The state agency may be overspending by even more, mostly as a result of benefits granted to guards by Gov. Davis and lawmakers.

By Dan Morain
Times Staff Writer

November 1, 2003

SACRAMENTO — The California Department of Corrections is overspending its budget by more than $544 million, and perhaps far more, largely because of pay hikes, overtime and other benefits granted to prison guards by Gov. Gray Davis and the Legislature last year.

In a letter submitted to the Department of Finance, Corrections officials said the cost overrun would have been even greater — $732.6 million — had they not moved to cut other costs associated with running the nation's largest prison system. Though the department has overspent its budget for years, the $544.8-million deficit is the largest ever registered by the prison system, and is believed to be the largest deficit ever incurred by a state department.

The shortfall amounts to more than 10% of the $5.1 billion that Davis and the Legislature earmarked earlier this year for the state's adult prison system. By comparison, the department incurred $140 million in unexpected costs during the previous two years.

The department attributes the largest single chunk — $184 million — to increases of nearly 7% this year in salaries for prison officers and raises for other prison employees. Another $168.5 million results from the department's need to increase payments to the employees' pension fund, in part because of past stock market declines, but also because increased salaries had added to retirement pay.

"Negotiated labor agreements providing for general salary increases and increased retirement contributions have dramatically added to the department's expenses," said the letter, signed by Corrections Director Edward S. Alameida and delivered to the Department of Finance on Wednesday.

Additionally, the department estimates that it will need $87.7 million more to cover merit salary increases in the 2003-04 fiscal year, and $52 million for unexpected overtime costs. "This is very preliminary," Wendy Still, the Corrections Department's chief budget officer, said Friday. "It is based on two months of budget data."

Finance officials are reviewing the request, and probably will seek to pare it back. The Legislature and incoming Gov. Arnold Schwarzenegger must decide whether to pay all or a part of the deficit. Schwarzenegger spokesman H.D. Palmer called the deficit "eye-popping by anyone's standards," and added that Corrections' budget would be "added to the platter of ugly fiscal issues that the governor-elect is going to have to address."

"Overspending," Palmer said, "was one of the reasons we found ourselves going from a $10-billion surplus to a $38-billion deficit in five years. This is one example of why this happened." The Davis administration negotiated a labor package with the California Correctional Peace Officers Assn. last year, granting roughly 28,000 members salary increases of as much as 37% spread over the five-year life of the contract. By 2006, prison officers are expected to be making $73,000 a year.

"These salary increases were ratified and put into effect and the Department of Corrections wasn't funded for them," Corrections spokeswoman Terry Thornton said Friday. "Ask the Personnel Department; they're the ones that negotiated the contract. Ask the Legislature; they're the ones who ratified it."

The prison guards union is one of the most influential forces in Sacramento, in part because it is a major donor to state political campaigns. The union contributed $1.4 million to Davis directly and indirectly during his first term. The union gave his 2002 reelection campaign $251,000 two months after he signed the legislation approving their pay raise.

Unlike several other state employee unions, the prison guards refused Davis administration efforts to renegotiate their contract in light of state budget deficits. Lance Corcoran, executive vice president of the union, said the officers union was willing to work with the next governor. Maybe, he said, it might agree to deferring future pay raises in exchange for other benefits.

"We make no apologies for success," Corcoran said. "We understand the state is in a dire fiscal situation. We're willing to work with the new administration, just as we were willing to work with the Davis administration." Only one state legislator — Sen. Tom McClintock (R-Thousand Oaks) — voted against ratifying the guards' contract last year. On Friday, McClintock said he was not at all surprised by the latest run-up in prison costs.

"The state prison system has simply priced itself out of the market," he said, adding that Schwarzenegger should consider turning some prison functions over to private enterprise. " If he is going to fulfill his contract with the people," McClintock said, "he has to reduce prison costs, and an important way to do that is to contract out to private facilities."

The union has blocked attempts to expand the use of private prisons. The Corrections Department hopes to offset the $544.8-million cost overrun by paring as much as $188 million from its budget in a variety of ways, including laying off some officers — possibly 600 of the 28,000 union members. If you want other stories on this topic, search the Archives at

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