Representative Luciano "Lucky" Varela
Chairman
Representative Donald E. Bratton
Representative Rhonda S. King
Representative Henry "Kiki" Saavedra
Representative Nick L. Salazar
Representative Edward C. Sandoval
Representative Don L. Tripp
Representative Jeannette O. Wallace

State of New Mexico
LEGISLATIVE FINANCE COMMITTEE
325 Don Gaspar, Suite 101 • Santa Fe, NM 87501
Phone: (505) 986-4550 • Fu: (505) 986-4545

David Abbey
Director

Senator John Arthur Smith
Vice-Chairman
Senator Sue Wilson Beffort
Senator Pete Campos
Senator Carlos R. Cisneros
Senator Stuart Ingle
Senator CarroU H. Leavell
Senator Mary Kay Papen
Senator John M. Sapien

September 8, 2010

MEMORANDUM
To:

Representative Al Park, Co-Chair
Senator Peter Wirth, Co-Chair
Courts, Corrections and Justice Committee

From~rett F. Woods, Principal

Analyst, LFC

SUbject: Review of Private Prison Contracts Penalty Assessment
As you are aware, Legislative Finance Committee (LFC) staff was asked by your committee to
follow-up on testimony by the New Mexico Corrections Department (NMCD) regarding
enforcement efforts with respect to its private prison contracts. LFC program evaluation staff
was requested to assist in the analysis and to advise LFC budget staff of their findings in
anticipation of the FY12 budget cycle. The LFC program evaluation staff analysis is forwarded
herewith.
It should be noted that NMCD staff has reviewed a draft version of the LFC analysis and is in

agreement that the general methodology used by LFC appears to be sound, although the
department is still waiting to receive information directly from the private prisons as well as
other information from NMCD staff for use in the department's analysis of the vacancies.
cc:

BW/mt

Representative Luciano "Lucky" Varela, Chairman, LFC
Senator John Arthur Smith, Vice-Chairman, LFC
David Abbey, Director, LFC

Memo
To:

Brett F. Woods, Principal Analyst

From: Lawrence Davis, Program Evaluator
Charles Sallee, Deputy Director for Program Evaluation
Legislative Finance Committee
Date:

September 7, 2010

Re:

NMCD - Staffing Vacancies

Background. Legislative Finance Committee (LFC) staff was requested to follow-up on
testimony by the New Mexico Corrections Department (NMCD) regarding enforcement
efforts of its private prison contracts at a recent Court, Corrections and Justice Committee
hearing. LFC program evaluation staff was requested to assist in the analysis to respond to
this legislative request and to inform your budget analysis. This memo is to assist you in LFC
staff response to the legislative request and for your budget analysis.
Summary. NMCD private prison contracts specify required staffing patterns of facilities,
including penalties for facilities with vacant positions over 30-60 days (depending on the type
of position) and not manning mandatory posts. NMCD has chosen not enforce financial
penalties for staffing patterns at the private prisons, which is within the Secretary's discretion
per the contract. However, based on LFC staff analysis ofNMCD contract monitor reports it
appears vacancy salary savings may have totaled almost $5 million for positions open more
than 30 days and wunanned posts. Private prisons also accrue savings from not having to pay
benefits for vacant positions, which total an estimated $1.1 million. Assuming these vacancy
trends existed across facilities for the past four fiscal years (two fiscal years at NENMCF) an
estimated $22.7 million in salary and benefit vacancy savings accrued to the contractor, of
which $18.6 million was salaries and potentially eligible to be recovered if the department had
chosen to enforce the contract. The contracts only allow for vacant salaries, not benefits, in
the penalty calculations. Regardless of decisions to enforce penalties, it appears NMCD
spends large sums of contract funding on vacant private prison staff positions.

Vacancy information and potential penalty amounts should be gathered and calculated by
NMCD on a regular basis. However, NMCD does not regularly compile vacancy rates,
contractor staff pays rates, contractor vacancy savings or review potential penalty amounts in
its central office, but should do so immediately. The Secretary of NMCD has recently
requested that one of its contractors (Geo Group) perform this analysis and provide other
information to "defend my position" of not enforcing contract penalties (Attachment A).
NMCD staff should have been performing this compilation to assist in decision making about
whether the Secretary should enforce contractually required staffing patterns and associated
penalties, or rationale for why not to enforce agreed upon contractual provisions. LFC staff
has requested NMCD to now perform this function and report its results, including the specific
rationale for not enforcing the contract.

Methodology. General assumptions outlined within the staffing vacancy analysis are based
on the limited infonnation provided by the New Mexico Corrections Department (NMCD).
Staffing infonnation was received for all four private correctional facilities operated New
Mexico. Infonnation was received in monthly, bi-weekly and weekly contract monitor
staffing summary reports, and were selected and compiled byNMCD. NMCD staff reviewed
the data, methodology and calculations in this memorandum and did not dispute the figures
and generally agreed with the methodology.

In the absence of pay rates for facility staff, LFC applied an average of Lea County
Correctional Facility (LCCF) pay rates to Northeast New Mexico Correctional Facility
(NENMCF - Clayton, NM) and Guadalupe County Correctional Facility (GCCF). Although
there may be slight variation, this serves as a good estimate of realistic rates for other GEO
correctional facilities. Staffing pay rates were requested and received for LCCF and New
Mexico Women's Correctional Facility (NMWCF). In the past, NMCD has also requested
this infonnation but has been told that such infonnation was proprietary.
Overall vacancy and unmanned mandatory post averages were calculated from infonnation
provided by NMCD. Below is a synopsis of the infonnation provided by facility:
•
•
•
•

LCCF - 11 monthly and three bi-weekly reports from fiscal years 2008 through 2010.
NENMCF - 13 weekly reports from fiscal year 2009.
GCCF - 20 bi-weekly reports from fiscal years 2008 through 2010.
NMWCF - 22 monthly reports from fiscal years 2008 through 2010.

Vacancy and unmanned averages were then multiplied using the most conservative pay rates
for custody and non-custody positions. For example, the majority of vacant custody positions
are correctional officers; therefore a standard rate for GEO facilities (3 of 4) of $ 13.241hr. was
used. These totals were then multiplied based on custody and non-custody daily work hours,
which derives a "daily salary" rate which is used as the basis for estimated NMCD staffmg
penalties. Finally, an annual factor of 365 days is applied, which annualizes the daily rate.
Note that an additional multiplier of 2 is used to calculate unmanned mandatory posts as
outlined within contracts.
Potential savings were estimated from custody positions that remained vacant past 30 days.
Non-custody positions must remain vacant for more than 60 consecutive days in order for the
state to be eligible for a per diem credit. However, staffing reports only track positions that
remain vacant over 30 days. Because the data demonstrated that non-custody positions often
remain vacant throughout staffing reports, it can be assumed that these positions may be
vacant for more than 60 days.

2

Contract requirements. NMCD is authorized to enforce staffing vacancy penalties based on
the following clauses within GEO and CCA contracts.
•

•

•

If any position in the staffing pattern other than correctional officer positions remains
vacant for more than sixty (60) consecutive days, NMCD has the authority to reduce
the per diem rate by an amount equal to one (1) day's salary for that position for each
day it is vacant past 60 days.
If more than ten (10) percent of the correctional officer positions set forth in the
staffing pattern remain vacant for more than thirty (30) consecutive days, then NMCD
has the authority to reduce the per diem rate by an amount equal to one (1) day's
salary for each such correctional officer position (above the 10% vacancy rate) for
each day it remains vacant past 30 days. NMCD also has the authority to deduct an
additional ten (10) percent of the base salary for any correctional officer position
vacancy (above the 10% vacancy rate) for each subsequent thirty (30) day period that
the position remains vacant.
If an essential/mandatory duty station or post is not actually manned on any shift for
which it was so designated, NMCD has the authority to reduce the per diem rate by an
amount equal to two (2) day's salary for that position for each shift that it was not
actually manned.

In addition to staffmg, NMCD has the authority to impose penalties for performance measures
and liquidated damages, including non-compliance with standards that cause an inmate to be
properly discharged or released.
Vacancy Savings. Vacancy salary savings may have totaled almost $5 million for positions
open more than 30 days and unmanned posts. NMCD private prison contracts require
facilities to maintain adequate staffing levels with respect to the care and custody of NMCD
inmates. Staffing patterns outline minimum staffing positions and designate mandatory and
non-mandatory security posts. Each contract states that the contractor or cOlmty "shall at all
times staff all essential employee positions (designated as "Mandatory") in strict accordance
with the schedules on the approved staffing pattern." Savings figures only include savings
from positions open for more than 30 days, including $3.4 million for custody positions and
$811 thousand for vacant support service (non-custody) positions and about $755 thousand for
unmanned "mandatory posts." Vacancy rates run on average from 5.9 percent to 21 percent
depending on positions and facility. In 2007, LFC's evaluation staff reported facilities had
high vacancy rates, contract penalties were not enforced and the state did not benefit from
vacancy savings 1• If the facilities' operational quality is not hampered due to high vacancy
rates, then the department may be paying for staff that isn't needed.
Private facilities also accumulate savings from vacant employee benefits. However, the
department does not have the authority to recover these savings. If a conservative employee
benefit package of 22 percent is applied to the potential annual savings from vacant staff
1

Corrections Department - Review of Facility Planning Efforts, May 23, 2007

3

positions ($5 million * 22%) could amount to almost $1.1 million in additional savings.
Benefit packages include paid time off, medical, dental, vision, 401k, insurance benefits etc;
as well as social security, Medicare and unemployment taxes that are paid by the employer.
Assuming these vacancy trends existed across facilities for the past four fiscal years (two
fiscal years at NENMCF) an estimated $22.7 million in salary and benefit vacancy savings
accrued to the contractor, of which $18.6 million was salaries and potentially eligible to be
recovered if the department had chosen to enforce the contract. The contracts only allow for
vacant salaries, not benefits, in the penalty calculations.

Potential Annual Savings from Vacant Staff Positions*
(in thousands)

$1,966.4
$504.1
$541.3

$498.2
$26.7
$153.6

Unmanned
Mandatory
Posts
$715.0
$37.8
$2.2

$350.6

$132.2

$.3

$483.1

$3,362.4

$810.7

$755.3

$4,928.4

$739.7

$178.4

$166.2

$1,084.3

$4,102.1

$989.1

$921.5

$6,012.7

Custody

Facility
Lea County CF
Northeast NMCF
Guadalupe County CCF
New Mexico Women's
CF
Subtotal for Staffing
Vacancy
Employer benefit savings
at @ 22 percent
Total

Non-Custody

Total Annual
Savings
$3,179.6
$568.6
$697.1

Source: NMCD data and LFC analYSIS
*For positions open for more than 30 days and penalty provisions for unmanned mandatory posts.

Average Number of Vacancies by Facility
Custod~

Facility
Lea County CF
Northeast
NMCF
Guadalupe CCF
NMWomen's
CF

Non-Custody

Unmanned
Mandatory
Posts

Overall

Above
30 Days

20.23

20.11

Overall
Vacancy
Rate
17.4%

11.3%

4.08

1.08

5.9%

2.29

9.33

15.6%

8.05

6.2

12.0%

0.27

6.05

13.4%

7.33

4.32

12.0%

0.14

Overall

Above
30 Days

42.43

33.91

Overall
Vacancy
Rate
21.0%

13.77

8.69

19.35
11.36

187.5

Source: NMCE data and LFC analysis

This data analysis does not take into consideration over-time payments paid to staff because
contract staffing requirements do not include any provisions for over-time and over-time data

4

was not provided to. LFC. In addition, over-time work requirements contribute to staff fatigue,
which creates individual safety issues for correctional staff and inmates.

Staff"mg patterns and pay rates. In order for NMCD to enforce staffing penalties, a staffing
pattern must be agreed upon and approved by the county and NMCD. However, NENMCF,
which began operations in August 2008, does not have an approved staffing pattern. Staffing
patterns serve as the basis for penalty calculations and outline custody, non-custody,
essential/mandatory and un-mandatory positions that apply to penalty language within the
contract. Basically, NMCD may not have the authority to impose any staffing penalties upon
NENMCF because an approved staffing pattern is nonexistent. LFC staffwas notified on July
28, 2010 that NMCD is working on the implementation of an approved staffing pattern.
Since, NMCD does not have position pay rates for three facilities, they cannot apply penalties
outlined within the contracts.
Mental Health Provider (1\1HP) pay rates vary highly from other non-custody pay rates and
were not included within the commingled non-custody average. The pay rate for a MHP is
approximately $21.63/hr. If an MHP position remains vacant this position can generate
vacancy savings of $45 thousand per year. For example, LCCF's average vacancy rate for
MHPs is 4.4 percent, which generates approximately $196.9 thousand in vacancy savings.
LCCF stated that they rely on an outside agency to provide mental health services at a rate of
$70 per hour.

Penaltv enforcement. No penalties have been assessed to any facility. The Secretary of
NMCD has discretion whether or not to impose penalties for excessive staffing vacancies.
Vacancy information and potential penalty amounts should be gathered and calculated by
NMCD on a regular basis. However, NMCD does not regularly compile vacancy rates,
contractor staff pays rates, contractor vacancy savings or review potential penalty amounts in
its central office, but should do so immediately. NMCD staff should have been performing
this compilation to assist in decision making about whether the Secretary should enforce
contractually required staffing patterns and associated penalties, or rationale for why not to
enforce agreed upon contractual provisions. LFC staffhas requested NMCD to now perform
this function and report its results.
The figures in this memo do provide a basis for considering whether the state should in the
future continue to pay large sums for unfilled vacant positions. However, lack of sufficient
clarity in contract language, monitoring, and contractor data makes precisely determining
potential penalty amounts difficult. The figures used in this memo may prove conservative, or
not, depending on actual pay rates of staff and further analysis and negotiations with
contractors over potential penalty amounts. There will likely be disagreement that certain
vacancy savings should be subject to the penalty provisions of the contractor or not.
Correctional Medical Services was assessed a $40 thousand penalty in December 2007 for not
operating on-site dialysis services.

5

Contractor sponsored trips and parties. NMCD provided infonnation regarding trips or
retirement parties paid for by contractors (Attachment B). NMCD also disclosed one instance
of the GEO paying travel cost for the Secretary Williams in the amount of $773.12 to actively
participate in the training session held from May 19th through 22nd at Charlotte, North
Carolina. According to NMCD this was in compliance with state law.
The letter also indicated that the GEO Group did sponsor a retirement dinner on May 26, 2010
for Mr. Donald Dorsey at a total cost of $1,296.95. NMCD claims that the Gift Act does not
apply because no one employee attending the dinner received a gift of anywhere near the $250
per employee limitation set by the Act.
In addition, NMCD indicated that since it does not have a contract directly with GEO, "it is
questionable whether or not GEO is a restricted donor as defined by the Act." NMCD has
entered into intergovernmental agreements with local government to house state inmates, who
have contracts with private prisons. As a result NMCD does not have a direct contract with
private prisons but does negotiate its contract tenns and prices with the private prison
operators, raising questions about whether the Gift Act should apply in this unique
circumstance or not.

Recommendations.
•

•

•

•

While we recognize the value of private prison contracts, it is understood that the
department has oversight and contractual responsibility to protect the state's fiduciary
interests and maintain the safety of New Mexico inmate's population. Accordingly,
the department should reduce private prison funding for FYll and FYI2, using this
and its own forthcoming analysis as a basis for reduction.
NMCD should compile an actual staffing vacancy for last four fiscal years and
provide that infonnation along with actual pay rates to the LFC to detennine specific
penalty amounts. Furthennore the department should recover such penalties for the
past four fiscal years and revert any recovered funds to the state general fund.
NMCD should reevaluate the methodology used for applying staffing penalties, or
restructure the contracts to assume minimum vacancies and withhold a portion of the
total per diem as incentive pay for meeting certain staffing levels.
Additional language for assessing penalties for employer benefit savings should be
included within private prison contracts.

6

A
c

(~
STATE OF NEW MEXICO
CORRECTIONS DEPARTMENT
Central Office Administration: 4337 State Road ~4, Santa Fe, New Mexico 87508
Post Office Box 27116, Santa Fe, NM 87502"()~~6
Main Number (505) 827~600 Fax (505) 827~533
www.correctlons.stpte.nm.us

Bill Richardson, Governor
Diane Denish, Lt. Governor
Joe R. Williams
Sectetaty of Corrections (505) 827-8884
Jolene M. Gonzales
Deputy Secretaty of Administration (505)
827-8667

Administrative Services (505) 827-8601
Adult Prisons
(505) 827-8767
Corrections Industries
(505) 827-8597
General Counsel (505) 827-8698
Information Technology (505) 827-8713
Probation and Parole
(505) 827-8830
Reentry & Prison Reform (50S) 827-8509
Training Academy
(505) 827-8900

August 26, 2010

(

Wayne Calabrese, President and Chief Operating Officer
John Hurley, Senior Vice President, and President, U.S. Corrections
James Black, Western Region Vice President
Kyle Schiller, Western Region Director of Business Management
GEO Group, Western Region Office
6100 Center Drive, Suite 825
Los Angeles, CA 90045
Dear Sirs:

In order to obtain more accurate staffing data, I am requesting the following information so that the
Department may fully respond to the LFC. The Department understands your general position that
information regarding your staffs pay is proprietary. However, it is difficult for the Department to come
up with a methodology to substantiate the LFC's information, or to contest the LFC's conclusions,
without actual pay rates. I would also point out to you that the vacancy penalty provisions in the private
prison contracts contemplate that GEO will voluntarily and in good faith provide salary information on
vacant positions at the Department's request. Otherwise, the Department would be forced to guess or
speculate what the specific position's salary was in order to calculate any contractually authorized
penalty. Such speCUlation on the Department's part could easily be higher than the actual salary, and this
would obviously be to the detriment of GEO. To be clear, I am not saying that the Department has plans
to invoke the vacancy penalty provisions of the contracts. However, in light of this fact that the contracts
do reasonably appear to contemplate that GEO will comply with the Department's requests for salary
information, I would ask you to reconsider your position that salary information is proprietary.

'----

With that in mind, please consider releasing the following information to me as soon as possible so that
the Department may respond to the LFC's request:

./
I
\

Page 2
GeoGroup
Alugust26,2010
•

•

Staffing vacancies as related to the penalty provisions of the private prison contracts for fiscal
years ending June 30, 2007, ~008, 2009 and 2010. This data should include actual pay rates for
each position and associated employee benefits.
.Amounts of overtime for mandatory and non-mandatory positions and which positions were
covered with overtime for the relevant time frame.

For the purpose of my presentation to the interim committees I would like to have the following
information. This information could help me defend my position.
•
•
•
•
•

Amount of gross receipts taxes and property taxes paid by GEO regarding the relevant private
prisons within the above bolded relevant time frame.
Any NMCD monitoring reports that you may have on file for the relevant time frame.
Cost of transporting inmates on NMCD's behalf for the relevant time frame.
Any community projects, donations to schools, public works projects or any contributions during
the relevant time frame that show a benefit to the quality of life for the citizens of New Mexico.
Any other costs or expenses incurred by GEO in New Mexico during the relevant time frame that
you believe constitute a benefit to the State or the citizens of New Mexico.

I would also appreciate it if you would also include the methodology you used to come up with your
numbers (calculating the potential amounts of vacancy paybacks for the relevant time frame) so that the
Department may compare it to those of the LFC and the Department.

(

Thank you in advance for your consideration of this request. Please understand that any information that
you provide will be used to try to contest or correct the LFC's calculations and position, and in a manner
that I believe will be to the benefit of the Department, GEO, and the citizens of New Mexico.
Sincerely,

Secretary

STATE OF NEW MEXICO
~:' :-: . i:

l

-CORRECTIONS DEPARTMENT

~~tfal Offic,e,:4!Sministration: 4337 State Road 14, Santa Fe, New Mexico 87508
L '1 ~ ':;..~- : '\ ~ ~.\ \ .~~ efflce Box 27:116, Santa Fe, NM 87502-0116

f \ NAN C\::.

V \)

i-I

1'1

~010 JUL 19 Prl

Main Number (505) 827-8600 Fax (505) 827-8533
www·corrections.state.nm.us

Lt

27

Bill Richardson, Governor
. Diane Denish, Lt. Governor

Joe R. Williams
Secretary of Corrections (505) 827-8884

Jolene M. Gonzales
Deputy Secretary of Administration (505) 827-8667

Administrative Services
,\dult Prisons
Corrections Industries
General Counsel
Information Technology
Probation and Parole
Reentry & Prison Reform
Training Academy

(505)
(505)
(505)
(505)
(505)
(505)
(505)
(505)

827-8601
827-8767
827-8838
827-8698
827-8713
827-8830
827-8509
827-8900

July 14,2010
Brett Woods, Ph.D.
Principal Analyst
New Mexico Legislative Finance Conunittee
325 Don Gaspar, Suite 101
Santa Fe, New Mexico 87501
Dear Mr. Woods:
In response to your request for infonnation regarding whether contractors were paying for trips or retirement parties
ofNMCD employees; GEO group did sponsor a retirement dinner on May 26,2010 for Donald Dorsey. The total
contribution was $1,296.95. Such a sponsorship was in compliance with the Gift Act because no one employee
attending the dinner received a gift (food) of anywhere near the $250 per employee limitation set by the Act.
Further, since NMCD does not have a contract with GEO, it is questionable whether or not GEO is a restricted
donor as defmed by the Act. The $250 per employee limitation set forth in the Act only applies to gifts received
from or given by restricted donors.
Furthennore, I did travel to Charlotte, North Carolina from May 19th through the 22nd , 2010 for training which was
paid for by the GEO group. The total cost for my airfare was $350.30 and the cost of my hotel room was $290.82,
shuttle ground transportation was $132.00. My active participation in this training, including being a presenter at
the training, benefited the Department by giving it an opportunity to exchange perspectives with private
correctional leaders and other state correctional leaders on ways to reduce costs to state government. Please see
attached invitation to participate in the conference from GEO Group Inc.
New Mexico Corrections Department General Counsel Jim Brewster reviewed and approved this travel request
before it was submitted. He specified that there was absolutely no violation of the Governmental Conduct Act by
me participating in the training. In fact, Section 10-16-4.1 of the Act clearly authorizes my meals, lodging and
actual travel expenses incurred in attending and presenting at the training to be paid by GEO. I never would have
attended this training if! thought that doing so would have violated the law in any way.

Attachment

..
,

..,

March 22, 2010

Secretary Williams,

The GEO Group, Inc. Eastern Region cordially requests your presence at its Annual
WardenlBusiness Manager Conference in Charlotte, NC. The conference dates are May 17 - 21,
2010. On Thursday, May 20th, I would like for you to join Commissjoner Ed Buss, Indiana
Department of Corrections to host a round table "From the Client Perspective" discussion with the
40 conference participants. This is a unique opportunity for private correctional leaders and clients
representatives to exchange perspectives which could result in cost benefits to state governments.

This conference supports training funds for travel and lodging, unfortunately we will not be paying
presenters an honorarium due to budget restraints. It is our position that your participation in this
conference will engage our leaders to identify promising practices to capture the most efficient
methods to saving money by developing and deploying ingenious processes and systems. Likewise,
we hope to share with you activities and techniques we utilize to potentially reduce the cost within
your jurisdiction while enhancing correctional effectiveness.

This collaboration will produce an enhanced understanding of the potential opportunities and
challenges we collectively share. Through the collective application of creative thinking, yet to be
discovered solutions will be found. This type of innovation will produce the efficiencies essential to
meeting tomorrow's correctional needs.

Thank you for your consideration. If your schedule can accommodate this request, please advise.
David Donahue
VICE PRESIDENT
The GEO Group, Inc.®
13777 Ballantyne Corporate Place, Suite 200
Charlotte, North Carolina 28277

Tel: 7045433400'· Fax: 7045433416
ddonahue@geogroup.com
www.geogroup.com