operational since 1981 and very well respected. But as of June 30, 1997, PRIDE had only 13 inmates working in their existing PIE Program earning approximately $5.00 per hour. Despite the perceived advantages of private-sector management and the broader market access afforded by the current PIE Program, PRIDE employs less than 5 percent of the total eligible inmates in the prison population of Florida. Thus, it's only one-fifth as successful as FPI which I indicated employs approximately 25 percent of the eligible inmate population.
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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 intricate part of the Bureau of Prisons. In my dual role as Director of the Bureau of Prisons and the CEO of FPI, I take very seriously my responsibility for balancing the various priorities. FPI's success can be attributed to its integral relationship to the Bureau of Prisons which has generated strong support at all levels.
We're proud of FPI's track record and believe that FPI is absolutely capable of successfully implementing the new authorities outlined in your bill. If though, ultimately, a different form of prison industry management is adopted, it should be done very carefully and strategically so as to not erode our potential for successfully employing inmates and managing our burgeoning inmate population.
We're also somewhat concerned with the time schedules proposed in the bill that they may be a bit too aggressive given the number of new institution activations we have coming along in the next few years. We need to further evaluate the timeframes to make sure they work appropriately in light of these new activations.
Mr. Chairman, I appreciate the hard work that went into crafting this bill. Not everything is as we would have written it and it represents a major change, and a major challenge for FPI, but taken as a whole, we believe it provides important opportunities to mutually address the concerns of the private sector and public policy objectives of prison industry programs.
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Again, since we do not believe H.R. 2758 will successfully balance these priorities, we are opposed to its adoption.
Mr. Chairman, that concludes my remarks and Mr. Schwalb and I would be very happy to answer any questions you or members of the Subcommittee might have.
[The prepared statement of Ms. Hawk Sawyer follows:]
PREPARED STATEMENT OF KATHLEEN HAWK SAWYER, DIRECTOR, FEDERAL BUREAU OF PRISONS AND CHIEF EXECUTIVE OFFICER, FEDERAL PRISON INDUSTRIES
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, H.R. 4100, entitled ''Free-Market Prison Industries Reform Act of 1998,'' and H.R. 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 H.R. 4100.
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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 H.R. 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.
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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 H.R. 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.
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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 H.R. 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.
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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 H.R. 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 H.R. 4100's focus on maximizing these types of prisoner contributions from their earnings is very appropriate.
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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, H.R. 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 H.R. 4100, H.R. 2758 provides for FPI to absorb all the pain and the private sector to realize all the gain. There are no provisions in H.R. 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 H.R. 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 H.R. 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.
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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, H.R. 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 ( 1/2 of 1 percent) working in the PIECP program, earning approximately $5.45 per hour.
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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.
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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 H.R. 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.
Mr. MCCOLLUM. Thank you very much, Dr. Hawk Sawyer, for doing that—for giving us your analysis and we know on relatively short notice on both bills.
I'm going to yield myself 5 minutes and then we'll go to our colleagues here for the same purpose of questioning.
I'm curious as to what percentage of the population at any given facility you would like to see involved in prison industry programs if you had your druthers?
Ms. HAWK SAWYER. Well, as of right now, the almost 25 percent that I cited earlier is acceptable to us. To have anything less than that, we would be in big difficulty because we would not be able to have enough activity for inmates to do.
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Now obviously even given that 25 percent, many of our inmates are assigned on other work projects in the plumbing shop, or in the paint shop, or on cleaning crews, or whatever and there really is not enough work to go around, necessarily, all the time for all of those inmates. So something upward of 25 percent would certainly be desirable, but at least maintaining the current 25 percent is very, very important.
Mr. MCCOLLUM. So something higher than 25, but at the very least, 25 percent?
Ms. HAWK SAWYER. Yes, sir. Yes, sir.
Mr. MCCOLLUM. Do the folks who participate, the prisoners in Federal Prison Industries, do this voluntarily?
Ms. HAWK SAWYER. Yes, they do. Yes, they do. All inmates who are medically able must work in the Bureau of Prisons; those that are sentenced. If they're not yet sentenced and convicted, we don't have the authority to make them work or do anything. But those who are sentenced, we have a responsibility to work, but they can choose whether or not they work in prison industries or they work in a regular other work assignment. So all inmates in prison industries volunteer to work in prison industries.
Mr. MCCOLLUM. And isn't true that there is actually a waiting line in most cases?
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Ms. HAWK SAWYER. There certainly is, sir. There certainly is. It's a very desirable work assignment.
Mr. MCCOLLUM. And they get higher wages, in essence, or higher income, too, for this than they would otherwise. Is that not true?
Ms. HAWK SAWYER. Yes, they do. Yes, they do.
Mr. MCCOLLUM. What would be the effect of legislation that would decrease the number of inmates involved in prison industries?
Ms. HAWK SAWYER. Well as I indicated in my comments, prison industries has a direct involvement in us being able to maintain security and the good health of an institution. So, if we had more inmates who were idle with nothing constructive to do with much of their time, then the management of the inmate population would become much more difficult. But on the broader, public policy standpoint, I think the issue of recidivism becomes very, very important.
As we've indicated, and as you've referenced, Mr. Chairman, involvement in prison industry shows a 24 percent improvement for any inmate being released in terms of their ability to remain crime-free and not fall back into crime and be working productively in the community. So, the two losses of losing any of the prison industry jobs are number one, inmate management, and number two, the impact that it would have on recidivism.
Mr. MCCOLLUM. Do you believe that Representative Hoekstra's bill that's before us today, 2758, would decrease the number of inmates employed in prison industries at the Federal level?
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Ms. HAWK SAWYER. I believe that it certainly would, sir.
Mr. MCCOLLUM. Do you have any idea of by how much, and then I might follow up by asking you, why do you believe they would decrease the number of prisoners?
Ms. HAWK SAWYER. I don't know by how much how quickly because the issue is that it would basically eliminate our mandatory source for all intents and purposes almost immediately except for some very rare exceptions that it sets forward. Without, as I indicated in my testimony—without any protection or gradual attrition of how we would bring on new work for the inmates to do once we've lost mandatory source.
The wonderful benefit of H.R. 4100 is that it allows those two to work together in terms of reducing our reliance on mandatory source while trying, and giving us a number of new authorities, to be able to step outside of the Government market; to be able to expand the number of products and services we would actually be able to manufacture. It would give us the opportunity to test the waters in many different arenas; try some new and creative things and only reduce our mandatory source as we've been able to gain success and benefit with the other kinds of work that we are to bring into the institutions.
Representative Hoekstra's bill does not provide any of those protections, and so we would see an immediate drop off dramatically of our employment. Now we may be able to regain some of that back gradually over time, but with no additional authorities that would allow us to move into other markets or create incentives for private sector to want to work with us, we believe that it would damage prison industries very severely.
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Mr. MCCOLLUM. Do you think the incentive structure in H.R. 4100 would actually encourage and get private business into new facilities as it is hoped that it would do?
Ms. HAWK SAWYER. We're not sure, and that's what I said in my testimony. We hope so, but we're very interested in hearing, perhaps, some of the other testimony from today's hearings and whatever discussions may ensue from this to determine whether or not there really is enough incentive in the eyes of private-sector business of really wanting to get involved with us.
Mr. MCCOLLUM. But if, today, we abolished mandatory source altogether, tomorrow morning FPI facilities—could they hold their own?
Ms. HAWK SAWYER. No.
Mr. MCCOLLUM. Could they compete?
Ms. HAWK SAWYER. No, we could not.
Mr. MCCOLLUM. Alright, thank you.
Mr. Meehan, you're recognized for 5 minutes.
Mr. MEEHAN. Dr. Hawk Sawyer, you cite increased sales on the part of the furniture industry in the past 2 to 3 years to dispute the claim that the Federal Prison Industries has adversely affected the industry. Isn't it possible that furniture industry sales would actually be higher absent competition from prison industries, and thus that increased private sales and adverse impact are not necessarily mutually exclusive?
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Ms. HAWK SAWYER. I would like to defer to Mr. Schwalb on that, please, if I may sir.
Mr. SCHWALB. Mr. Congressman, I think that's a fair question, and our position all along has been that if the debate is going to be on the impact the prison industries has on the potential for even higher sales, and earnings, and profits than we see today as compared to the operation of the industry's program, that's a fair debate. It's not usually characterized that way. It's usually characterized as having had an adverse effect on businesses as having to layoff people and reduce sales.
There's no question that if we didn't sell the products, someone else would, but our impression is that the market is getting bigger and so, therefore, the ''pie'' if you will, is getting larger so that everyone is sharing in the growth of that. And our experience in looking at the data is that there's been room in the furniture industry for us to grow in sales and the industry to grow in sales as well.
Mr. MEEHAN. Dr. Hawk Sawyer, you claim that the root of the textile industry's problem is foreign imports, not necessarily competition from Federal Prison Industries. Even if prison industries is not responsible for the underlying plight of domestic textile manufacturers, isn't it possible that prison industries might exacerbate this plight?
Ms. HAWK SAWYER. Well, I think the answer flows much similar to Mr. Schwalb's answer to your last question. You know, if we weren't in the textiles business then obviously there could be more work either to be done by manufacturers in this country or to be shipped more offshore because the cost is not achievable here in this country. I think this is, again, one of the wonderful parts of H.R. 4100 that it emphasizes and gives benefit and incentive for us to look at products, and companies to look at products that are currently made offshore so as not to harm the industry any more. We have no desire to harm the industry any more, but perhaps any expansion we might to make in the future could be in terms of bringing offshore manufacturing back into this country.
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Mr. MEEHAN. Well, you note in your testimony that in the spirit of lower consumer prices and net domestic job creation, we import goods from countries where American workers are not paid——
Ms. HAWK SAWYER. That's right.
Mr. MEEHAN [continuing]. Or where the workers are not paid on par with American workers. I assume that you are drawing an analogy between imports from abroad and products by prison labor. Isn't it true, however, that there are no statutory mandated sole source contracts for foreign goods?
Mr. SCHWALB. I'm not aware of any.
Mr. MEEHAN. Right, so and isn't it also true that we lower barriers to imports, not just in service to lower consumer prices, but also because ideally we secure reciprocal commitments by other countries to open their markets to goods produced by law-abiding American workers. In other words, to increase sales of products made by our workers. In other words, these trade agreements that you've cited, or that I assume that you were talking about—they were reciprocal agreements that, at least potentially, would increase sales or products made by American workers.
Ms. HAWK SAWYER. I think that's very, very true, sir. It is a much more complicated issue than simply saying the one begets the others, but I think that also is true of prison industries because we're not just talking about products being made and sold. We're talking about impacts upon criminality. We're talking about impacts upon recidivism. We're talking about teaching inmates job skills so they can learn when they come back to the community. We're talking about a number of things that goes simply beyond just as do our sales to foreign countries and the reciprocal agreements with them. There are benefits—public policy benefits to issues of prison industry that goes far beyond, also, just the issue of selling a product for——
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Mr. MEEHAN. Of course, I'm getting at the analogy that you pointed out that workers in another parts of the world get paid on par or less than what prison workers would in citing the global economy. I'm just pointing out that in negotiating—any time any administration negotiates agreements, for example, with other countries to lower trading barriers, presumably we get—American workers get something out of it or at least products made by American workers get something out of it to lower the barriers for both countries.
Mr. COBLE. H.R. 4100 would authorize FPI to sell foreign-made goods on the open market without restriction. Now, under the bill, a good or product is considered to be foreign-made if 95 percent or more of the dollar amount sold in the United States are fabricated in a foreign place as determined by the Bureau of Labor Statistics. Now, Mr. Hoekstra's staff, I'm advised, contacted the Labor Department's Bureau of Labor Statistics and was informed that they don't collect such information. The staff then, according to my report, contacted the Commerce Department's Bureau of Economic Analysis. They were informed that the Bureau of Economic Analysis did not collect such information. The Bureau of Economic Analysis believe that the information required by the bill may be collected by any Federal agency but suggested contacting the Commerce Department's International Trade Administration and the Bureau of the Census. Well, no responses have been forthcoming. Can you illuminate for me, Dr. Hawk, as to who's going to assemble this information?
Ms. HAWK SAWYER. I certainly cannot speak with any level of expertise on the Chairman's bill, but I think the intent, at least as we would certainly read the intent, is that however this information gets collected—and it would be in some way—we would be not be intending to give incentives for our working on products that are not sold on the foreign markets. I mean, the whole intent was to try to focus first preference or focus our attention to then expand markets into those items made on the international level. How those numbers are achieved, I'm sure the Chairman knows much better than I.
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Mr. COBLE. And he might address that. Mr. Schwalb, do you want to add anything to that?
Mr. SCHWALB. Well, all I would add is that I think the intention—at least, certainly, our interpretation is—that some independent body would make the determination within the Government that these products are predominantly made offshore. So, that the impact of bringing them back into the United States would be not only not negative, it actually would generate additional American jobs in support of that.
Mr. COBLE. My time has expired, and I see the chairman is back. Mr. Frank—do you want me to recognize Mr. Frank? The gentleman from Massachusetts.
Mr. FRANK. Thank you very much. I really appreciate this. I thank my colleague. Dr. Sawyer, I guess you got married; congratulations.
Ms. HAWK SAWYER. Yes, I did. Thank you, sir.
Mr. FRANK. I see from your name tag. You said that the amount you sell is .006 percent, or something, of GDP. What percentage is it in the furniture and textile industries? I will concede that you do not do much competition with the electric power industry or with the pavilion of lawyering, and you don't get at much surgery in prison industries, so we can exclude some of those. But in the areas where you are competitive, furniture and textiles, could you give me the percentage of the furniture and textile business you do?
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Ms. HAWK SAWYER. I defer to Mr. Schwalb.
Mr. SCHWALB. In the office furniture category, in general, we sell about 18 to 20 percent of the Federal market. Of course, we don't sell on the commercial market at all, and I think our estimate is it's less than 1 percent of the entire Federal, domestic furniture market. The textiles, I don't have as a whole group but we sell a variety of different prices of work clothing and protective clothing and so on, and I think only one of those categories do we have more than 20 percent of the Federal market.
Mr. FRANK. Well, I'd be interested in that breakdown. I think that's a lot more relevant than however many 06 of the GDP. And you say that—you were asked if there was interest on the part of businesses in coming and working and taking advantage of the Chairman's bill as it became law. You say you hadn't gotten any interest from any businesses? My sense it that most businesses are pretty much opposed to it. You do have the representatives of the furniture manufacturers and the textile workers speaking in favor of the alternative bill and not the Chairman's bill. Do you have any realistic expectation of private sector involvement here?
Ms. HAWK SAWYER. Yes, sir. In contrast to what you're saying, we have been approached by several companies who are very interested in working with us. The caution that I raised was greatly on hearing from the private sector industry as to whether the incentives in this bill would be sufficient to allow us to maintain 25 percent employment levels.
Mr. FRANK. Now—a more serious question—now, you say that if you lost the mandatory sourcing, you would lose much of your contracting?
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Ms. HAWK SAWYER. Yes, sir.
Mr. FRANK. Meaning that if the Federal purchasing people had their choices, they would buy from somebody else?
Ms. HAWK SAWYER. No, sir. The question was posed in terms of immediate impact and——
Mr. FRANK. Yes, and it can only be this, Dr. Sawyer. If we would lose mandatory sourcing and the Federal purchasing people were then allowed choices, they would presumably buy less of you. Why?
Ms. HAWK SAWYER. No, what I'm saying is that if we had—we don't, right now, do marketing for our business very——
Mr. FRANK. Excuse me. It's inescapable. The only way you could lose market share, if we did away with the mandatory sourcing, is if the people who are now required to buy from you decided to buy from somebody else. I mean, that's just not—there's no other logical explanation of that.
Ms. HAWK SAWYER. I understand what you're saying sir——
Mr. FRANK. But why would they stop buying from you if there was no mandatory sourcing?
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Ms. HAWK SAWYER. My point—the question was posed as——
Mr. FRANK. No, but I'm posing a different one. Why—you apparently argued that if we lost mandatory sourcing, some of the people now buying from you would stop buying from you. Why would they stop buying from you?
Ms. HAWK SAWYER. As I indicated, I don't know how quickly, how fast——
Mr. FRANK. No, not how quickly, not—why? Not when, not how, why?
Ms. HAWK SAWYER. To get to what I believe the point of your question is, I believe that over time we would clearly be able to——
Mr. FRANK. No, that's how you are avoiding the point of my question, and I am disappointed. It is really clear, and you understand it. You said that if you lost mandatory sourcing, you would sell less. So, that——
Ms. HAWK SAWYER. Mr. Frank, I'm not avoiding your question. You're just not allowing me to answer it.
Mr. FRANK. No, Dr. Sawyer, you are avoiding it, and I've got a 5-minute thing here. You said that if you lost mandatory sourcing, you would sell less. You said that, correct? Why would they stop buying from you if there was no mandatory sourcing?
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Ms. HAWK SAWYER. It's a marketing issue, and that's what I started to answer to you, sir. We do not have any large scale marketing. Private industry does a lot of marketing of their products; we don't. We rely on the mandatory source to bring the purchaser to us first, and then we sell our product to them by saying, ''We can make it of your quality. We can make it the way you want it. We would like to have this sale.'' Since we don't do marketing, we would have to gear up a major marketing operation in order to——
Mr. FRANK. No, Dr. Sawyer. That would be true with new people, but you're telling me that some of the people to whom you are now selling—you do need to do a lot of marketing to customers you do not have, but where you have an ongoing customer relationship, you're saying that with your ongoing customer relationship—and we're not talking now about remote people; we're talking about your Federal co-employees—you're telling us that if you did not have mandatory sourcing, some of the Federal people who are now buying from you would stop buying from you. Isn't that correct?
Ms. HAWK SAWYER. No, sir. Some of them might, that's true, some of them might.
Mr. FRANK. Well, how else would you lose market share?
Ms. HAWK SAWYER. What I'm saying is that we would have to be able to sell the products at the level we're selling them now which means growth. We're going to be opening up——
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Mr. FRANK. No, I'm talking about—so, you don't think anybody now buying from you would stop buying from you?
Ms. HAWK SAWYER. Some of them would, yes, sir.
Mr. FRANK. Why?
Ms. HAWK SAWYER. I don't know how many.
Mr. FRANK. Why do you think they would?
Ms. HAWK SAWYER. I don't know. You would have to ask them, sir. I would have to speculate.
Mr. FRANK. I probably should have asked them in the first place. Thank you, Mr. Chairman.
Mr. MCCOLLUM [presiding]. Thank you, Mr. Frank. Ms. Jackson Lee, you're recognized for 5 minutes.
Ms. JACKSON LEE. Thank you very much, Mr. Chairman. Obviously, there are many good competing interests that we have to deal with in this hearing. Let me first say that the Federal detention center in Houston is going well, and I look forward to your return upon its official opening. But I think that a hearing is always established so that we can find solutions. I understand through your testimony—and I apologize for being delayed—that we, obviously, are concerned about busy inmates; inmates who are doing things that are constructive. We want to minimize adverse impact that such inmate employment may have on the private sector and labor and to reduce the taxpayer's burden on the overall budget that the Federal Bureau of Prisons has to maintain. At the same time, it is clear that there is some agony brought about by these, sort of, mandatory processes to small businesses and to hard working Americans who are not incarcerated; who have not been found guilty of a particular crime, though we are certainly, I am, an advocate of rehabilitation and reintegration. Tell me how you would fix H.R. 4100. You have been, sort of, pressed on the issue of mandatory sourcing, and, as I interpret it, what it is, is that you have sort of a monopoly to a certain extent. What happens is, is that you have the purchaser, or the person interested in the product, gets automatically directed toward the prison industry. The question then becomes, doesn't that give a disadvantage to our small businesses, our working people, minority businesses of the region that you're in?
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Let me also ask an information piece which I would just like to have brought to me, if you would. Would you all provide me the data of the locations sites of the prison sites with the prison industries and type of industries that are done in those areas, and the comparison of available small and minority businesses in those same areas? I would appreciate that information.
Ms. JACKSON LEE. Dr. Hawk Sawyer, congratulations. I take that as new information. Answer the question, how can we fix this legislation, first of all, and how can we get to where you would like us to be while we are not diminishing the opportunities for working people and small businesses?
Ms. HAWK SAWYER. I think that, as I indicated in my opening testimony, that there is a lot that is very, very good about H.R. 4100 in achieving exactly what you're suggesting where we need to get to. I think the only cautions we have in terms of fixing the bill rest in the time line and the aggressiveness of the time line and making sure as our new institutions come on line we're going to be able to adhere to the requirements of the bill, and, also, the caution in terms of hearing from the private sector as to whether or not the incentives put forward in this bill are really going to enable them to be willing and interested in partnering with us in moving forward with replacing the mandatory source productions with productions that we do very openly and competitively on the open market.
I think what this bill does for us that the original statute did not—the original statute put lots of restrictions on us, saying you only can sell to the Federal market; you can't sell to anybody else which is not a restriction that's on small businesses and minority businesses or anyone other than us. And, also, we deal with the inmate population, and our goal is to maintain security, reduce recidivism, and all of those public policy—important public safety kinds of issues.
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What this bill does is lift those restrictions that were on us in terms of only selling to the Federal market and enables us to open up the breadth of the kinds of services and products we could provide on a much grander scale. If that occurs and if private sector industry is willing to work with us on that, then we would be very willing to see mandatory source go away. What frightens us in the alternative bill is that it makes mandatory source go away before you've built in these other—granting of other authorities and also the protections that enable us, as the mandatory source come down, that we've got the other industries and factories to be able to put in their stead.
So, there's much that's very, very good about H.R. 4100, and we believe the elements that concern us are very fixable and workable. There is very little in the alternative bill that enables us to continue prison industries as we know it to be at all.
Ms. JACKSON LEE. I am going to reserve judgment, but—if the chairman would indulge me—I hear what you're saying. The only thing that I would say in response to that is that the question is—do we to jump into the pool when the water is ice cold before we find out that it is ice cold? And, so I am concerned that as we might proceed with H.R. 4100—and I want to reserve judgment and hear the other participants that will be speaking—but I am concerned that we will damage the marketplace, if you will, for small and minority businesses. Let me offer to say to you that many of those businesses only have the opportunity to do business with the Federal Government. They don't do well on large contracts with the private sector. They are section 8(a)s or they work with the Small Business Administration and other entities, and, so they are very much dependent upon the Federal Government particularly in areas where you might be.
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I just want to understand whether the Federal Bureau of Prisons would be open to even some working on 4100 even beyond your time frame question if our documentation or further research shows that you would be a bad neighbor in the community and alongside those workers and businesses that are there?
Ms. HAWK SAWYER. We certainly would, and I think, also, the other beauty of 4100, it does give preference, in a way, to bringing products and services that are provided offshore back into this country which would not have an adverse impact upon existing small businesses. So, I think there's another benefit in there that tries to protect the very group that you're talking about, and we would be very willing to work collaboratively on that issue.
Ms. JACKSON LEE. I thank the Chairman. Thank you.
Mr. MCCOLLUM. Thank you, Ms. Jackson Lee.
Ms. JACKSON LEE. Mr. Chairman, would you just—I'll make a point—I also would like to chat with you about health care.
Ms. HAWK SAWYER. Sure.
Ms. JACKSON LEE. It's an issue that has come to my attention for the Prison Bureau, and like the chairman who has spoken to the industries, I don't mind speaking about the health care issue, and I'd like to be able to chat with you about that issue. Thank you very much.
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Mr. MCCOLLUM. Ms. Jackson Lee, thank you, and I want to point out that, not only do we have the next panel, we will at least have one more hearing on this bill, because we know we need to bring in a variety of industries including minority businesses and have a good discussion about how we might get from point A to point C.
But, with that in mind, we're going to have a vote on the floor. There are no other people here to ask you questions, Dr. Hawk Sawyer and Mr. Schwalb, so I think what we should do is to let you go. Thank you very much for being here today, and when we come back from our recess for this vote, I'll introduce the second panel, and will continue our hearing. The hearing is in recess pending the vote.
[Recess.]
Mr. MCCOLLUM. The Subcommittee on Crime will come to order. I apologize for delay over there, but we had all kinds of floor activity. I'm ready to introduce the second panel. We're delighted to have with us today Morgan O. Reynolds who is the director of the Criminal Justice Center at the National Center for Policy Analysis. He is also professor of economics at Texas A&M. Dr. Reynolds is the author of the Reynolds Report, an annual study on the actual time criminals spend in prison for their crimes and is widely published in academic journals. His recent NCPA work include Factories Behind Bars, Crime and Punishment in America, and Using the Private Sector to Deter Crime. He's a consultant to the National League of Cities, the U.S. Department of Labor, and the National Labor Relations Board. He received his Ph.D. in Economics from the University of Wisconsin.
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Knut A. Rostad is co-founder and president of the Enterprise Prison Institute, a non-profit organization created to study prison industries. He's also the managing principal of Knut A. Rostad Associates and has worked for more than 15 years as a researcher and management consultant to corporate government and non-profit clients in the United States and Europe. He's conducted extensive work on criminal justice and corrections issues and has spoken at numerous industry criminal conferences and meetings including the National Prison Industries Forum and the Nation's Summit on Prison Construction. He holds a Bachelor's degree in Political Science from the University of Vermont and a Master's in Business Administration from the Norwegian School of Management.
Michael J. Sullivan has served as secretary of the Wisconsin State Department of Corrections since 1993. A member of Governor's Thompson's cabinet, Mr. Sullivan oversees a department that employs more 8,700 employees and is responsible for the confinement of over 15,500 incarcerated persons, 68,000 offenders on probation and parole, and more than 950 juveniles. He began his career in corrections as a probation and parole agent in 1968 and became the director of probation and parole in 1983. In 1987, he became deputy administrator of the division of corrections, renamed the department of corrections in 1990 before assuming his present position.
Len Lorey is the Government sales manager for Kimball International, Inc. located in Jasper, Indiana. He has been with that company for 23 years spending his career in sales and marketing. Mr. Lorey is very active in industry affairs and currently serves as chairperson of the Government Sales Committee for BIFMA International, the Trade Association for Business and Industrial Furniture Manufacturers.
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Larry Martin has been president of the American Apparel Manufacturers Association since 1995. AAMA is the national trade association representing the American apparel industry and its suppliers. AAMA members produce 80 percent of the clothing at wholesale in the United States. Before becoming president of AAMA, Mr. Martin was director of government relations at the association for 13 years. He also served in the Senate as the Chief of Staff for the former Senator Kaleb Boggs of Delaware.
I want to welcome the entire panel here today. Again, I want to thank you, as I did earlier, for you patience and indulgence on the timing of this hearing. We are scattered to the four winds with our members, and I'll suspect you will see them wondering back in and out of here in the next hour. I understand some of you have some time constraints, so we want to proceed in the order in which I've introduced you, and, again, thank you for being here. Dr. Reynolds, your—and all of the members of the panel—your full statements will be admitted into the record without objection. There is none, so ordered, and, Dr. Reynolds, you may proceed to summarize.
STATEMENT OF MORGAN O. REYNOLDS, PH.D., DIRECTOR, CRIMINAL JUSTICE CENTER, NATIONAL CENTER FOR POLICY ANALYSIS
Mr. REYNOLDS. Thank you, Mr. Chairman. I consider our current prison labor policy as the height of folly. We can look to welfare reform in terms of rethinking old ways. I noticed that the President the other day said that the welfare roles have fallen from 5.5 to 3.3 percent. Of course, this is in part due to a strong economy but also due to a drastic change in both Federal and State welfare policies.
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We should aim at mainstreaming those incarcerated back into society, and prison employment policies are key in this. Right now, we're operating under a tired, old socialist model, and I don't think that the term ''socialist'' is any exaggeration. The private sector, clearly, must provide the bulk of prison jobs and produce for the open market. That's consistent with the general economy and matches successful change elsewhere.
I noticed that the Director of the Federal Bureau of Prisons referred to the limited track record of the private sector. I'd like to speak up on behalf of the private sector which provides 110 million jobs in round numbers right now while the public sector provides 20 million. Furthermore, of course, the history of prison labor policies show that they were very dependent on the private employment of prisoners. Back in the old days when three or four prisoners had jobs for wages, two out of three of those jobs were provided by the private sector. What we have, of course, is limited success with private employment of prisoners due to bad public policies. That should be changed.
The H.R. 4100, I'm here to enthusiastically endorse, and it would accomplish two praiseworthy, overall objectives: one, it would repeal the Federal ban on interstate transport of prison-made products, and, secondly, it would gradually switch Federal prison industries from our privileged socialist model to an open, private sector model.
There are three things I would change if I were to write the bill—well, let me first mention that among the bill's virtues are an omission and that is there's no minimum or prevailing wage regulations which can go a great distance in killing the growth of private sector jobs. I'm sure that's going to be a controversial issue in terms of potential amendments or modifications of the bill.
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There is relatively little that a free market advocate can criticize about the bill, but let me suggest three things: one, I would advocate payment of wages in full to inmates. This is part of responsibility 101, education in the real, legitimate, voluntary cooperation world, rather than, as currently drafted, the payment of fees to the Attorney General. A second area of unhappiness on my part would be the time for phase-out or the transition. I consider a decade too long. I would prefer something on the order of 5 years. I think some study could be devoted, and I think I'm going to look into this this summer in terms of what constitutes the right mix, arguably, for pressure to change and privatize and what is balanced with a reasonable amount of time for adjustment. Thirdly, the bill does use language to the effect that we should allow private management or takeover of existing industries. I would not want us to be captive of the past to that extent or straight-jacket ourselves. We do need some private management consultants to look over the FPI and see what's salvageable; what has to be changed entirely, et cetera. In other words, we need experienced people from the private sector—which isn't my job—to deal with the details of this transition, and we might want to do an initial survey along this line, so that real business people can offer some direct opinion.
Finally, while there is room for disagreement over some of these details in the bill, and, of course, the Chairman has done us the service of offering this line in the sand here that I think is marvelous, I want to reiterate, again, my firm endorsement of the bill as drafted. I think, if implemented, it would move us worlds ahead in criminal justice reform. Thank you.
[The prepared statement of Mr. Reynolds follows:]
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PREPARED STATEMENT OF MORGAN O. REYNOLDS, PH.D., DIRECTOR, CRIMINAL JUSTICE CENTER, NATIONAL CENTER FOR POLICY ANALYSIS
On any given day, we have 1.8 million unhappy souls in lockups across the country. Taxpayers pick up the tab because fewer than 100,000 state and federal prisoners work in paying, productive jobs inside or outside prison walls.
Our current policy is the height of folly. To ban any part of the population from productive employment opportunities creates a string of economic losers. A new study of inmate labor from the American Bar Association's subcommittee on correctional industries shows that the unemployment problem in prisons is getting worse rather than better. The nation's inmate population is growing so rapidly that the share of state and federal prisoners with jobs has shrunk from 7.6% to 6.5% since 1990.
Just as with welfare reform, we've got to rethink our old ways and change. Some citizens may object, ''They don't deserve to work,'' or, ''It's unfair to allow prisoners to produce goods in competition with legitimate businesses.'' That's the same old protectionist mentality that has made it virtually a crime for legitimate businesses to employ prisoners. A series of federal and state restrictions from the Great Depression hamper hiring convicts today. As Andrew Peyton Thomas, an Arizona attorney, writes, ''Prison labor, once viewed as indispensable for restoring a healthy relationship between the criminal and society, was made literally a federal offense.''
Our aim should be to propel offenders into, rather than away from, successful participation in the labor force. Those incarcerated should be mainstreamed into normal civilian work to the maximum extent consistent with safety and security. We should aggressively reverse the policies and inertia discouraging inmate employment.
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And the good news is that market-based solutions are readily available. Old-style prison industry is based on monopoly sales to other government bureaus-license plates, highway signs and office furniture. But that's a tired, old socialist model. Government only buys so many license plates. The private sector clearly must provide the bulk of prison jobs and produce for the open market. That's consistent with the general economy and matches successful change elsewhere.
In the past, I have urged repeal of the laws that establish monopolies in prison labor and in prison production in favor of a more open marketplace for both prison labor and their products. Make wardens (or their surrogates) marketers of prison labor rather than uncompetitive producers of shoddy prison-made goods. We should allow and encourage private enterprise to compete for prison labor, pay wages in accord with anticipated productivity and build industrial parks next to prisons. That would produce fair competition.
Study after study finds that employment for ex-felons is the strongest antidote to reengaging in criminal activity. Working not only improves behavior behind bars but lowers the probability of arrest on all sorts of charges upon release. And nearly all prisoners are released sooner or later. Fred Braun, a Kansas businessman who has employed prisoners for 20 years, jokingly says, ''If we can turn more ex-convicts into taxpayers, that's punishment enough.''
In 1839, a writer expressed the widespread satisfaction with the results of the private system of prison employment that prevailed in New York State this way: ''It is surprising how little it costs to do good, if we really set ourselves to work in the right way.'' That's not naiAE4ve. It's still true today. The opportunity to turn prisons from failures into successes beckons.
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The new bill, the Prison Industries Reform Act of 1998, if enacted, would be a dramatic step forward in reducing the tragic idleness among both state and federal prisoners, as well as reducing their post-release crime rates.
The bill, as I read it, would accomplish two praiseworthy, overall objectives:
It would repeal the federal ban on interstate transport of prisoner-made products, and
Gradually switch Federal Prison Industries from a privileged socialist model to an open, private sector model
The first aim removes a central barrier to selling prisoner-made goods on the open market, thus enabling the states to quickly expand job opportunities, while the second reform would privatize federal prison jobs and output. The bill truly represents a radical departure from the Depression-era mentality that brought us to our present state, in favor of harnessing the entrepreneurial market process to productively employ inmates.
The bill's many virtues include its omission of minimum or prevailing wage regulations, which can go so far in killing growth of private sector jobs. Let us hope that the bill does not become encumbered with such. We should increasingly rely on a dynamic market process and vigorous labor auctions to set wage rates behind fences.
There is relatively little in the bill for a free-market advocate to criticize. In terms of wage policy, however, I would recommend that the market-style, gross wage be paid in full to the productive inmate, subject to deductions, rather than as a fee paid to the Attorney General. The reason is to educate the inmate in real-world magnitudes. Surely 80 percent can be deducted for room and board, restitution, family support, and other expenses, as practiced by some of the states today.
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A second area of possible criticism is the phase-out process for traditional Federal Prison Industries, now dubbed ''Limited Sales Projects,'' and their dependence on the irritating mandatory-source preference within the federal government. I would recommend a much quicker phase out, certainly no more than five years to termination. Success in this whole effort depends on pressure to privatize that is real and immediate, not illusory and long delayed. The transition from unfair to fair competition should be pursued posthaste.
There is room for disagreement over some of these details in Representative McCollum's Prison Industries Reform Act of 1998, but I want to reiterate my firm endorsement of the bill. Its enactment would be a magnificent blow for rational prison labor policies in this country. We should harness the wonders of private, ethical cooperation for mutual, productive gain as a major step in rationalizing our criminal justice policies.
Mr. MCCOLLUM. Thank you very much, Dr. Reynolds. Mr. Rostad?
STATEMENT OF KNUT ROSTAD, CO-FOUNDER AND PRESIDENT, THE ENTERPRISE PRISON INSTITUTE
Mr. ROSTAD. Thank you, Mr. Chairman. This afternoon, I'm going to speak briefly about the narrow issue of opinion research as it relates to inmate work and then why I think it's important and I think the implications for this bill. I want to say at the outset that the thrust of the research that we have done is focused on the private sector employment of inmates. It doesn't directly focus on the issues around the mandatory preference, and if it's possible to separate those two, that's what I'd like to do, and I know for many people here the focus is on the other issue.
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So, starting out, I want to say, just point blank, the American public and the business communities of which we have surveyed strongly favor the idea of private companies employing prison inmates while they're incarcerated. Even in the scenario where it's possible that there could be some economic cost in terms of lost jobs or economic development, both the business community and the American public support private sector employing inmates.
To briefly go over—and, Mr. Chairman, I'm on page 3 of my handout if you want to take a look at any of these numbers as I go through it—in a survey that we did in the State of Iowa last year, 72 percent of the businesses surveyed liked the idea of businesses employing inmates while they're incarcerated, but more, relevant to the point is that even if the unemployment rates rise and there is some fair competition for jobs still a margin of 47 percent to 25 percent favor the idea of businesses employing inmates.
I think to really bring this home to the business person on the street, 41 percent to 33 percent would support a manufacturing company from my community operating inside a prison even if my community lost an economic development opportunity. So, what we tried to do was to make a fair caricature of a situation to make it clear that it's not just a support of the notion of work in a conceptual way.
This is very complimentary with the research that we've done in terms of national public opinion—and I'm going down to the bottom of that page, Mr. Chairman—from a national survey we released last month. Fifty-six percent of the American public liked the idea of private sector inmate employment, because they can learn new job skills and pay part of their prison costs v. 32 percent who don't like it, because they might take jobs away from law abiding citizens looking for work. Again, we tried to set up a scenario where it was a fair competition among competing interests, values, and it came down strongly in favor of private companies employing inmates.
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Finally—the next point down, Mr. Chairman—to, again, bring this home to the person on the street in a concrete way or as much of a concrete way as possible, we said would you support a business from your community setting up an operation inside your State prison, because my community would not lose jobs or economic development to prisoners? Sixty-three percent to 33 percent supported that idea, and I, again, bringing as much back to your home community as possible.
In contrast to this, I want to just mention a little bit of work that we did in terms of organized labor, and I don't want to overemphasize this, because this is one survey of one State in the State of Iowa, and we worked with the AFL–CIO in Iowa in terms of drafting the questionnaire, and made a good faith effort, again, to get an honest sentiment in terms of their members, and I think the interesting part is in terms of traditional prison industries, it was split—43 percent opposed, 41 percent in favor of traditional prison industries; a pretty clean split. But then when you bring in the issue of wages, that's what moved a lot of the opposition away. Specifically, by 55 to 24 percent, this sample of organized labor agreed that they would be much more supportive of prison industries if a training or prevailing wage were paid to inmates. So, I think that is key here in terms of organized labor at least at the grassroots level that once you bring in the wage issue, it changes the dynamics there pretty seriously.
Also, in the survey work we did to parallel the issue on inmate work, we got into a basic question about fundamental sentencing, and we took a scenario of a repeat 24-year old non-violent offender and gave the respondents a choice between do you favor, basically, a tough punishment with a long and harsh sentence or do you favor a sentence that is focused on preparing the individual for re-entry into the workplace? We did this in Florida—your home State—we did this in Iowa, and also in the national survey, and there's a pretty fair consistency throughout that there is a—in terms of the national survey, 46 percent preferred the sentencing focusing on preparing for release v. 34 percent prefer that he receive a stiff punishment and a long sentence. The business community had similar results. Labor was most in favor of the preparation for release option, but I think that is a consistency that runs through. And then, finally, on the bottom of page 4, you look at how similar business and labor are in terms of what they think that the prisons should be doing and whether they should be doing a better job changing, quote, unquote ''changing criminals.'' Sixty-three percent business; 73 percent labor agree that we should be doing a much better job. So, I think there's a consistency there that sort of explains their point of view.
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Finally, I want to make one point about what is the significance of public opinion vis a vis my friends and associates who are corrections professionals? Obviously, we're not expecting Director Hawk to do nightly surveys to give her direction in terms of on a day-to-day basis how to run the FPI, but I think that there is also a sense that by many of the corrections professionals on a State level that it does certainly play a role. And to quote the president of the American Correctional Association, Reggie Wilkinson, in which he wrote last year, ''Change can often be anathema to a command and control structured system. However, if agencies are managed in the years ahead as they had been in the good old days, our entire profession is put at risk. The public is not always wrong, and we are not always right. We ignore the tide of public opinion at our peril.'' I think that is a sentiment that is seen more and more, at least, out in the corrections community, and I think it's important to this issue.
Finally, and in closing, as you know, Mr. Chairman, last month, Warren Sikens, who might be our secretary of State of prison industry's diplomacy, moderated the National Prison Industries Forum, and the question that drove the discussions during that day was, what would it take to regard prison labor as a national economic asset and support its participation throughout the domestic economy? Mr. Chairman, I think the answer in terms of the public opinion is absolutely clear. The research suggests that all it would take for the public to support inmate work is to employ inmates through the private sector and not around the private sector. Secondly, public support for employing inmates through the private sector increases when it is in my backyard and concerns a business from my community. And, finally, the research suggests that if we employ inmates through the private sector we can even compete in the employment marketplace and still enjoy some public support.
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So, the conclusion to me, Mr. Chairman, is given the support, the more relevant question might be, how much more public support do we need to expand productive inmate work? With that, I want to thank you for the time, and I'll be happy to take any questions.
[The prepared statement of Mr. Rostad follows:]
PREPARED STATEMENT OF KNUT A. ROSTAD, CO-FOUNDER AND PRESIDENT, THE ENTERPRISE PRISON INSTITUTE
SUMMARY
I. The American public and the business community strongly favor private companies employing prison inmates while incarcerated, even if the policy might ''cost'' the community in ''economic development or lost jobs to prisoners''. Organized labor, as surveyed in Iowa, is split on the issue.
A recently completed national survey and state surveys in Florida and Iowa illustrate the strong support from the general public and the business communities for private companies employing inmates while they are incarcerated.
A survey of labor leaders in Iowa shows support is ''split'' for traditional industries and shows some support for private companies employing inmates. The key issue for labor is wages.
II. Support of inmate work from the public, business, and labor is consistent with their support of rehabilitation.
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In the national survey, and state surveys in Iowa and Florida, there is solid evidence of support for the rehabilitative mission of prisons.
III. Public opinion is important to corrections professionals.
Notwithstanding corrections strong traditions and professionalism, practitioners increasingly speak of the importance of staying ahead of public opinion.
IV. Public opinion is important if the key is to ''regard prison labor as a national economic asset'' and eliminate ''mandatory source preference.''
Private sector employment of inmates is the best strategy for adhering to the mission of FPI and also eliminating the ''mandatory source preference'', without ''ignoring public opinion at your peril''
STATEMENT
My name is Knut A. Rostad and I am president of the Enterprise Prison Institute, a private research group which is chaired by Edwin Meese III. Our work in industries has been focused in the states and addressing the issue of how we can expand productive inmate work while addressing the legitimate concerns of business and labor.
I appreciate this opportunity to discuss opinion research we have completed on inmate work as it relates to H.R. 4100 and H.R. 2758. This morning I will briefly summarize some of the key findings of opinion research we completed of business, labor and the public in surveys in Florida, Iowa, and nationally.
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The thrust of our research addresses the private sector of inmates and consequently the vision for inmate employment as outlined in the Free Market Prison Industries Reform Act. It does not, unfortunately, explicitly address traditional state-run prison industries or the mandatory source preferences.
I. The American public and the business community strongly favor private companies employing prison inmates while incarcerated, even if the policy might ''cost'' the community in ''economic development or lost jobs to prisoners''. Organized labor, as surveyed in Iowa, is split on the issue.
A. Business leaders support private sector inmate employment; business support is lost if jobs are ''shifted'' into prisons from the community.
From a survey last year of the business community in Iowa:(see footnote 1)
72% to 13% favor private sector inmate employment, generally.
47% to 25% favor private sector inmate employment, even if ''unemployment rates rise'' and there is some fair competition for jobs.
41% to 33% favor a ''manufacturing company from my community'' operating inside a prison even if ''my community lost an economic development opportunity.''
65% to 26% oppose ''just shifting jobs from the community into the prison.''
From the Florida Opinion Leader Survey in 1995:(see footnote 2)
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65% to 32% agree ''private companies should have an incentive to employ prisoners while they are in prison and pay them competitive wages
B. Labor leaders in Iowa are somewhat supportive of private sector inmate employment; and split on traditional state industries. The issue for labor is wages.
From a survey of labor leaders in Iowa last year:
43% to 41% oppose traditional prison industries (which do not pay a training or prevailing wage).
55% to 24% agree they ''could be much more supportive'' if a training or prevailing wage were paid to inmates.
C. The public supports private sector inmate employment, even if concrete costs might be involved.
From a national survey of the public released last month:(see footnote 3)
56% like private sector inmate employment because ''they can learn new job skills and pay part of their prison costs ; 32% don't like it because'' they might take jobs away from law abiding citizens looking for work.
63% to 33% would support a business from my community setting up an operation inside my state prison because my community would not lose jobs or economic development to prisoners.
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II. Support of inmate work from the public, business, and labor is consistent with their support of rehabilitation.
A. Business, labor and the public believe in the rehabilitative role of prison
From the national survey of the public released last month on how to treat a 24-year old convicted a 3rd time for burglary:
46% prefer that ''he spend his time learning an employable skill, getting a high school diploma, and taking vocational courses''
34% prefer that he ''receive stiff punishment and a long sentence.''
From the Iowa survey of business and labor, on a ''24-year-old convicted a 3rd time after failing probation/parole'':
48% (business), 68% (labor) agree ''What's most important is how prepared he is to hold a job when released. Whether his sentence is long or short and punishment is tough is less important.''
28% (business), 17% labor agree ''what's most important is his punishment is tough, his sentence is long; how he spends his time is less important.''
From the Florida Opinion Leader Survey in 1995, on a 24-year-old convicted a 2nd time for burglary:
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65% agree ''What's most important is how he spends his time in prison and how prepared he is to hold a job when released . . . whether his sentence is long or short is less important''
27% agree ''What's most important is his punishment is tough, his sentence long . . . ''
B. Business and labor firmly believe prisons can do ''a better job changing criminals''
From the Iowa survey of business and labor, when informed that ''one in three state prisoners who are released end up getting arrested for a new crime. Is this the best we can do, or do you think we should expect to do a better job changing criminals?''
9% (business), 8% (labor) agree ''this is the best we should expect . . . ''.
63% (business), 73% (labor) agree ''we should do a lot better.''
II. Public opinion is important to corrections professionals.
The Federal Bureau of Prisons stands out with a rich tradition of providing important leadership to the corrections profession, and keeping its mission clearly in focus. For sixty years, Federal Prison Industries has been a critical part of this mission.
In light of this tradition, is should be asked why public opinion should matter to the FBOP and corrections professionals. As Senator Mike DeWine has pointed out, ''It is often stated that public opinion and professional correctional judgement are almost adversarial in regard to correctional policies.(see footnote 4) ''
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The basis of this conflict is characterized by Vermont Commissioner John Gorczyk when he described his management challenge before undergoing substantial change in his agency:(see footnote 5)
'' . . . The media castigated us nightly as the 'revolving door'. . . Our staff morale was shot. Quite clearly the problem wasn't us. It was everybody else. It was their fault. They just didn't understand.''
It certainly may be true the media ''didn't understand''. What also may be true is the media not understanding is not what is important. As Reggie Wilkinson, Director of the Ohio Department of Rehabilitation and Correction (and president of the ACA) has written:(see footnote 6)
''A reluctance to part with tradition can blind us to certain realities . . . Change can often be anathema to a command and control structured system such as ours. However, if agencies are managed in the years ahead as they have been in the 'good old days'. . . . Our entire profession is put at risk. . . . The public is not always wrong and we are not always right. . . . We ignore the tide of public opinion at our peril.''
Interestingly, when Commissioner Gorczyk completed restructuring his agency and its services, he saw the world and public opinion somewhat differently:
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''The upshot of the analysis: They aren't the problem. We are.''
IV. Public opinion is important if the key is to ''regard prison labor as a national economic asset'' and eliminate ''mandatory source preference.''
Last month Warren Cikins, who might be our ''Secretary of State'' of prison industries diplomacy, moderated the National Prison Industries Forum, a one-day gathering of the interested parties in prison industries. The central question of the day, the question which drove the group discussions was simply stated:
''What would it take to regard prison labor as a national economic asset, and support its participation throughout the domestic economy?''
Mr. Chairman, public support for employing inmates is strong—much stronger than many people might imagine.
First, the research suggests that all it would take for the public to support inmate work is to employ inmates through the private sector and not around the private sector.
Secondly, public support for employing inmates through the private sector increases when it is ''in my backyard'' and concerns ''a business from my community''.
Finally, the research suggests if we employ inmates through the private sector we can even ''complete'' in the employment market place and still enjoy public support.
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Given this support, the more relevant question might be how much more public support do we need to expand productive inmate work?
In conclusion, Mr. Chairman, we applaud the underlying vision for our federal and state prisons which is the basis for H.R.4100. It is a vision which can strengthen the important mission of Federal Prison Industries to train and rehabilitate inmates while addressing the legitimate concerns of business and labor.
Mr. MCCOLLUM. Thank you, Mr. Rostad.
Mr. Sullivan, you're welcome to be here today and to give us your thoughts, please.
STATEMENT OF MICHAEL J. SULLIVAN, SECRETARY OF THE DEPARTMENT OF CORRECTIONS, STATE OF WISCONSIN
Mr. SULLIVAN. Thank you, Chairman McCollum. I appreciate the opportunity to speak to you today. I consider it a privilege to be here to speak to you on the subject of prison industries, and specifically, H.R. 4100 as it might impact on prison industries in Wisconsin and other states.
Prison industries in Wisconsin and all other states are an extremely important program for agencies for many reasons. It is important to the inmates and it is important for the prison system. Most inmates come to prison with little or no real work experience or job skills. Prison industries provides the inmates the opportunity to learn basic work skills, such as working 8 hours a day, responding positively to a supervisor, and working with other inmates in a productive manner. Additionally, they learn marketable job skills.
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Prison industries is also important to secure operations of prisons. From our experience, inmates working for prison industries do not wish to jeopardize their jobs. They follow the rules, they don't cause problems, and institutions are more secure.
Prison industries is also important to state taxpayers. The cost of operating the industries' program, including staff salaries, inmate wages and materials, are paid from revenues realized from the sale of products and services.
If it were not for prison industries, those costs would be borne by the taxpayer.
Finally, prison industries is important to the citizens of our state. Follow-up studies conducted, as you have heard earlier, in Wisconsin and many other states consistently indicate that inmates who participated in an industries program are less likely to reoffend once released from prison and return to prison less often. And I believe this is the bottom line of our business.
State prison industries in Wisconsin have demonstrated remarkable success in the past decade. Bringing modern business practice to industries, Wisconsin gross revenues for industry sales have increased from $5.6 million to almost $20 million. Inmate employment in state industries has increased from 350 to almost 700.
Additionally, in the past 2 years, Wisconsin has been an active participant in the Prison Industries Enhancement Program, or PIE Program. Our ability to be an active participant in PIE was only accomplished by forging agreements with business and labor leaders in Wisconsin. In this past year, 80 to 150 inmates have been employed in our two programs at any given time.
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These programs produce products that are sold to our private sector partners according to their specifications. Inmates are paid prevailing wages and are required to contribute earnings to taxes, victims programs, child support and the cost of their incarceration.
For the Fiscal Year, it is estimated that inmates will have contributed over $614,000 for these purposes. Our participation in the PIE program has had a positive impact on our overall correctional program and we plan to expand our participation in the next few months.
Specifically, as it relates to H.R. 4100, I applaud the intent of the authors to expand the opportunities to grow prison industries at the Federal and State level but my assessment of the proposal as it impacts Wisconsin's program is that it will have the opposite impact. I speak to section 7 of the bill entitled Modification of Prohibition of Sales of Prisoner-Made Products.
One concern is that in line 15, it indicates that state industries are exempt from the prohibition on sales if the industry is operated by a person other than the state. The word ''operated'' is ambiguous. In Wisconsin's PIE programs, existing industries make products which are sold to our private partners. The inmates are employed by the state operation, supervised by state workers, and paid by the state. Businesses chose this mode of operation to avoid the need to take on the administrative burden. It appears to me that the proposed language would preclude this arrangement.
The proposed change removes existing subsection (b) in section 1761, which clearly exempted the sale of agricultural commodities or parts for repair of farm machinery and does not apply to products manufactured for use by the Federal Government, a State or a political subdivision of a state.
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Removal of this subsection suggests that these exceptions no longer exist and would have a negative impact on not only our prison industries program and sales to other states, but also our correctional farms which sells products in the open market that often end up in interstate commerce.
Also, the requirement to remove state use laws related to private sector ventures creates a problem for Wisconsin and, I am sure, many other states. Both of our PIE projects operate within factories that also manufacture products covered by state use provisions.
Under 1761(b)(1)(B)(ii), we would be forced to decide whether to continue the PIE project or stop producing products under the state use law. In either case, our operations would be reduced, not increased.
From a technical standpoint, the word ''unless'' in line 14 of the bill should be changed to ''if.'' The word ''unless'' accomplishes the opposite of what is intended, according to the analysis.
Finally, the repeal of the current requirements under PIE to pay inmates prevailing wage allow for deductions for taxes, room and board, crime victims programs and child support, and to assure non-displacement of free-workers is of great concern. It was these elements of the program that led our legislature to agree to our participation in the program. Removal of these assurances and protections will likely eliminate support of the business and labor community that originally supported our participation in PIE.
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In total, the current provisions in section 7 of H.R. 4100 would reduce the scope of prison industries in Wisconsin.
Two other examples: We presently house inmates in other states in county jails. This provision does not talk to allowing jails to operate prison industries. I believe they need to be included. And lastly, I believe as a mind-set, people exclude inmates when they say and speak of the labor force. I believe if the mind-set is that inmates are part of the labor force, the view of many others would come toward what is the view of the Chair.
In closing, I want to again commend the intent of the legislation to expand prison industries, and I express my willingness and interest in working to fashion legislation which will accomplish that goal.
[The prepared statement of Mr. Sullivan follows:]
PREPARED STATEMENT OF MICHAEL J. SULLIVAN, SECRETARY OF THE WISCONSIN DEPARTMENT OF CORRECTIONS, STATE OF WISCONSIN
Thank you Chairman McCollum and members of the House Subcommittee on Crime. I am Michael Sullivan, Secretary of the Wisconsin Department of Corrections and for the last three years have served as the first Chair of the American Correctional Association's Committee on Prison Industries. I appreciate the opportunity to speak to you on the subject of prison industries and specifically on H.R. 4100 as it may impact on prison industries in Wisconsin and other states.
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Prison industries in Wisconsin and all other states are an extremely important program for agencies for many reasons. It is important to the inmates and it is important for the prison system. Most inmates come to prison with little or no real work experience or job skills. Prison industries provides the inmates the opportunity to learn basic work skills such as working eight hours a day, responding positively to a supervisor and working with other inmates in a productive manner. Additionally, they learn marketable job skills.
Prison industries is also important to the secure operations of prisons. From our experience, inmates working for prison industries do not wish to jeopardize their jobs. They follow the rules, they don't cause problems and institutions are more secure.
Prison Industries is also important to the state taxpayers. The cost of operating the industries program, including staff salaries, inmate wages and materials are paid from revenues realized from the sale of products and services. If not for prison industries, those costs would be borne by the taxpayers.
Finally, prison industries is important to the citizens of our state. Follow-up studies conducted in Wisconsin and many other states consistently indicate that inmates who participated in prison industries programs are less likely to reoffend once released from prison and return to prison less often.
State prison industries in Wisconsin have demonstrated remarkable success in the past decade. Bringing modern business practices to industries, Wisconsin gross revenues for industries sales have increased from $5.6 million to almost $20 million. Inmate employment in state industries has increased from 350 to almost 700. Additionally, in the past two years Wisconsin has been an active participant in the Prison Industries Enhancement Program or PIE Program. Our ability to be an active participant in PIE was only accomplished by forging agreements with business and labor leaders in Wisconsin. In this past year 80 to 150 inmates have been employed in our two programs at any given time. These programs produce products that are sold to our private sector partners according to their specifications. Inmates are paid prevailing wages and are required to contribute earnings to taxes, victims programs, child support and the cost of their incarceration. For the fiscal year ending June 30th it is estimated that inmates will have contributed over $614,000 for these purposes. Our participation in PIE Programs has had a positive impact on our overall correctional program and we plan to expand our participation in the next few months.
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Specifically as it relates to H.R. 4100, I applaud the intent of the authors to expand the opportunities to grow prison industries at the federal and state level but my assessment of the proposal as it impacts Wisconsin's program is that it will have the opposite impact. I speak to Section 7 of the bill entitled ''Modification of Prohibition of Sales of Prisoner-Made Products.'' One concern is that in line 15 it indicates that state industries are exempt from the prohibition on sales if the industry is operated by a person other than the state. The word ''operated'' is ambiguous. In Wisconsin's PIE programs, existing industries make products which are sold to our private partners. The inmates are employed by the state operation, supervised by state workers and paid by the state. Businesses chose this mode of operation to avoid the need to take on the administrative burden. It appears to me that the proposed language would preclude this arrangement.
The proposed change removes existing subsection (b) in section 1761 which clearly exempted the sale of agricultural commodities or parts for repair of farm machinery and does not apply to products manufactured for use by the Federal Government, a state or a political subdivision of a state. Removal of this subsection suggests that these exceptions no longer exist and would have a negative impact on not only our prison industries program in sales to other states, but also our correctional farms which sells products in the open market that often end up in interstate commerce.
Also the requirement to remove ''state use'' laws related to private sector ventures creates a problem for Wisconsin and I am sure many other states. Both of our current PIE projects operate within factories that also manufacture products covered by state use provisions. Under 1761(b)(1)(B)(ii) we would be forced to decide whether to continue the PIE project or stop producing products under the state use law. In either case our operations would be reduced.
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From a technical standpoint the word ''unless'' in line 14 of the bill should be changed to ''if.'' The word ''unless'' accomplishes the opposite of what is intended according to the analysis.
Finally, the repeal of the current requirements under PIE to pay inmates prevailing wage, allow for deductions for taxes, room and board, crime victims programs and child support and to assure non-displacements of free world workers is of great concern. It was these elements of the program that lead our legislature to agree to our participation in the program. Removal of these assurances and protections will likely eliminate support of the business and labor community that originally supported our participation in PIE. In total the current provisions in Section 7 of H.R. 4100 would reduce the scope of prison industries in Wisconsin.
In closing I want to again commend the intent of the legislation to expand prison industries and I express my willingness and interest in working to fashion legislation which will accomplish that goal.
Mr. MCCOLLUM. Thank you very much, Mr. Sullivan.
Mr. Lorey.
STATEMENT OF LEN LOREY, GOVERNMENT SALES MANAGER, KIMBALL INTERNATIONAL
Mr. LOREY. Thank you for this opportunity to testify on behalf of the office furniture industry. I am Len Lorey of Kimball International and the chairperson of BIFMA International's Government Sales Subcommittee.
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I am speaking today not only for the officer furniture manufacturers, but also for the U.S. Chamber of Commerce, of which my company is a member. The last White House Conference on Small Business ranked unfair competition from government entities as a major concern. BIFMA and the Chamber of Commerce are both members of the growing Competition in Contracting Act Coalition which seeks elimination of FPI's unfair advantage in the Federal marketplace. This coalition now numbers over 300 business and labor organizations from across our country who have found a common ground in the need to reform FPI by ending its monopoly powers.
Today's hearing is on two pieces of legislation that offer distinctly different ideas on what reform is needed and how quickly. FPI was created in the 1930's and is sorely in need of reform. But the reform of prison industries must start with House Rule 2758, the Hoekstra-Frank-Collins-Maloney Federal Prison Industries Competition in Contracting Act of 1997.
That bill has been pending before this committee for 8 months and is similar to legislation introduced in the 104th Congress. It would implement the National Performance Review recommendation to take away the Federal Prison Industries status as a mandatory source of Federal supplies and require it to compete commercially for Federal agencies' business.
Despite the many laudable attempts to have government adopt more businesslike practices, some branches of the Federal Government are having a hard time making that adjustment. The operation of FPI represents one of the longest running conflicts with government policy that our industry and many others have faced. In the office furniture industry alone, UNICOR is in the middle of an expansion that essentially doubles the amount of office furniture that they require Federal agencies to take.
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At the same time that the Justice Department is accusing Microsoft of monopolistic practices, it is harboring over 100 factories within the Bureau of Prisons that operate with these monopoly powers. While Microsoft meets only one of the three tests of a monopoly, that of having an overwhelming market share, FPI has two of the three: the power to set prices and the power to prevent competition.
FPI employs monopoly tactics within the government purchasing process through its mandatory source status. It is not required to bid for contracts under the same guidelines enforced for private companies. It can set any price it wants within the range of market prices and has no incentive to charge the lowest price.
The only way around buying from the prisons is for an agency to request a waiver. But FPI itself controls that waiver and appeals process. Nearly 10,000 waiver requests are made each year, and there is no record of how many agencies could not afford the time or resources to challenge the red tape at FPI's bureaucracy.
H.R. 4100 does not appear to end FPI's monopoly powers any time soon. Mr. Chairman, you have fulfilled the promise you made last month to a National Prison Industries Forum to introduce a bill that would be controversial. You also indicated that it would not be intended to pass this Congress. But we urge this committee to do something that can pass this Congress, and H.R. 2758 has support from Republicans and Democrats alike and, as incremental reform, would be a clear statement of good government policy.
In our experience, FPI has never seen a reform proposal that it likes. Any change to their operation is leveled devastating. So it is left up to the Congress to reinvent the agency for them. In doing so, we believe the instructions to that program's administrators should be to go out and engage in activities that provide a total good to society.
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We have made numerous suggestions before to the group, and some state prisons build houses and give them to Habitat for Humanity. Some state prisons use inmates to help sandbag rivers during floods. Why couldn't the Federal prisons around the country become disaster relief training centers where inmates learn everything from CPR to fire fighting?
When fires break out, as they have in your home state, Mr. Chairman, or might in my home state of Indiana, we would have a team of trained people ready and able to assist local fire departments and other agencies facing catastrophic challenges. The creative ways that inmate labor could be used to benefit society are limited only by a lack of creative minds within the agency.
In conclusion, complete elimination of mandatory source status at a date certain is needed now. The Justice Department's double standard must end. Our government should not be exempt from the rules and regulations it asks its citizens to obey.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Lorey follows:]
PREPARED STATEMENT OF LEN LOREY, GOVERNMENT SALES MANAGER, KIMBALL INTERNATIONAL
Thank you for this opportunity to testify on behalf of the office furniture industry. I am Len Lorey of Kimball International and the chairperson of BIFMA International's Government Sales Subcommittee.
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I am speaking today not only for office furniture manufacturers and suppliers, but for the U.S. Chamber of Commerce of which my company is a member. The last White House Conference on Small Business ranked unfair competition from government entities as a major concern. BIFMA and the U.S. Chamber of Commerce are both members of the growing Competition in Contracting Act Coalition which seeks elimination of FPI's unfair advantage in the federal marketplace. This coalition now numbers over 300 business and labor organizations from across the country who have found common ground in the need to reform Federal Prison Industries, Inc. (FPI) by ending its monopoly powers.
Today's hearing is on two pieces of legislation that offer distinctly different ideas on what reform is needed and how quickly. FPI was created in the 1930's and is sorely in need of reform but reform of prison industries must start with H.R. 2758, the Hoekstra–Frank–Collins–Maloney ''Federal Prison Industries Competition in Contracting Act of 1997''. That bill has been pending before this committee for eight months and is similar to legislation introduced in the 104th Congress. It would implement the National Performance Review recommendation to: ''take away the Federal Prison Industries status as a mandatory source of federal supplies and require it to compete commercially for federal agencies' business''.
Despite the many laudable attempts to have government adopt more businesslike practices, some branches of the federal government are having a hard time making the adjustment. The operation of Federal Prison Industries represents one of the longest running conflicts with government policy that our industry, and many others, have faced. In the office furniture industry alone, FPI (also known as UNICOR) is in the middle of an expansion that essentially doubles the amount of office furniture that they require federal agencies to take.
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At the same time that the Justice Department is accusing Microsoft of monopolistic practices, it is harboring over 100 factories within the Bureau of Prisons that operate with monopoly powers. While Microsoft meets only one of the three tests of a monopoly: having an overwhelming market share, FPI has two of the three: the power to set prices, and the power to prevent competition. FPI employs monopolistic tactics within the government purchasing process through its ''mandatory source status''. It is not required to bid for contracts under the same guidelines enforced for private companies. It can set any price it wants within the range of market prices and has no incentive to charge the lowest price. The only way around buying from the prisons is for an agency to request a waiver but FPI itself controls the waiver and appeals process. Nearly 10,000 waiver requests are made each year and there is no record of how many agencies could not afford the time or resources to challenge the red tape of FPI's bureaucracy.
H.R. 4100 does not appear to end FPI's monopoly powers any time soon. Mr. Chairman, you have fulfilled the promise you made last month to a National Prison Industries Forum to introduce a bill that would be ''controversial''. You also indicated that it would not be intended to pass this Congress. We urge this committee to do something that can pass this Congress. H.R. 2758 has support from Republicans and Democrats alike and, as incremental reform, would be a clear statement of good government policy.
In our experience, FPI has never seen a reform proposal that it likes. Any change to their operation is labeled ''devastating'' so it is left to the Congress to reinvent the agency for them. In doing so, we believe the instructions to that program's administrators should be to go out and engage in activities that provide a total good to society. Some prisons build houses and give them to Habitat for Humanity. Some prisons use inmates to help sandbag rivers during floods. Why couldn't prisons around the country become disaster relief training centers where inmates learned everything from CPR to fire fighting? When fires break out, as they are in your home state today Mr. Chairman or might in my home state of Indiana, we would have a team of trained people ready and able to assist local fire departments facing catastrophic challenges. The creative ways that inmate labor could be used to benefit society are limited only by a lack of creative minds within the agency.
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In conclusion, complete elimination of mandatory source status at a date certain is needed now. The Justice Department's double standard must end. Our government should not be exempt from the rules and regulations it asks its citizens to obey.
Mr. MCCOLLUM. Thank you very much, Mr. Lorey.
Mr. Martin.
STATEMENT OF LARRY MARTIN, PRESIDENT, AMERICAN APPAREL MANUFACTURERS ASSOCIATION
Mr. MARTIN. Thank you, Mr. Chairman. It's a pleasure to be here today and we take this opportunity to commend you and the committee for your interest in this most important subject.
The American Apparel Manufacturers Association has a government contractor's committee comprised of about 50 companies, all of which have vital interests in your deliberations and in the future of prison industries. By and large, these 50 companies do business only with the Federal Government and are not in a commercial marketplace.
As we have pointed out before, these government contracting companies have few options. They have little or no experience in the commercial marketplace. Half of that market has already been taken by the imports, while the other half is contested by about 12,000 domestic firms.
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Moreover, the apparel industry in the United States is shrinking dramatically. In the last 5 years, we have lost 220,000 jobs. Dr. Sawyer earlier alluded to the fact that she believed that our problem was imports and not FPI. Let me assure you our members who are in the commercial marketplace have no interest in entering the government contracting marketplace. A few of them have from time to time and had rather bitter experiences.
Secondly, as everybody knows, most of our members sell exclusively to Department of Defense and the Barry Amendment precludes imported apparel from being purchased for the military.
Also, in response to a question that was asked earlier, UNICOR has taken 100 percent of the Federal market for cavlor helmets, and it has announced it is going to take 53 percent of the Federal market for brown tee shirts by the year 2000.
We cannot overemphasize also the importance of maintaining a warm industrial base in the United States. If the companies which manufacture for the Department of Defense go out of business, who is going to expand production in the event of a sudden military buildup such as we witnessed during the Gulf War. We seriously doubt that FPI will ever have that capability.
We had the privilege of testifying before this subcommittee in September 1996 and again last October. We have made several recommendations for reform of prison industries and we believe they remain valid today. We suggest that Congress should, one, eliminate the mandatory source designation and require UNICOR to compete for Federal orders with private sector companies.
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Two, provide guidelines defining specifically what constitutes undue competition with the private sector and what is a reasonable share for FPI production of any given product. AAMA has proposed that ''undue burden'' should be defined as sales exceeding 20 percent of the Federal Government market for any given product.
Three, narrowly define the term ''specific product'' so that it refers to specific products and not generic groupings of products, which has in the past enabled FPI to take over certain specific individual products.
And fourth and finally, require UNICOR, as part of its annual report to Congress, to provide an analysis of its impact on private sector companies that produce the same or similar products as those produced by UNICOR.
We have reviewed both H.R. 4100, the Free Market Prison Industries Reform Act of 1998 and H.R. 2758, the Federal Prison Industries Competition in Contracting Act of 1997. We endorsed H.R. 2758 last February for many of the same reasons that have been expressed by others on this panel. It contains most of the items we seek in FPI reform, notably the repeal of the special preference.
Unfortunately, the draft of H.R. 4100 before us today addresses none of our recommendations. However, we note that section 9 of the bill directs the Attorney General to submit to Congress a plan to restructure FPI. We would like to suggest that Congress should direct such a study, and further that the Attorney General be required to take into consideration the views of the Departments of Commerce and Labor and of the industries and labor organizations affected by FPI, as well as the recognized needs of FPI to provide jobs for prisoners.
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Further, in order to preserve the capabilities of the industries involved, we suggest that Congress, during the 1-year duration of the study, impose temporary restrictions on the activities of FPI. These restrictions should include, as we have suggested, a cap of 20 percent of the Federal market for any specific product. They also should include a reasonable and finite definition of the term ''specific product.''
We would be most pleased to work with the subcommittee, with FPI, and with other affected industries to flesh out these proposals. Hopefully, such a comprehensive study would result in an FPI that serves the need to employ and rehabilitate prisoners while preserving the ability of private firms competing with FPI to stay in business.
I appreciate the opportunity to be here today. I presume the rest of my statement will be in the record.
[The prepared statement of Mr. Martin follows:]
PREPARED STATEMENT OF LARRY MARTIN, PRESIDENT, AMERICAN APPAREL MANUFACTURERS ASSOCIATION
Thank you, Mr. Chairman. I am Larry Martin, President of the American Apparel Manufacturers Association (AAMA). It is a pleasure to be here today and I commend the Committee for its interest in this most important subject.
AAMA is the central trade association for American companies which manufacture clothing. Our members are located in virtually every state, make every kind of garment and are responsible for about 80 percent of the clothing sold at wholesale in the United States. Our Government Contracts committee is comprised of about 50 companies, all of which have vital interests in your deliberations and in the future of Prison Industries.
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As we have pointed out before, these government contracting companies have few options. They have little or no experience in the already overcrowded commercial marketplace. Half of that market already has been taken by imports, while the other half is contested by about 12,000 domestic firms. Moreover, the apparel industry in the United States is shrinking dramatically. In the last five years, we have lost 220,000 jobs.
Also, we cannot overemphasize the importance of maintaining a warm industrial base in the United States. If the companies which manufacture for the Department of Defense go out of business, who is going to expand production in the event of a sudden military buildup, such as we witnessed during the Gulf War? We seriously doubt that FPI will ever have that capability.
We had the privilege of testifying before this Subcommittee in September of 1996 and again last October. We have made several recommendations for reform of Prison Industries and we believe they remain valid today. We suggest that Congress should:
1. Eliminate the mandatory source designation and require Unicor to compete for federal orders with private sector companies.
2. Provide guidelines defining specifically what constitutes undue competition with the private sector and what is a reasonable share for FPI production of any given product. AAMA proposes that undue burden should be defined as sales exceeding 20 percent of the federal government market for any given product.
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3. Narrowly define specific product so that it refers to specific products and not generic groupings of products which has in the past enabled FPI to take over certain specific individual products.
4. Require Unicor, as part of its annual report to Congress, to provide an analysis of Unicor's impact on private sector companies that produce the same or similar products as those produced by Unicor. In this way, Congress will be able to ascertain whether Unicor's operations are imposing an undue burden on the private sector.
We have reviewed both H.R. 4100, the Free Market Prison Industries Reform Act
of 1998 and H.R. 2758, the Federal Prison Industries Competition in Contracting Act of 1997. We endorsed H.R. 2758 last February. It contains most of the items we seek in FPI reform, notably the repeal of the special preference.
Unfortunately, the draft of H.R. 4100 before us today addresses none of our recommendations. However, we note that Section 9 of the bill directs the Attorney General to submit to Congress a plan to restructure FPI.
We would like to suggest that Congress should direct such a study. Further, that the Attorney General be required to take into consideration the views of industries and labor affected by FPI, as well as the recognized needs of FPI to provide jobs for prisoners.
Further, in order to preserve the capabilities of the industries involved, we suggest that Congress during the one-year duration of the study impose temporary restrictions on the activities of FPI. Those restrictions should include, as we have suggested, a cap of 20 percent of the federal market for any specific product. They also should include a reasonable and finite definition of the term specific product .
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We would be most pleased to work with the Subcommittee, with FPI and with other affected industries to flesh out these proposals. Hopefully, such a comprehensive study would result in an FPI that serves the need to employ and rehabilitate prisoners while preserving the ability of private firms competing with FPI to stay in business.
There are several sections of the draft bill we would like to address.
Section 4122 of the bill would expand the FPI board from six to seven members. We think it also should be required that a significant number of board members be recruited from industries and labor organizations affected by FPI's operations.
This section also gives FPI authority to sell assembled goods and foreign-made goods. We are not sure we understand the intent here, but it appears that it would turn FPI into merely a distributor of goods made elsewhere. If that is the case, it certainly does not serve the purpose of providing work for inmates.
We object strongly to new Section 4123 of the bill which would give FPI authority to contract sales to state and local governments. This is expansion into another sphere of competition with private enterprise. It is unclear to us whether this expansion would carry with it the mandatory source requirement.
We note that the same section gives FPI authority to sell off-shore. While we might find that more appealing than having FPI compete with us in this country, we note that it would create a contradiction. It would authorize use of prison labor to produce exports, while other federal law prohibits imports of products made with prison labor.
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The same section retains the requirement that FPI limit its appetite to a reasonable market share , but it leaves with FPI the authority to determine what that share is.
Finally, the two new types of prison industries this bill would create Private Sector Projects and Prison Industry Enhancement Projects would for the first time give FPI the right to participate in the commercial marketplace. We have not had the time to discuss and take a position on this proposition.
However, we should note that, as previously stated, the commercial market already is overcrowded and it is doubtful there is room for a large new entrant. Moreover, FPI's record of poor quality and failed delivery dates for the military suggests it would have a difficult time in a truly competitive world.
Moreover, if FPI is to compete in the commercial marketplace it should do so on even terms. It should be subject to minimum wage laws and to a true accounting of its overhead costs.
Mr. Chairman, we thank you for the opportunity to share our views. We would be pleased to respond to any questions.
BIOGRAPHY
Larry Martin has served the U.S. apparel manufacturing industry as President of the American Apparel Manufacturers Association (AAMA) since 1995. AAMA is the national trade association representing the American apparel industry and its suppliers. AAMA members produce over 80% of the clothing sold at wholesale in the United States.
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For eleven years prior to becoming President of AAMA, Mr. Martin held the position of Director of Government Relations at the association.
Previously, Larry Martin was Vice President of the American Fiber Producers Association, was on the staff of the United States Senate, and worked in the newspaper business.
He is a native of Urbana, Ohio.
Mr. MCCOLLUM. Yes, your entire statement has been admitted by unanimous consent, Mr. Martin. Thank you very much for that testimony. Again, thank you all for your patience today. And I know each of you is probably wondering if we can race out of there to whatever planes you need to get to, and I am going to try to accommodate that.
Dr. Reynolds, I think you are the earliest one who told us you had to pop out, and appropriately, you were put at the head of the list anyway in terms of the appearance here. So I am going to ask you some questions and if you need to scoot, then if none of my colleagues wander in in the meantime, feel free to do that.
You have told us in no uncertain terms that you do not believe that the minimum or prevailing wage should be a requirement in prison industries. And the bill H.R. 4100 doesn't contain it, although as Mr. Sullivan has indicated, and I suspect others would, and we have the AFL–CIO statement today, though they weren't able to appear here, I think they take the position that it should contain a minimum and/or prevailing wage.
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The question is, shouldn't we require this so the cost of production in prison industries is more like the private sector? Shouldn't we require prevailing or minimum wage in our bill?
Mr. REYNOLDS. I think we should rely primarily on the marketplace, and that means that over time we will have a vigorous auction for prisoners. We should rely on the competitive mechanism. If prisoners are underpaid, then these will be attractive production opportunities for competing businesses open to all, at least to the extent that corruption or nepotism or favoritism is suppressed.
I am on record as saying at least at today's prices, the Federal minimum wage at current scale of employment of prisoners isn't really a binding constraint, probably in terms of getting us up into perhaps 25 percent of prisoners employed.
After that, of course, you have creamed most of the best prisoners, et cetera, so productivity problems really bind. So I would rely on the marketplace primarily to set wage rates behind prison walls just as we do predominantly throughout our overwhelmingly private sector economy.
I can understand the people who have less confidence in the private marketplace than I do.
Mr. MCCOLLUM. But you would not go with the prevailing wage, but you think that up to 25 percent of the prisoners in the country today could be employed if we set a minimum wage standard.
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Mr. REYNOLDS. Yes.
Mr. MCCOLLUM. Well, that's good to know. And that's one of the reasons we are having this hearing, so we can flesh that out. The Bureau of Prisons has expressed grave concern to us, though I did not ask them that today. They have told us that they did not believe either the minimum or the prevailing wage would work to attract enough private industry to make up for their losses. So that was the reason for that question.
So that brings me to the other question. What incentives do you believe are necessary to attract private business to prisons?
Mr. REYNOLDS. If, by incentives, you mean some kind of subsidies, I would oppose that. Some kind of over the top subventions. We shouldn't get into that business. We have an attractive asset which are a large number of potentially productive prisoners. The socialist style mechanism can't succeed. Only business can succeed in business. I believe that is a logo to which you would subscribe as well.
So I hark back to a study, for example, in the mid-1920's that the Bureau of Labor Statistics or the Department of Labor did in which private industry had four times the productivity, even in similar businesses, furniture operated by government versus furniture production operated by the private sector.
So the productivity really has to come from the productive sector. Now we are always going to have at least a residuum of public sector employment. That is not the problem. The problem is to expand dramatically the private—now, you need lots of details that I am not an expert in, but you need recruiting, for example. You probably need a non-profit corporation that acts as an interface between the business community and the prison operation per se and so on.
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Mr. MCCOLLUM. You recommend that mandatory source preferences be phased out a whole lot faster than H.R. 4100 does, and the Bureau of Prisons has indicated a concern that if we did that, there wouldn't be sufficient time to make adjustments to get the private sector in there.
How do I reconcile that? Why do you think we could do it faster?
Mr. REYNOLDS. Well, how many decades does it take? Apparently, one decade isn't enough. Well, it's just common sense to realize that a 10-year deadline doesn't put a whole lot of pressure on you.
Mr. MCCOLLUM. Are you talking about 5 years? Would that be better?
Mr. REYNOLDS. Yes. I think that is a nice interim schedule. I don't have any social science evidence to support that, but I am going to scan the literature and see what kind of success we have had in privatizing some things and what seems to be a reasonable schedule.
I also think that private management consultants could be surveyed or hired and get some expert opinion from the business community on this issue.
Mr. MCCOLLUM. Do you believe that Federal Prison Industries could survive without a mandatory source preference with no other changes in the law? Just do away with it?
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Mr. REYNOLDS. No, that's just not viable. Of course, Congressman Frank was questioning the Director on that. It is very clear that agency heads don't like this restriction either in terms of preference. Everybody wants a lot of degrees of freedom.
Mr. MCCOLLUM. Secretary Sullivan, you expressed some concerns that I am very interested in making sure we do address. Dr. Reynolds, if you need to run. I know that Congresswoman Jackson Lee has come in, but he has to catch a plane, so he has got to go and I am going to go ahead and finish my 5 minutes, and there is no time for questioning him further.
Ms. JACKSON LEE. Mr. Chairman, if you will just indulge me. I welcome you. I may not agree with everything you've said, but coming from Texas A&M, I welcome you here this afternoon. Thank you.
Mr. MCCOLLUM. Thank you. Mr. Sullivan, first of all, we didn't intend to do some of this activity apparently we have done, which is why we have these hearings, such as removing the existing subsection (b) in section 1761 with regard to the agriculture commodities.
So I can assure you when we do mark a bill us, we will address that and make sure that we don't do that feature. Secondly, we had thought that the current requirements of PIE could be handled by the states. In other words, if Wisconsin wants to have a prevailing wage and all the deductions and so forth, that your state legislature could simply enact that. It wouldn't be a problem. You would be free to determine that. We wouldn't keep you from doing that by what we were enacting.
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So as opposed to imposing more on you, our view was we were going to remove constrictions, orders, directions, et cetera, in that regard to that extent. So I wanted to be sure you understood those concepts. Now it still may be a problem in Wisconsin. I don't know whether it would present a political problem or not. You certainly made good points in that regard, but I wanted to point those out.
And while I am at it, I wanted to ask you some questions about some of the things you have said. You have expressed concern over the requirement that state prison industry programs would have to be operated by private businesses in order to sell goods on the open market. The concern we had with that and the state uses or mandatory preferences is that I have been around here long enough to know that we aren't going to be able to get a bill through Congress that does away with the prohibition on the sale of interstate sale of goods unless we make some serious concessions to industry and labor.
And involved in that, it seemed to me, one of those concessions was to require that there be some private business in the prison and that indeed there be the opportunity for some of the things that you have said may be a problem in your state.
But we don't want to interfere, at the same time, with your marketplace, with the structure you have got. So your suggestions about how we can blend the status of the situation as you see it in your state into what we are doing, I am open-minded to that.
Do you have comments on the general principle that I am describing? Can we address these problems and resolve them, do you think?
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Mr. SULLIVAN. From our perspective, I think they can be resolved, Mr. Chairman. I guess my belief would be that this should be the private sector's choice whether they want to come in and run the industry themselves or whether they want to buy the product from the state after the state produces it and they pay the price of that product where it meets prevailing wage.
So I believe there is ample room for resolution to this conflict.
Mr. MCCOLLUM. Again, I want to work with you. I want to yield to Ms. Jackson Lee for 5 minutes. Then I have certainly got questions of the rest of the panel and may come back to you. But my point again—and I want to stress it, not just for you as an individual, but for all of the state prison directors of the prison industries and corrections officials—is if we are going to remove the longstanding Federal prohibition on the open market sale of prison-made goods, it is absolutely essential, in my judgment, to make other changes not only at the Federal level with regard to mandatory source preferences, but in some of the ways the States do business. So we are going to have to work with you. That's the whole reason for the bill, is to be a work product. But thank you for that accommodation.
Ms. Jackson Lee, you are recognized for 5 minutes.
Ms. JACKSON LEE. Thank you very much, Mr. Chairman, and let me echo your remarks. The whole idea is to get a work product. I am gratified that you have already indicated that there will be other hearings, because I noticed that representatives from the AFL–CIO were not able to be here today and I hope that we will have the opportunity to hear from their perspective.
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Mr. Sullivan, I noted that you commented on the prevailing wages issue. Can you just elaborate for me. That is certainly a concern, and were you raising that as a concern?
Mr. SULLIVAN. I raised it as a concern because we believe that needs to remain in there for the State of Wisconsin.
Ms. JACKSON LEE. I'm sorry, it needs to be what?
Mr. SULLIVAN. It needs to be in there. At least from the state perspective, that prevailing wage should be part of this. That is the manner in which we sold this to the State legislature. That is the vehicle by which we were able to bring labor and business to a point of agreement in order to bring the PIE program in.
We do not want to provide unfair competition. We need to pay the prevailing wage and Corrections shouldn't even determine what the prevailing wage is. A separate entity of government like a Department of Labor or Department of Commerce should do that, and there are means to do that.
I believe if Corrections is going to get into the open market, it needs to be on a fair, even, level playing field.
Ms. JACKSON LEE. So what I understand, Mr. Sullivan, is that you have a working example in Wisconsin where you have collaborated with the business community and the prison entity and, in fact, in that business community are included small businesses.
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Mr. SULLIVAN. Yes, we have.
Ms. JACKSON LEE. And your program has been working for how long as a State effort?
Mr. SULLIVAN. A couple of years now.
Ms. JACKSON LEE. And how has it impacted the marketplace or the competitive edge of small businesses? I am not sure of your level of minority participation, but what kind of results have you been seeing?
Mr. SULLIVAN. We have not heard complaints from the small business community with the two enterprises that we have going. I think, to some degree, that is due to the robust economy evident in Wisconsin where many employers are looking for employees. And in the two particular industries that we have, that is the case. They cannot find employees to come into their plants where they exist, therefore, we are not considered unfair competition because of that and the fact that we are paying a prevailing wage.
Ms. JACKSON LEE. Would you think that if we were to pass H.R. 4100—I know there is an alternative bill—I am looking for, if you will, if we can find the perfect model, would you challenge us, would it be your belief that we really need to work through these concerns that some of us have expressed, prevailing wages, collaboration with labor, the whole question. Minority businesses are in many of our communities where Federal prisons are located. That is a big issue. Small businesses, that is a big issue. Would it be a better bill if we addressed those issues and made sure that we had a collaborative product?
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Mr. SULLIVAN. Certainly for our State, it would. And I believe in other States, it would also be the case, but I don't know if that is the case for all States.
Ms. JACKSON LEE. Well, whether it is the case for all States, I would certainly want it to be the case for any Federal legislation, because it would certainly have far-reaching impact. Once we pass legislation federally, it impacts all States and all States are increasingly diverse, both economically as well as it relates to the level of businesses and minorities and women doing business. And I think it is extremely important that we have that focus.
So would you provide my office, if you would, with sort of a synopsis or a paper, if you will, on the Wisconsin program. I would appreciate getting that.
Mr. SULLIVAN. Yes, we will, Congresswoman.
Ms. JACKSON LEE. Thank you very much. Mr. Chairman, I have another obligation on the floor, so I will yield back my time with the understanding that we will have another hearing. And might I ask, Mr. Chairman, I know that the representative from the AFL–CIO was not here. Do we intend to have a hearing that will have that opportunity?
Mr. MCCOLLUM. Oh, certainly, we do. And they did submit their testimony, but they couldn't be here in person. But we are going to have that opportunity, other small businesses and quite a few more people. This is just the beginning.
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Ms. JACKSON LEE. I thank you, Mr. Chairman, very much.
Mr. MCCOLLUM. Thank you.
Ms. JACKSON LEE. Have a good working session.
Mr. MCCOLLUM. We are going to do our best, Ms. Jackson Lee. Thank you for your participation today.
Mr. Lorey and Mr. Martin, I want to come back to you. Everybody has focused on Mr. Sullivan and Mr. Rostad, and you haven't had any questions. I don't want you to feel left out; I had no intention of doing that.
At previous hearings that we have held on this subject, your organizations have submitted testimony that you support the prison industry program in principle, obviously disagreeing—we know that—with mandatory source preference.
But what I am curious about is how can you support the elimination of the mandatory source in 2758, which bill you do support, without also giving the Federal Bureau of Prisons and the Federal prison industries the authority to sell good on the open market. And maybe you do; maybe I am wrong in that. But that bill doesn't do that, and that is one of the critical things that H.R. 4100 does. Whether you agree with how it gets there, we are still trying to work through that process. Mr. Lorey?
Mr. LOREY. Yes. Well, at this point, our coalition, made up of primarily the office furniture industry, the textile, the apparel industries, actually the four core industries that have been hurt by FPI UNICOR the most over the years, our number one concern is the elimination of the mandatory source preference.
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I think once that is taken care of, I believe the industries can work together a little better. We have given numerous, many suggestions in the past on what we feel the prison industries should be doing. Essentially, we have not suggested getting into other industries, diversifying into other industries.
I know we hear that from a lot of other members of NAM and the Chamber of Commerce that the four industries that are carrying the burden of that program have not just gone out and said, well, why don't you get in this guy's backyard and that guy's backyard. We have not done that. We have suggested really good society items, such as the recycling program. We are extremely disappointed that they have not been in that.
We have been suggesting that since 1989, to have them take over the entire national recycling, demanufacturing automobiles, appliances. At their prevailing labor rates that they pay, they can tear down, demanufacture products and get the value out of it, whereas companies paying the prevailing wage rates and health benefits cannot do that.
For years, we have suggested they should produce products that are just made overseas, that are not made in our country so they do not take away American jobs. We have given a lot of suggestions——
Mr. MCCOLLUM. And I wouldn't argue with you on that. I want to give Mr. Martin some time to answer too, because we are going to take whatever time we need here. I don't have others here; I wish I did. But I want to be sure we do get your thoughts on the record.
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Frankly, I see this as a working session where we can share ideas, not just some formal whatever. What I am looking at is that I concur with you and Mr. Martin that we should do away with the mandatory source preference. I absolutely believe it.
What I do believe too is that somehow it is my responsibility and the committee's and Congress' to come up with a way to employ in productive industries to give them training that is adequate for them to get a job when they get out, many more inmates than are today employed. And at least keep at the Federal prison system 25 percent working, as Dr. Hawk Sawyer said.
Mr. Martin, how can I do that? How can we do that unless we, along with whatever scheme we come up with to do with mandatory source preferences, also open up the market to sell other goods into the general marketplace?
Mr. MARTIN. Mr. Chairman, we have not taken a position on that question. It is a question that will have to go to our larger membership, obviously, rather than to our government contracts people. It is very possible that we would not have a problem with it.
I believe that we would take the position that if they are to enter the commercial marketplace, they should be subject to minimum wage laws and that they should have a true accounting of their overhead costs.
But to be perfectly frank, FPI's record of poor quality and field delivery dates suggests that it would have a difficult time competing in a truly competitive apparel market.
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Mr. MCCOLLUM. That's why, Mr. Martin—and we are not looking at the apparel market here, as such, we are looking at this model. Again, no pride of authorship here, we are trying to get private industry, whether that is the apparel industry or making shoes or service industries with computers or whatever, into the prison to run it and do it and market it and do all of that.
So we wouldn't be having an FPI like you know it today at all. That would be the idea here. Do you think that is possible to do?
Mr. MARTIN. It may be, but some months ago or some years ago, I forget the time frame, the Federal prisons were locked down for weeks at a time. If that resulted in one of my larger members missing delivery dates to Walmart, we would have difficulty maintaining a relationship with that prison.
Mr. MCCOLLUM. Of course you would, and I realize that. And there are some who do today participate and they are very successful with them. I suppose that is a risk factor that any industry group would have in making those contracts. That also is one of the rubs when we have the prison industry people come in and say well, you can't demand that it be prevailing wage or minimum wage, because there are all kinds of factors you have to put in here that private industry is going to take into account because prison labor is different.
It does have risks like that and it has risks that a certain percentage of the prisoners are not going to be as productive as the private sector, and they've got to do the training and their turnover is greater. All those things are in there. We haven't heard all that. We are going to have hearings where we get into that sort of detail later.
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But in principle, you think it is a noble cause to look to get private industry into prison, I gather. Whether we can accomplish it is something you are still unsure of.
Mr. MARTIN. Well, we intend to address it. We would be very pleased to work with this committee on that subject.
Mr. MCCOLLUM. Good. I would appreciate that. I think that is very, very important.
One of the last things that concerns me, Mr. Lorey, about your testimony is the part about, as noble as it is, the disaster help and the help with the fires and all, which you expressed could be jobs these folks could do.
I am concerned on two levels with that train of thought. One of them is that if you have prisoners doing these things, it is a good public service, no doubt about it. I wouldn't oppose there being some training so they could help with public service things, building homes for the poor or whatever.
But by and large, that doesn't give them the skills, so I have observed so far, of the nature they need to go out when they are released from prison and get a job and not commit a crime and come back again. And since they have a 60 percent recidivism rate nationally—those that don't go through prison industries do, compared to 12 percent for those who do—it seems to me we have got to find a way to get them doing something besides those things you suggested, albeit those are good ideas to do.
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What is your thinking on that?
Mr. LOREY. Well, I think from listening to Mrs. Sawyer today, I know in the past, way, way back in time, I know FPI wanted to try to teach a trade. I think they do admit today that they don't really teach a trade in a lot of the jobs. They are teaching a work ethic, that a person gets up and goes to a job and reports to work and so forth.
I think their main concern is just keeping people busy. I don't think they or the prisoners within are quite as concerned or worried about learning a craft.
Mr. MCCOLLUM. Well, they may not be, but I am. And I think as a public policy, I am curious whether you are.
Mr. LOREY. I think if they would learn a trade, I think that would be fine. I think particularly the Western prisons where there are fires all the time, I think that would be an excellent choice out there. Maybe in some of the Southern prisons as well. The recycling, they would still learn a trade, they would be running some machinery of a different type there.
Mr. MCCOLLUM. Well, some of those are good ideas. I am not debunking them. I am just suggesting to you that if somebody got into, for example, computer data input, which some of our Federal prisoners do, and did it for private businesses, that they would be learning something that is marketable outside.
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And whereas the recycling may be marketable, it is a limited number. If we are going to put to work 25 to 50 percent of the prisoners in this country to try to reduce recidivism, which I think is a goal that many have expressed as desirable, that is going to be a lot of prisoners who've got to be working at job training, if you will, that will teach them marketable skills.
So it is a question of finding more than just recyclables. That would be one industry that probably would work, no question about it. But the putting out of the fires, with so many firefighters, that is not a particularly long-term deal.
Mr. LOREY. That's right. And we understand they could only have a certain level of people involved in that. Probably minimum security type people, maybe some medium types.
But our coalition and our industries have really been affected by the burden of this social program. We are not against them contracting work in other industries. I just don't think FPI has pursued that in the past. Maybe their charter hasn't allowed it, maybe there hasn't been a law that allowed it. We think that would be fine if they could go out and produce computer chips or something.
Mr. MCCOLLUM. They really haven't been able to market this stuff, that is the problem. The prohibition I mentioned earlier on interstate lines. We have the little PIE program that Mr. Sullivan has got 80 to 150 employees in at one time, and that is a State program. And the Federal Government doesn't really even have that.
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We don't have a program, nothing that will attract very many people. And the other side of that, of course, is if we do donated work, you have to find tax dollars to pay for all of this, because now, as you know, Federal prison industries—and you and I both share this, don't like the mandatory source part, who they market to and how much of the market they get—they do get an income from that to defray these costs. So we are looking at both how do we afford this, as well as what does it do.
Mr. Sullivan, that brings me back to you on all of this. If we look at the prevailing wage rate that Ms. Jackson Lee raised a little while ago, I think you expressed to us the concern you got with the State of Wisconsin. And I understand that and I respect that. But again, I want to reiterate to you that my understanding is that we wouldn't have to impose the prevailing wage for the State of Wisconsin to do that under what we are proposing in here. If we just allowed Wisconsin to do it and didn't mandate it—see, the idea was to do away with the PIE program and supplant it, because the reason for the PIE program is to allow the interstate sale of goods and to get the private industry in it.
Now we are suggesting in 4100, if we are going to do away at the Federal level with mandatory source preferences and allow the Federal Government in order to do that, have their prison products sold in interstate commerce, why shouldn't we allow that opportunity for the States too?
And then the question becomes what construct is there to do that? And the feeling was that in order to do that, to attract businesses to make that meaningful, you don't need the PIE program anymore, because the whole idea of the PIE program is to give you an opportunity to invite some people in under very limited conditions to sell those goods in interstate commerce.
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So if we eliminate the interstate prohibition for anything you produce, then we wouldn't have a national constraint. We wouldn't have a PIE program. So your legislature could go in and impose the prevailing wage, is my point, if you follow what I am saying, because we wouldn't have anything to impose it on, if you follow me.
But the other thing that interests me is, and the real question here, is you now have in your employ, according to your testimony, about 700 employees in your State prison industries cumulatively, the PIE, I assume, including and the others. And that is about 5 percent of your prison population.
If you wanted to take that employment up to 25 percent or about 4,000 of your prison inmates, what does it take to do that? Could you develop a plan that you believe could accomplish that and have 25 percent employed within 5 years, if somebody asked you to prepare that kind of plan?
Mr. SULLIVAN. Well, my objective is to get up to 50 percent of the inmates involved in meaningful employment in industries. And I think the only way that can happen is to have the private sector come in and be partners with us, whether they simply buy our product or they come in and actually run an industry themselves.
I think that is the only answer, and that is why I agree with the intent of the legislation and with some of the ways to get there. But I believe in Wisconsin, as in some other States where unions are strong, if the legislation does not prohibit us having elements like prevailing wage, then we are fine.
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Mr. MCCOLLUM. It does not. Thank you. That is what I wanted to clarify.
And you think it is doable to get up to the 50 percent. How long do you think it would take you to get there if we opened up the marketplace for you so you could bring private industry in in a meaningful way? Do you think that is something that takes 10 years to get to?
Mr. SULLIVAN. I would hope it could be accomplished in 5 years, but a lot of selling has to be done with the private sector. Some of the issues that Mr. Martin said, for example. We in prison administration need to view lockdowns and how we handle them in a much different manner.
For example, if none of your inmates involved in the private industry issue are part of the reason for the lockdown, then they need to be allowed to go to work, maybe under some restrictive conditions because of the overall condition in the institution.
But I think prison administrators need to look at some of these issues differently. You need to keep these industries running and open quickly when they are shut down.
Mr. MCCOLLUM. Mr. Rostad, you alluded to the support going up much more with labor when you have the minimum or the prevailing wage factored into this. Each State is different, though. There are States that are not really union States. There are States that are highly unionized, as I assume Wisconsin is.
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How can we develop something which will be flexible enough to allow Wisconsin to impose the prevailing wage, but allow another State that might not want to, might not have the big union base there, not have it, and still bring the union worker to see that what we are doing here is not detrimental to their cause. Do you have any suggestions about that?
Mr. ROSTAD. Well, I think consistent with what you have already suggested, Mr. Chairman, in terms of letting the States set the wage at minimum or above, I guess in terms of should we have a minimum wage, absolutely. A Federal minimum wage, no doubt about it, and then let the States set it accordingly.
In terms of organized labor, I guess I would limit my observation to say that I think on the State level—and I am sure you have already sensed this yourself—there is a very different attitude about this issue than I think you might get on a Federal level.
I think that on a State level, there is a willingness to talk about a minimum or a training wage in a much different way than perhaps on the Federal level.
But I would like to make one quick, brief remark about what everybody, starting from Director Hawk, have talked about in terms of providing enough incentives for business. I think this needs to be looked at somewhat differently in terms of I don't think it's a matter of providing incentives.
As you well know, in over half the States, there is a huge incentive already for many companies to look into prisons, and that is called full employment.
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That is beyond anything else we can do.
I think the incentive is already there. I think the perspective needs to be looked at in terms of how does the business look at this and what is the risk involved. I think there is significant financial risk, business risk, and political risk involved in these decisions that are not affected or impacted significantly by a little incentive here, a little incentive there.
Mr. MCCOLLUM. But if they can't sell across State lines, if they can't market the goods that are produced in the prison, isn't that a problem? And that is the current law for most of them.
Mr. ROSTAD. I was making this comment in the context of a PIE program, a potential PIE partner. So that they obviously can, at that point, sell across State lines. I think the more central issue is what can be done to reduce the perceived risk from the point of view of the businessman. We can talk about wages all day and all night if we set a prevailing wage. I don't think we will have to worry about, because the financial risk becomes too great, as you well know.
Mr. MCCOLLUM. In other words, if we said there had to be a prevailing wage across the country——
Mr. ROSTAD. We wouldn't have anything to worry about.
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Mr. MCCOLLUM. Because no industry would come into the prison, is that what you are saying?
Mr. ROSTAD. Precisely, because it becomes a bad financial decision because of what you have already referred to in terms of the additional costs. And the additional cost involved in an operating operation, involving inmates versus the free work force, the higher turnover, the lack of skills.
So yes——
Mr. MCCOLLUM. But you don't see minimum wage as the problem.
Mr. ROSTAD. No.
Mr. MCCOLLUM. Again, I don't remember if Dr. Hawk Sawyer said it here, but I know she said it during our development of this legislation, that there is great fear at her level that the minimum wage alone would be a deterrent to industry.
Mr. ROSTAD. I think there is a great fear, absolutely. I think there is a great uncertainty. My sense, in terms of FPI, is there is an enormous uncertainty about what to expect. But I think that has nothing to do necessarily with the issue of how is the market going to respond.
And I don't see any reason for having to go below Federal minimum wage. I think that creates more problems than it solves. What I do this is there is a huge reason to again, not look at this in terms of traditional way of what incentives can we throw on the table, but look at it in terms of how can we address the legitimate perceptions of risk, financial, political, business risk, and then approach some other solutions.
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Many of these companies, as you full well know, have the option to go offshore, to go to Mexico. But that is the same sort of decision, I think, from their perspective in terms of evaluating the risk. I think if the focus was on how can we address the concerns of risk instead of what incentives can we throw onto the table, I think it would be much more fruitful.
Mr. MCCOLLUM. Mr. Lorey and Mr. Martin, I will ask each of you this question. Do you think that under any conditions that you can conceive of, any members of your respective associations would choose to engage prison labor in their businesses? Do either of you think they would?
I mean, is there any construct under which we could anticipate that we might be able to see them interested at all?
Mr. MARTIN. I can't answer the question definitively. I know that there are areas in the United States where because the good economy, apparel manufacturers are having trouble hiring adequate employees, particularly in the Northeast, Pennsylvania and so forth. I would think that if there were interest, it would be in those areas.
Mr. MCCOLLUM. How about you, Mr. Lorey?
Mr. LOREY. I know from some of our past association meetings, and recently we had a national meeting in Chicago just last month, at this point in the office furniture industry, manufacturers are not willing to displace their own employees that they have now in place of putting those jobs into the prison labors.
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Mr. MCCOLLUM. Good. I wouldn't want them to.
Mr. LOREY. So that is the prevailing feeling, at least from the office furniture industry. I know that once the mandatory source preference, if we can get that pulled right away, that could change things. I know that that is very important to the coalition.
Some of the ideas that we heard from this side of the table today are great. Those will take a lot of time to incorporate. We've been giving ideas since 1989, and here it is 9 years later and none of those have been implemented.
At Federal prison industries, it is too easy for their board of directors just to approve expansions——
Mr. MCCOLLUM. But that's why we're here today. We are actually making some progress, I think, and I would like for you to believe we are.
Mr. LOREY. I think we could make progress if that mandatory source is removed immediately. I think there would be a lot more companies maybe at the table.
Mr. MCCOLLUM. But to get the mandatory source removed—I know you want it done solely and immediately—but I honestly believe, and I think you and your members need to understand this, something else is going to have to go along with it. We can't just go cold turkey, because I believe that too many members will agree with Dr. Hawk Sawyer that an immediate cold turkey removal without changing some other conditions will result in a net loss.
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Mr. LOREY. I'm willing to take that message back to the coalition.
Mr. MCCOLLUM. I'd appreciate it if you would. And we'll work on it with you. We're not wedded to anything, but we'll work on it with you.
And the last question, Mr. Martin, how about the apparel makers who use offshore labor? A lot of apparel is produced overseas now. Do you think we could find a way to entice them back, with some of them using prison labor? We didn't talk about that today with you, but is that not a fertile ground for bringing some back if we make the conditions right for them?
Mr. MARTIN. It might in some circumstances if the obvious downsides could be dealt with, such as the lockdown problem and so forth. You know, the sad fact of it is that there is a lot of garments that can't economically be made in the United States now, and we are making them in Mexico and Central America and other places.
Mr. MCCOLLUM. If we get them back home, it would be a lot better, no matter who is making them. Certainly if prisoners are making them who are later not going to go out and commit more crimes, that would be a great public service.
I want to thank all of you, seriously, for coming today. We have more votes on and we are not getting the attendance perhaps because it's the last day that we are here. But I do want to thank you for coming. It's important for us to get this first step out of the box and to get on the path toward the ultimate cause we all share. I think we all share the basic principles we want to accomplish.
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Again, thank all of you for being here. This hearing is adjourned.
[Whereupon, at 5 p.m., the subcommittee adjourned.]
A P P E N D I X
Material Submitted for the Hearing Record
STATEMENT OF ANN HOFFMAN, LEGISLATIVE DIRECTOR, UNION OF NEEDLETRADE, INDUSTRIAL AND TEXTILE EMPLOYEES, AFL–CIO
The general public overwhelmingly favors protecting the jobs of hard-working Americans from the unjust competition created by proposals such as H.R. 4100, which is known as the ''Prison Industries Reform Act of 1998.'' On May 5, 1998, the Enterprise Prison Institute released a public opinion survey related to inmate work. The survey asked respondents whether they agreed or disagreed with the following statement:
''The only way I would support any company setting up in prison is if there were absolute assurances we were not just shifting jobs from the community into prison.''
By more than a two to one margin, respondents agreed or strongly agreed with this statement. However, even though Americans want ''absolute assurances'' that prison labor will not have adverse effects on jobs in their communities, the proposed legislation discards all previous attempts to curb unjust competition, and extends prison labor initiatives to unprecedented levels. This legislation would lead to even more law-abiding Americans losing their jobs to those members of our society that have been incarcerated.
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Even under the current status of prison labor programs in many states, thousands of law-abiding Americans have lost jobs to the unfair competition from incarcerated workers. For example, prisoners in Washington state shrink-wrapped the software that had been packaged by Microsoft employees. South Carolina prisoners made the Victoria Secret lingerie that was once made by workers in the private sector. Some TWA reservation officers have lost their jobs to convicts in a California prison.
The proposed legislation repeals the existing prohibition on the sale of inmate-produced products in interstate commerce, and thus makes it even easier for states to create prison industries that compete with non-prison labor. Thousands of law-abiding workers have already lost jobs with the current level of prison labor initiatives. Many thousands more will lose jobs if prison labor initiatives are allowed to expand.
H.R. 4100 would also expand Federal Prison Industries (FPI) by extending its mandatory-source rule to include all forms of services as well as products. Under current law, federal agencies are required to buy products offered by FPI, even if they could procure the same or better products at lower cost and faster from commercial companies. The proposed expansion of the mandatory-source rule to services would simply force government agencies to make even more inefficient purchases at the taxpayer's expense.
Moreover, the mandatory-source rule would create new safety and security risks. For example, if convicts were given personal information, such as credit card numbers, income figures, addresses and phone numbers as part of information-processing jobs, both government employees and private citizens would be exposed to abuse. Furthermore, if convicts were placed in federal buildings to perform janitorial services or in national parks to perform landscaping, federal employees and vacationing families would be put at risk.
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This bill would also expand Federal Prison Industries by authorizing the unrestricted sale of FPI products in the commercial marketplace, as long as they are ''foreign-made goods'' or ''assembled goods.'' The combined effect of all of these exceptions is that virtually every product for the commercial market will be eligible for federal prison production, and even more law-abiding workers in virtually every industry would be at risk of unfair competition from prison labor.
According to the bill, a product will be considered a ''foreign-made good'' if the Bureau of Labor Statistics determines that 95% or more of the dollar amount sold in the United Sates is fabricated ''in a foreign place.'' However, just because an item was made in a foreign country one year does not mean it would not be made in a non-prison setting in the United States the next year. In fact, many corporations manufacture a given product in this country in one year and elsewhere the next, or make a blue shirt in the United States and the identical shirt in a different color in another country at the same time. UNITE's experience with FPI manipulation of market data in the recent case of glove industry expansion leads us to anticipate similar manipulation in defining ''foreign-made goods.'' Moreover, this provision will encourage other countries to replace U.S. made exports with their own prison-made products, thereby further endangering American jobs.
The use of the term ''assembled good'' makes it possible that virtually any product produced for the commercial market may be deemed as an acceptable FPI industry. However, if by some chance, a particular FPI product did not qualify under one of the two provisions, the produce would only need to be designated as ''Private Sector Project'' or ''Prison Industries Enhancement Project'' in order to gain access to the commercial market.
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H.R. 4100 even seems to undercut the rehabilitative benefits of inmate work opportunities by repealing the provision of FPI's authorizing statute that calls for ''maximum opportunity to acquire a knowledge and skill in trades and occupations which will provide them with a means of earning a livelihood upon release.'' To the extent that employment programs would still be designed to train prisoners for gainful post-confinement careers, the manufacture of goods that would otherwise be produced offshore is inappropriate training. Furthermore, training in industries such as textiles and apparel, which already compete with low-cost imports, is of little value. A released innate would find himself among the thousands of unemployed garment workers that would have lost their jobs to competition either from abroad or from within prisons.
Although there are flaws in the current status of prison labor initiatives and the proposed reform bill, UNITE understands the legitimate argument for providing prisoners with training opportunities that enhance rehabilitation. We would, however, prefer reforms that make prison industries less predatory and still allow for constructive activities for prisoners.
To that end, UNITE has endorsed the ''Federal Prison Industries Competition in Contracting Act of 1997,'' H.R. 2758, which was introduced by Congressmen Hoekstra and Frank, Congresswoman Maloney and more than 20 other Members. We believe this bill strikes the appropriate balance between the need to keep prisoners employed and the need to maintain private sector employment.
This alternate bill contains several improvements over the bill that is currently being considered by this committee. For example, it would finally require Federal Prison Industries to compete for its contracts by eliminating the mandatory-source status of federal procurement. Under this improvement, the American taxpayer would no longer be forced to pay for over-priced or lesser-quality good from prisons when a better option is available through the free market. The alternative bill would also enhance the opportunity for public participation in the FPI decision-making process.
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UNITE strongly supports enhanced training programs within prisons, as long as prison labor programs are not destroying American jobs. If production of goods must continue as an element of prison industries, we believe such production should be only of those products for which there is no commercial market. Such prison labor initiatives would fulfill three valuable ends: prisoners would receive training; important goods, which are not commercially viable, would be produced; and law-abiding Americans would no longer face unfair and predatory competition from prison labor initiatives.
(Footnote 1 return)
Iowa Department of Corrections Prison Industries Opinion Surveys of Business and Labor Leadership, completed in cooperation with the Iowa Association of Business and Industry, and the South central Iowa Association of Business and Industry, and the South central Iowa federation of Labor, AFL–CIO, The Enterprise Prison Institute, March 1997
(Footnote 2 return)
Florida Opinion Leader Survey, The Luntz Research Companies, with Knut A. Rostad, September 1995
(Footnote 3 return)
National Survey of 1005 adults completed for The Enterprise Prison Institute by The Luntz Research Companies, April 29–May 1, 1998
(Footnote 4 return)
''Public Opinion and Corrections: A Need to be Proactive'', Corrections Management Quarterly, p. 6, Summer 1997
(Footnote 5 return)
''Restructuring Corrections: Using Market Research in Vermont'', op. cit., p. 26
(Footnote 6 return)
''Public Opinion: Sometimes You're the Windshield, Sometimes You're the Bug'', op. cit., p. 10