2009-10 Budget Analysis Series: Judicial and Criminal Justice

Federal Receiver’s Prison Health Care Construction Program


The federal–court appointed Receiver in the Plata v. Schwarzenegger inmate medical care legal case is proposing a health care construction program totaling $8 billion. The key components of the program include:

  • Pending Litigation on Receiver’s Proposal. Although most of the above improvements were included at the Receiver’s request in a 2008–09 budget proposal, the Legislature did not approve them. As a result, the Receiver’s construction plan is currently the subject of pending federal court litigation initiated by the Receiver to obtain funding for these projects from the state. This past fall, the Plata federal court ordered the state to determine a method for transferring to the Receiver $250 million that was already appropriated from the General Fund. These funds are from the original $300 million that had been appropriated in AB 900 for a different purpose than proposed by the Receiver—specifically, for infrastructure improvements on the grounds of existing state prisons.

    The state, which has contested the Receiver’s request, was later granted an emergency motion by the Ninth U.S. Circuit Court of Appeals to stay the federal district court’s order pending appeal. The Ninth Circuit is scheduled to hear arguments regarding this matter on February 12.

    No Construction Funding in Governor’s Budget. The Governor’s proposed budget for 2009–10 does not include funding specifically to support the Receiver’s health care construction program. (As discussed earlier in this report, the proposed budget does include a $180.1 million unallocated reduction to the Receiver’s operating budget for medical services.)

    Issues for Legislative Consideration

    Last spring, we conducted an analysis of the Receiver’s health care construction program and identified a series of issues for legislative consideration. In general, we found that the Receiver did not provide the Legislature with the basic information ordinarily required to justify capital outlay projects of this magnitude.

    Since we completed that analysis, the Receiver has made progress in addressing some of these concerns. For instance, the Receiver released a revised facility plan in November 2008, that identified the number of staff needed (by function and classification) to operate each new health care facility. It is important for the Legislature to understand whether the additional space proposed for the new facilities is appropriately sized for the staff and whether the staffing complement proposed by the Receiver is reasonable.

    Despite the Receiver’s recent efforts to provide greater detail on operational and fiscal components of his construction program, several issues remain unresolved and merit consideration by the Legislature as it considers future proposals related to the Receiver’s program. We summarize these issues in Figure 16 and discuss them below.

    Figure 16

    Receiver’s Health Care
    Construction Program—Issues
    For Legislative Consideration


    Need for 10,000 new beds remains uncertain.

    Cost estimates for new facilities remain high.

    Costs to operate new facilities are significant.

    Existing funding not used.

    No formal security assessment by CDCR.

    Programming needs at facilities undetermined.

    Need for 10,000 New Beds Remains Uncertain. The Receiver proposes that 5,000 beds at the stand–alone facilities be developed for chronically ill inmates with medical needs, while another 5,000 beds be built for inmates who primarily have mental health needs. Our analysis indicates that the proposal for 10,000 beds has not been fully justified for the following reasons:

    Cost Estimates for New Facilities Remain High. The cost estimates for the Receiver’s proposed new prison medical facilities remain significantly higher than we believe is justified, due mainly to the inclusion of excessive “soft costs” and contingencies. In addition to the so–called “hard costs” of construction materials for new buildings, all capital outlay projects also incur what are often termed soft costs for such non–construction purposes as architectural and engineering fees, management fees, and inspection fees. Typically, capital outlay projects are also budgeted for certain contingencies and escalations in order to address unanticipated changes in costs, such as price increases in materials. Our analysis indicates that the soft costs and contingencies built into the Receiver’s preliminary estimates for the new prison medical facilities are over budgeted. These costs total about $2.5 billion—the equivalent of about 70 percent of the $3.5 billion in hard construction costs estimated for them. Under the standards generally used by industry experts and the Department of General Services, the soft costs and contingencies would ordinarily be much lower for such projects—roughly one–half. The final designs for the new facilities are still under development. Thus, the final assignment of soft costs and contingencies for each project has not occurred. As the designs for the proposed facilities are finalized, we will review assigned soft costs and contingencies and advise the Legislature whether they remain excessive.

    Costs to Operate New Facilities Are Significant. The Receiver has recently provided information indicating that the annual operating costs (including personnel costs and equipment costs) for the seven new stand–alone medical prisons would be about $1.4 billion. According to the Receiver, it would cost $753 million to operate five of the facilities (each with 1,320 inmate patients and a staff of 1,372) and an additional $637 million to operate the remaining two facilities (each with an average of 1,734 inmates and a staff of 2,634). At the time of our analysis, the Receiver’s staff had prepared preliminary estimates indicating that the operating costs for the new facilities should be partly offset with as much as $200 million in savings from having fewer inmates in existing facilities. However, this still leaves a very significant potential fiscal impact on CDCR operating costs. Thus, we believe it is important for the Legislature to carefully consider the Receiver’s construction package in the context of the future costs to the state to operate the proposed facilities. To the extent that lease–revenue bonds are used to support the Receiver’s construction program, the debt service for these bonds would also be paid from the General Fund and should be considered by the Legislature.

    Existing Funding Not Used. If the Legislature decides to fund all or a portion of the Receiver’s $8 billion construction program, we suggest it consider taking advantage of a significant sum of funding that is already available to finance the construction of new medical facilities. Specifically, Chapter 7, discussed above, authorized the issuance of $1.1 billion in lease–revenue bonds to construct medical, dental, and mental health treatment or housing for inmates, including facility needs driven by settlements and court orders of several federal court cases. Of that $1.1 billion, CDCR has developed plans to spend about $257 million on various medical and mental health facilities, leaving $886 million in lease–revenue bond financing potentially available for the Receiver’s construction projects. Our analysis indicates that this level of funding would be sufficient for the Receiver to build one new medical facility and several improvement projects at existing prisons.

    No Formal Security Assessment by CDCR. The Receiver contends that the facilities will be operated in a safe and secure manner. The Receiver has retained his own experts on security in his facility planning. Although current CDCR staff have been invited to provide advice and input regarding the planning of the Receiver’s health care facilities, they have not completed a formal review of various security–design issues. Given that the department would eventually be responsible for managing the facilities once the Receivership ends, it is important that CDCR security experts carefully and objectively assess the design and security plans for the facilities, and that this formal and independent assessment be provided to the Legislature for its consideration.

    Programming Needs at Facilities Undetermined. Although the Receiver’s revised draft facility plan (dated November 2008) included an estimate of the number of staff needed at each facility and the location of these staff, it did not specify the type, level, and frequency of services that these staff would provide to inmate patients at the facilities. Detailed information about these matters is necessary for the Legislature to better understand the health care services that would be delivered at these facilities, and to determine the appropriate complement of staff that should be provided at them.


    At the time we prepared this analysis, litigation over the Receiver’s efforts to secure funding for his proposed $8 billion prison medical facility construction program remained pending. We will continue to monitor these events as well as the information that the Receiver releases to the Legislature and the public pertaining to his construction plans.

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