Business from behind bars: profitable, or not?

Are prison industries truly making a profit? There appears to be no simple answer.

Federal Prison Industries, or UNICOR, is a self-sustaining enterprise that uses available factory space in federally funded prisons. It turned a profit throughout the 1990s, including $16.6 million net income in 1999.

But according to an independent auditor's report for fiscal year 2000, UNICOR is beset by numerous problems, including inadequate controls over inventories, accounts receivable, and cash-transaction processing.

Last year, UNICOR experienced a net loss of $11.8 million. The reason for the drop, says UNICOR's Ruth Bracken, was a switch to a new manufacturing database, which temporarily resulted in lost productivity.

Historically, many state correctional industries have operated at a loss. But in Washington, Howard Yarbrough of Correctional Industries (CI) says, prisoners who produced products sold directly to state offices and nonprofits have been breaking even for the past two years. (CI did not provide documentation to verify this claim.)

The profitability of private business partnerships with state corrections facilities is more difficult to quantify, since private businesses that use prison labor do not report profits or losses as a group.

Individually, however, many of the private businesses using prison labor in Washington State have recently begun to look closely at their ledgers - and to question the cost-effectiveness of using prison labor, says Mr. Yarbrough.

Questions about the viability of labor arrangements have also been raised on the states' side of the equation.

In California, the Joint Venture Program (created to bring private businesses into prisons) has been operating at an annual loss to the state's general fund since 1991.

And in Oregon, Perrin Damon, communications manager for the Oregon Department of Corrections, says its prison-labor program, Inside Oregon Enterprises, "has not been as profitable as expected in the past."

The semi-independent state agency is restructuring to try to become a more profitable organization, while Array Corp., which uses prison labor to manufacture denim clothing called Prison Blues, admits its operation has yet to be profitable. "Our goal this year is to make this thing pay for itself," says John Borchert of Array Corp.

Private jobs for federal prisoners

Of the more than 150,000 men and women currently incarcerated in the federal prison system, 22,000 are employed by Federal Prison Industries, which uses the trade name UNICOR.

The wholly owned government corporation was established by Congress in 1934 to provide job skills, training, and employment for prisoners, and now has more than 100 factories operating inside federal prisons nationwide.

Currently, UNICOR's sole customer is the federal government, manufacturing products ranging from office furniture to industrial equipment.

But in March, Rep. Frank Wolf (R) of Virginia introduced legislation to revamp UNICOR, making its prisoner labor force available for private businesses - a practice already in place in many state prison systems.

The legislation also places an emphasis on allowing federal prisoners to manufacture televisions and VCRs - products now mostly made overseas.

The bill "offers a lot of positive opportunities that would be advantageous to those in the private sector," says Ruth Bracken, public information officer for UNICOR. "We want to provide the inmates with some real-life work experience, so that their inclination is going to be to try to find that job and not go back [to crime.]"

But the emphasis on having prisoners work in industries dominated by overseas manufacturers troubles Kara Gotsch of the American Civil Liberties Union. "[UNICOR is] training prisoners in an industry that doesn't exist in the US. What value is there in that program, if once [the prisoners are released], they can't get a job in that industry because it doesn't exist?"

(c) Copyright 2001. The Christian Science Monitor