Prison Enterprises, the for-profit arm of the Louisiana Department of Public Safety and Corrections that uses inmate labor in various businesses, has been unprofitable for 11 of the past 23 years and is training about a third of its inmates for jobs that aren't in growing industries, a state auditor's report says.
The program was last scrutinized two decades ago, but the Legislative Auditor's Office found some of the same issues lingering with Prison Enterprises in a May report.
In general, Prison Enterprises was lauded for fulfilling its purpose of reducing the cost of incarceration in Louisiana, providing work to inmates while in prison and selling products to municipal agencies. The report also noted that the five-year reincarceration rate for those who've worked for Prison Enterprises is 31.9% vs. an overall 43% Corrections Department rate.
However, Prison Enterprises fell short in workforce training for relevant jobs after prison, and its financial sustainability was questioned in the report.
Prison Enterprises operates garment factories, furniture-making operations, silk screening, a license plate plant, metal fabrication and a mattress plant and raises cattle — some profitable, others not.
The organization has piloted unique ideas but has also shut down unprofitable ventures. A business that raised quail to sell for hunting was shuttered in 2018 after it lost about $137,200 between 2016 and 2018. Likewise, a horse training business shut down in 2017 after more than $180,700 in losses during 2016.
Prison Enterprises was approved by the state last year to begin a welder and fitter apprenticeship program, since those skills are in high demand.
But fewer than one-third of the inmates working at Prison Enterprises are in furniture manufacturing and metal fabrication operations — industries that the Louisiana Workforce Commission says will require more workers in the future.
About 32% of inmates were working in industries not projected to have much growth in the labor market, such as garment factory work or agriculture. That's significant because more than 300 inmates out of about 760 total working in the program may be eligible for release from prison in 10 years or less. Another 300 inmates are serving life sentences.
"This means many of the offenders working for Prison Enterprises may not be learning job skills that could help them after they are released," the report says.
Over the past three years, Prison Enterprises reported a $288,326 profit in 2017 but net losses of $1.9 million in 2016 and $235,087 in 2018, despite its inexpensive labor force.
Inmates usually are paid between 2 cents and 20 cents per hour. Between 2016 and 2018, Prison Enterprises paid $3.8 million in wages to offenders inside the Department of Corrections, which by state law includes some inmates who don't work for Prison Enterprises but are employed in other ways.
Prison Enterprises argues it takes more than cheap inmate labor to profitably run operations that are often hindered by restrictions, and other experts agree it's difficult to make a profit off prison operations.
During 2018, Prison Enterprises generated $27.9 million in revenue overall. The majority of the organization’s expenses — about $21 million — were for the cost of making goods, which included raw materials, factory overhead and employee expenses. Other expenses spanned from utilities and insurance to inmate incentive wages and fertilizer.
Three garment factories generated $577,990 in net income. Furniture restoration made $57,141 in profit while its chair manufacturing plant lost $36,913. Silk screen operations lost $93,445, and its print shop lost another $36,222.
Most of the other manufacturing ventures generated profits: embroidery made $60,910; soap, $170,126; the license plate plant, $346,461; metal fabrication, $81,163; and a mattress, broom and mop plant, $66,420. Its meat processing plant generated $123,939 in net income, and the canteen distribution center made $336,666 in profits.
Several different cattle operations lost a total of $1.1 million, while its heifer business generated $224,649. Corn and cotton crops lost $405,512 while soybeans generated $18,451.
"We're absolutely sustainable," Michael Moore, director of Prison Enterprises, said of the organization. "We have some assets to cover down years and have gotten through so far."
Moore said the organization tries to operate like a business but has limitations about what it can do. For example, for manufactured goods like furniture or clothing, Prison Enterprises is allowed to sell its products only to state agencies and nonprofit organizations to purposely avoid competing in the private sector against businesses, and it can't sell outside Louisiana. Meanwhile, agricultural products, like soybeans, can be sold on the open market.
Moore suggested that annual net income isn't the best way to fully measure its success. One reason is that municipal agencies have limited budgetary windows, so Prison Enterprises' own finances fluctuate widely from year to year with those fiscal year budgets and spending on its products. For manufacturing, Prison Enterprises must buy raw materials up front for custom orders.
"We may have a big year of sales followed by slow sales beginning in the next year," he said of the bounce between profits and losses in any given fiscal year. "We may expend funds for a job early in the year that won't be delivered until July or August."
Prison Enterprises operates on a fiscal year of July 1 to June 30, not a calendar year.
The executive also said the organization reduces the state's burden, spends money in the state and operates within government constraints.
For example, Prison Enterprises employees supervise inmates while at work. The salaries of those supervising the inmates are paid from the organization's budget, which saves the Department of Corrections about $1.7 million each year. Likewise, its agricultural operations, such as row crops and cattle, use state land that would otherwise have to be maintained by the state.
Since it's part of a state agency, Prison Enterprises must go out for bids for raw materials. It purchased about $30 million in goods from Louisiana companies between 2016 and 2018.
"The cost to manufacture has gone up, and we haven't always been able to increase our prices," Moore said. "We have to follow the state bid process, so sometimes we get the lowest high bidder if there's not much interest in the bid."
Management also suggested that while some assembly-line jobs — among others — are not in high demand, those skills and so-called soft skills are still valuable work experience for inmates. And it's not interested in shutting down the clothing operation, which was among its most profitable businesses, though those aren't high-demand occupations.
Even where the organization has sold products back to the Department of Corrections — to the tune of $17 million in 2017 — it was unclear whether buying goods from Prison Enterprises saved the department money, according to the audit.
"We try to produce whatever the (corrections) department would need to acquire otherwise," Moore said.
"It's hard to put a number on what we save the department, like the quality of what we make and how long something is going to last," he said. "If they buy chairs from us and they last 10 years, that's a savings, but you can't always put a dollar figure on it; it's a gray area."
The department also has tried partnering with private-sector companies.
In 2011, Prison Enterprises stopped participating in the Prison Industries Enhancement program, designed to foster partnerships between correctional facilities and private companies to offer inmates work opportunities outside of prison. That's because the company it had a partnership with — Company Apparel Safety Items Inc. — shut down. The company had produced clothing for medical industry workers but saw a drop in demand from state hospitals after being undercut on clothing prices overseas.
Some inmate work programs run as enterprises have generated profits for other states, but that’s not the norm and many struggle, said Wanda Bertram, spokesperson for the Prison Policy Initiative.
While correctional facilities also run separate re-entry programs, prison labor enterprises are not always the best for job-training efforts, she said.
“Frequently, the jobs offered by correctional industries programs aren't the jobs that the economy is trying to fill,” she said.
Bertram suggested it’s a misconception that factories inside of prison are lucrative business propositions. “In reality, running a business behind prison walls comes with substantial overhead costs,” she said.
For example, Washington Correctional Industries generated $107 million in annual revenue during 2018 but spent $109 million to operate its companies; it was $1.7 million in the red. About $65 million of its expenses was cost of goods sold, and operating expenses were $43 million during 2018.
“Too often, correctional industries are portrayed as incredible jobs-training programs that also somehow make money for the state,” she said. “But that's not how training people works. Real training costs money.”
Mississippi Prison Industries, a nonprofit organization that oversees inmate work programs, has struggled with similar issues such as criticism that workforce training for private-sector jobs is lacking. The organization's net worth dropped from $10 million to $3.3 million between fiscal 2012 and fiscal 2017, according to a 2018 report.
Alabama Correctional Industries, which describes itself as a self-supportive division of the Alabama Department of Corrections, generated more than $654,300 in profits during fiscal 2018, according to its annual report. The Alabama work program has 421 inmates and generated $15.5 million in revenue from several businesses, including a mattress factory, chemical plant, chair plant and garment factory.
PRIDE Enterprises, a nonprofit organization that manages inmate work programs in Florida, generated $1.2 million in net income during 2018, according to its annual report. PRIDE Enterprises has a variety of businesses under its umbrella from lumber to license plates and food processing. Florida offers dental technician training at a dental lab inside the prison system — one example of training for higher-demand jobs when the inmates are released.
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