SB 0402 - Fiscal Note

Fiscal Note - SB 0402 - Revises contracting for telephone service for inmates

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 1447-01

BILL NO. SB 402

SUBJECT: Inmate Telephone Service

TYPE: Original

DATE: February 25, 1999

---

FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	$0 to ($8,750,000)	$0 to ($6,700,000)	$0 to ($7,200,000)
Total Estimated Net Effect on All State Funds	$0 to ($8,750,000)	$0 to ($6,700,000)	$0 to ($7,200,000)

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 3 pages.

FISCAL ANALYSIS

ASSUMPTION

The Office of Administration (OA), Division of Purchasing and Materials Management states that this legislation requires contracts for collect call telephone service for correction institutions to be awarded to the lowest and best bidder based on the costs to recipients of the calls. In addition, it allows the Division of Purchasing to renegotiate existing contracts for collect call telephone service for these institutions. This proposal would eliminate the revenues generated by the State for collect call telephone service for correctional institutions.

The state has received approximately $36,200,000 from July 1995 through January 1999 for prison inmate telephone services contracts. The existing contracts generate revenue for the state since the contractor pays the state a certain percentage of the cost of each collect telephone call made. OA assumes that if these contracts are awarded based on call costs to called parties, bidders would have no incentive to offer a percentage commission to the state for these calls. In order to offer the lowest call cost, bidders would no longer offer a commission to the state, but instead would offer the lowest cost per call since that would be the sole factor in evaluating the lowest bid.

Under current contracts, the state receives a certain percentage of the cost of each telephone call. OA assumes the state will receive approximately $12,000,000 in commissions for FY99. Recently, the contract was renegotiated to limit the rates charged for collect calls and cap the revenues received by the state at $10.5 million for FY00.

The fiscal impact of this proposal represents the range of possible options from leaving the contract as is, resulting in zero fiscal impact; to renegotiating the contract to reduce call costs, with the state receiving no commissions. If the contracts were renegotiated with no commissions offered to the state the resulting revenue loss would be $8,750,000 in FY00, prorated over 10 months. Estimated loss of revenue would be $6,700,000 for FY01; and $7,200,000 for FY02.

The Department of Corrections (DOC) assumes this proposal would have a minimal impact on their agency. However, DOC further assumes the impact on state revenues may be significant.

Oversight assumes that any prison inmate telephone services contract could contain provisions requiring that the state retain a certain percentage for the cost of each telephone call so as to minimize the loss of revenue to the state. Oversight has ranged the fiscal impact from $0 to the identified loss of revenue per fiscal year.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
GENERAL REVENUE
Loss of revenue from prison	$0 to	$0 to	$0 to
inmate telephone service contracts	($8,750,000)	($6,700,000)	($7,200,000)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
	$0	$0	$0
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.

DESCRIPTION

This proposal provides that contracts for telephone service in correctional facilities shall go to the lowest and best bidder based on costs of calls to called parties. The Office of Administration may renegotiate existing contracts to reduce costs to called parties.

This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.

SOURCES OF INFORMATION

Department of Corrections

Office of Administration

Division of Purchasing and Materials Management

Jeanne Jarrett, CPA

Director

February 25, 1999