[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
FEDERAL PRISON INDUSTRIES--EXAMINING THE EFFECTS OF SECTION 827 OF THE 
               NATIONAL DEFENSE AUTHORIZATION ACT OF 2008 

=======================================================================

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON CRIME, TERRORISM,
                         AND HOMELAND SECURITY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 6, 2008

                               __________

                           Serial No. 110-150

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov

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                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
MAXINE WATERS, California            DANIEL E. LUNGREN, California
WILLIAM D. DELAHUNT, Massachusetts   CHRIS CANNON, Utah
ROBERT WEXLER, Florida               RIC KELLER, Florida
LINDA T. SANCHEZ, California         DARRELL ISSA, California
STEVE COHEN, Tennessee               MIKE PENCE, Indiana
HANK JOHNSON, Georgia                J. RANDY FORBES, Virginia
BETTY SUTTON, Ohio                   STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois          TOM FEENEY, Florida
BRAD SHERMAN, California             TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin             LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York          JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota

            Perry Apelbaum, Staff Director and Chief Counsel
      Sean McLaughlin, Minority Chief of Staff and General Counsel
                                 ------                                

        Subcommittee on Crime, Terrorism, and Homeland Security

             ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman

MAXINE WATERS, California            LOUIE GOHMERT, Texas
WILLIAM D. DELAHUNT, Massachusetts   J. RANDY FORBES, Virginia
JERROLD NADLER, New York             F. JAMES SENSENBRENNER, Jr., 
HANK JOHNSON, Georgia                Wisconsin
ANTHONY D. WEINER, New York          HOWARD COBLE, North Carolina
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
ARTUR DAVIS, Alabama                 DANIEL E. LUNGREN, California
TAMMY BALDWIN, Wisconsin
BETTY SUTTON, Ohio

                      Bobby Vassar, Chief Counsel

                    Caroline Lynch, Minority Counsel
















                            C O N T E N T S

                              ----------                              

                              MAY 6, 2008

  PageDelete this line if inserting bill, leave in if not deg.

                           OPENING STATEMENTS

The Honorable Robert C. ``Bobby'' Scott, a Representative in 
  Congress from the State of Virginia, and Chairman, Subcommittee 
  on Crime, Terrorism, and Homeland Security.....................     1
The Honorable Louie Gohmert, a Representative in Congress from 
  the State of Texas, and Ranking Member, Subcommittee on Crime, 
  Terrorism, and Homeland Security...............................     3

                               WITNESSES

Mr. Harley G. Lappin, Director, Federal Bureau of Prisons, U.S. 
  Department of Justice, Washington, DC, accompanied by Mr. Paul 
  Laird, Chief Operating Officer, Federal Prison Industries
  Oral Testimony.................................................     5
  Prepared Statement.............................................     8
Mr. John Gage, National President, American Federation of 
  Government Employees, Washington, DC
  Oral Testimony.................................................    21
  Prepared Statement.............................................    23
Mr. Marc H. Morial, Director, National Urban League, New York, NY
  Oral Testimony.................................................    40
  Prepared Statement.............................................    42

                                APPENDIX

Material Submitted for the Hearing Record........................    65


FEDERAL PRISON INDUSTRIES--EXAMINING THE EFFECTS OF SECTION 827 OF THE 
               NATIONAL DEFENSE AUTHORIZATION ACT OF 2008

                              ----------                              


                          TUESDAY, MAY 6, 2008

              House of Representatives,    
              Subcommittee on Crime, Terrorism,    
                              and Homeland Security
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 1:55 p.m., in 
Room 2237, Rayburn House Office Building, the Honorable Robert 
C. ``Bobby'' Scott (Chairman of the Subcommittee) presiding.
    Present: Representatives Scott, Johnson, Sutton, Gohmert, 
Coble, and Lungren.
    Staff present: Bobby Vassar, Majority Chief Counsel; Ameer 
Gopalani, Majority Counsel; Rachel King, Majority Counsel; 
Mario Dispenza, (Fellow) ATF Detailee; Karen Wilkinson, 
(Fellow) Federal Public Defender Office Detailee; Veronica 
Eligan, Majority Professional Staff Member; Caroline Lynch, 
Minority Counsel; Kimani Little, Minority Counsel; and Kelsey 
Whitlock, Minority Staff Assistant.
    Mr. Scott. The Subcommittee will come to order.
    I am pleased to welcome you here today to the hearing 
before the Subcommittee on Crime, Terrorism, and Homeland 
Security on the ``Federal Prison Industries--Examining the 
Effects of Section 827 of the National Defense Authorization 
Act of 2008.''
    Last year, the senator from Michigan, Carl Levin, 
introduced section 827, an amendment to H.R. 1585, the 
``National Defense Authorization Act of 2007.'' This amendment 
passed without going through the Judiciary Committee on either 
the House or the Senate side. It eventually became law on 
January 28, 2008 as part of H.R. 4986, the ``National Defense 
Authorization Act of 2008.''
    The amendment altered the mandatory source requirement 
which had required the Federal Government to purchase a product 
from the Federal Prison Industries, or FPI. FPI is the 
government corporation that Congress established in 1934 for 
the purpose of providing jobs and training opportunities to 
prisoners in Federal prisons by producing goods and services 
for Federal agencies.
    FPI is administered by a six-person board of directors 
appointed by the president. It is self-sustaining and receives 
no taxpayer support for its operations. Under the new law, the 
Department of Defense is required to research products to 
determine if what the FPI makes is comparable to the products 
needed by the Department of Defense in terms of price, quality 
and production time.
    If comparable and the FPI's Federal market share is less 
than 5 percent of the Federal market for that product, then the 
mandatory source rule applies and DOD must purchase products 
through FPI. If FPI's market share is greater than 5 percent, 
then that product must be put out for competitive bidding. FPI 
may take part in that process.
    The Bureau of Prisons and prisoner advocate organizations 
believe that this amendment will have an effect of drastically 
reducing the number of jobs available for prisoners who work 
for FPI. The purpose of this hearing is to hear expert opinions 
on the likely effect of this change and as to the value of 
keeping the program vibrant and solvent.
    Unfortunately, this hearing is being held after the 
adoption of the amendment, not before, but in any event it is 
important to know what the effects may be.
    Besides the loss of inmates' jobs, the Levin amendment may 
also make it more difficult for officials to manage prison 
facilities. While earlier House Judiciary Committee-passed 
bills have made reductions in FPI operations, they were always 
tempered with vocational training or other work or work-related 
alternatives, as well as emergency authority for the attorney 
general or other officials to assure the job losses resulting 
in drastic impacts could be avoided. None of these alternatives 
are provided for in section 827.
    FPI contributes significantly to the safety and security of 
Federal correctional facilities by keeping prisoners 
constructively occupied. Today's Federal prison population is 
approximately 200,000 inmates, confined in 214 Bureau of 
Prisons facilities. This population has been steadily 
increasing, up from 25,000 in 1980, 58,000 in 1990, 145,000 in 
2000, and now approximately 200,000 prisoners.
    All able-bodied prisoners are required by law to work. Over 
80 percent of them work for menial, mostly make-work jobs which 
are paid 12 cents to 40 cents per hour. In comparison, Federal 
Prison Industry jobs are held by about 18 percent of the 
prisoners and they earn from 24 cents to $1.15 per hour. This 
additional pay is a significant financial incentive, making FPI 
jobs most desirable.
    Also, prisoners in FPI--those on the waiting list and those 
seeking to be eligible for the waiting list--must have their 
high school diploma or a GED or show that they are making 
progress to obtain a GED. That is why prisoners in the FPI 
program are less likely to engage in institutional misconduct, 
thereby enhancing the safety of staff and other prisoners and 
lessening the management burden and expense.
    More important, for citizens and taxpayers, vigorous 
research shows that participation in FPI and vocational 
training programs will have a positive effect on post-release 
employment and on recidivism reduction in both the short and 
the long run. In the short run, that is up to 1 year, prisoners 
who participated in FPI were 14 percent more likely to be 
employed and 35 percent less likely to recidivate than those 
who had not participated.
    Following prisoners up to 12 years after release, the 
results were that those who participated in FPI were 24 percent 
less likely to recidivate than non-program participants. In 
fiscal year 2004, prisoners who worked in FPI factories 
contributed over $3 million of their earnings toward meeting 
their financial obligations, that is child support restitution 
or court-ordered fines, so that it has the positive effect from 
that perspective.
    I am going to now recognize the esteemed Ranking Member of 
the Subcommittee, the gentleman from Texas, Judge Gohmert.
    Mr. Gohmert. Thank you, Chairman Scott.
    It is interesting when we have hearings on amendments after 
we pass them. In the tradition of the Congress, no matter who 
is in the majority, our procedure is ready, fire, aim, it 
seems. But this is an important hearing to have, and I am glad 
that you are having it.
    Federal Prison Industries employs offenders in a variety of 
manufacturing jobs to teach management skills, provide 
vocational training, and rehabilitate inmates within the 
Federal prison system. UNICOR is a government-owned corporation 
that employs Federal offenders to manufacture products that are 
then sold to executive agencies in the Federal Government. 
Eighteen percent or roughly 23,152 of the eligible inmates in 
Federal prisons were employed by UNICOR in fiscal year 2007.
    UNICOR has 110 factories in Federal prisons, representing 
seven different industrial operations, including clothing and 
textiles, electronics, fleet management, vehicular operations, 
industrial products, office furniture, recycling and data 
entry, and encoding services. UNICOR is economically self-
sustaining, as the Chairman mentioned, and in fiscal year 2007 
did generate $852.7 million in sales.
    They used the revenue to purchase raw materials and 
equipment, pay wages to inmates and staff, and invest in the 
expansion of its facilities. Inmates may earn from 23 cents per 
hour to a maximum of $1.15 per hour.
    In addition to compensating inmates for their work, FPI 
also holds them accountable for their debts. Under the Bureau 
of Prisons' Inmate Financial Responsibility Program, all 
inmates with court-ordered financial obligations must use at 
least half of their FPI income to satisfy those debts, which 
accounted for $2.7 million in 2007.
    I am a strong believer in the need to provide vocational 
skills and encourage a strong work ethic among inmates. 
Programs such as FPI not only prepare prisoners for life after 
prison, but also reduce idleness and the potential for violence 
in prison.
    At the same time, I appreciate the argument by many that 
FPI prohibits full and open competition by preventing Federal 
agencies from purchasing products in a free enterprise market. 
I share their concerns that FPI's mandatory source clause has 
caused U.S. workers to be displaced from their jobs. FPI can 
set its own prices and is not subject to many of the same 
Federal or State regulatory laws.
    I am pleased we are holding this hearing on FPI and section 
827 of the fiscal year 2008 Defense Authorization Act. That 
provision reduces the impact of FPI's mandatory source 
requirement for purchases by the Department of Defense, one of 
the largest customers of FPI.
    Prior to enactment of section 827, FPI was prohibited from 
applying its mandatory source requirement to products whose 
share of the Federal market exceeded 20 percent. Section 827 
reduced this percentage to 5 percent. According to the 
Department of Defense, products that have a market share above 
5 percent and thus require competitive procedures are laundry 
and dry cleaning equipment, hardware, electrical, communication 
equipment, office furniture and household furnishings.
    Through this, we have to struggle for balance here. As a 
former judge who spent time going to prisons and seeing what 
was going on there, I know if we don't train people for jobs 
that are viable jobs and trades once they come out, then they 
are extremely more likely to re-offend once they are out, which 
creates vast problems for society as we have seen.
    On the other hand, if we create an unfair advantage, then 
the result can be, as just happened in my district, where we 
lost a bunch of good union jobs because a prison unit was 
building trailers cheaper than they could. So we set up the 
scenario of law-abiding citizens being put out of work by law-
breakers who are put into work when they are in prison.
    So achieving that delicate balance of making sure we 
maximize rehabilitation while not putting law-abiding citizens 
into desperate economic situations is what we have to strive 
for.
    I look forward to hearing from the witnesses, particularly 
regarding the impact of section 827, and I yield back the 
balance of my time.
    Mr. Scott. Thank you.
    We have a distinguished panel of witnesses today to help us 
consider the issues before us. Our first witness is Harley 
Lappin, director of the Bureau of Prisons. He is a native of 
Akron, Ohio, where he received his B.A. degree in forensic 
studies from Indiana University in 1978, and a master's in 
criminal justice and correctional administration from Kent 
State University in 1985.
    In 1985, he began working in corrections. In 1996, he was 
promoted to warden of the Federal correctional institution in 
Butner, NC. He was sworn in as director of the Federal Bureau 
of Prisons on April 4, 2003. He is a career public 
administrator in the Federal Bureau of Prisons and is only the 
seventh director of the bureau since its establishment in 1930. 
He is responsible for the oversight and management of the 
bureau's 114 institutions, and with the safety and security of 
approximately more than 193,000 inmates under the agency's 
jurisdiction.
    Joining him at the table is Paul Laird, chief operating 
officer of Federal Prison Industries and the assistant director 
of the Industries' education and vocational training division 
of the Bureau of Prisons.
    Our next witness is John Gage, national president of the 
American Federation of Government Employees. He graduated from 
Wheeling Jesuit University and his career includes a brief 
stint as a professional baseball player with the Baltimore 
Orioles. He has been long involved with AFGE and the labor 
movement. He has committed over 20 years of service as 
president of AFGE Local 1923, and as national vice president of 
AFGE's Fourth District. Under his leadership, Local 1923 
experienced robust growth, making it the largest local within 
the federation.
    Our last witness will be Marc Morial, executive director of 
the National Urban League. He is a graduate of the University 
of Pennsylvania with a degree in economics and African American 
studies. He also holds a law degree from Georgetown University 
Law Center in Washington, DC, as well as honorary degrees from 
Xavier University, Wilberforce, and the University of South 
Carolina--Upstate.
    In a distinguished professional career that has spanned 25 
years, he has been an entrepreneur, a lawyer, professor, 
legislator and the mayor of the city of New Orleans. He is now 
the CEO of the National Urban League, the nation's largest 
civil rights organization. His energetic and skilled leadership 
has expanded the League's work around an empowerment agenda, 
which is redefining civil rights in the 21st century with a 
renewed emphasis on closing economic gaps between Whites and 
Blacks, as well as rich and poor Americans.
    Now, all of our witnesses' written statements will be 
entered into the record in their entirety. I would ask that 
each of the witnesses summarize their testimony within 5 
minutes or less. To help you stay within that timetable, there 
is a lighting device there which will go from green to yellow 
when you have 1 minute left, and red when the 5 minutes have 
expired.
    We have been joined by the gentleman from California, Mr. 
Lungren. Thank you.
    Mr. Lappin?

  TESTIMONY OF HARLEY G. LAPPIN, DIRECTOR, FEDERAL BUREAU OF 
     PRISONS, U.S. DEPARTMENT OF JUSTICE, WASHINGTON, DC, 
ACCOMPANIED BY MR. PAUL LAIRD, CHIEF OPERATING OFFICER, FEDERAL 
                       PRISON INDUSTRIES

    Mr. Lappin. Good afternoon, Chairman Scott and Members of 
the Subcommittee. Mr. Laird and I greatly appreciate the 
opportunity to appear before you today.
    Mr. Scott. Is your mic on?
    Mr. Lappin. Yes.
    Mr. Scott. Okay. Can you bring it a little closer to you?
    Mr. Lappin. Good afternoon, Chairman Scott and Members of 
the Subcommittee.
    Can you hear now? Okay.
    Mr. Laird and I greatly appreciate the opportunity to 
appear before you today to discuss Federal Prison Industries 
and the effects of section 827 of the National Defense 
Authorization Act of 2008.
    As you have indicated, the Federal Prison Industries is one 
of the bureau's most important correctional management 
programs. The primary goals of the Federal Prison Industries 
program are to improve public safety and inmate reentry. The 
program accomplishes this by providing inmates with jobs, 
skills, training and work experience, thereby reducing 
recidivism among ex-inmates and relieving inmate idleness 
within our institutions.
    FPI is not a business. Its main purpose is not to generate 
revenue. There are many ways in which FPI programs do not and 
should not operate as a business. The FPI program limits its 
advertising and marketing. The program spreads its operations 
across multiple business areas and the FPI program is 
deliberately labor-intensive in order to provide job skills 
training to the largest possible number of inmates.
    Another benefit of the FPI program is its ability to help 
with the effort to provide restitution to victims of crime. 
Inmates who work in FPI are required to contribute 50 percent 
of their wages to pay court-ordered fines, victim restitution, 
and child support. The FPI program also contributes 
significantly to reducing inmate idleness. Inmate idleness 
undermines other rehabilitation programs and increases the risk 
of violence and other disruptive activities. Idle inmates 
require more staff to monitor, which increases the cost to 
taxpayers.
    Federal Prison Industries is unique among other inmate 
programs and it receives no appropriated funding. Earnings from 
FPI programs are used for operating costs, including the 
purchase of raw materials and equipment, staff salaries and 
benefits, and compensation to inmates.
    Last year, FPI spent more than a half-billion dollars 
buying raw materials, equipment, and services from private 
vendors. As a result of these purchases, there are thousands of 
jobs in the private sector that are tied directly to the 
continued viability of the FPI program.
    Recent legislation and the FPI board of director decisions, 
which I detail in my written statement, have had a dramatic 
effect on FPI's operations. Provisions in the National Defense 
Authorization Act of 2002 and 2003 and in two more recent 
omnibus appropriation bills require that Federal agencies who 
wish to purchase an item that is offered by the FPI program, 
the contractor must first conduct market research to determine 
if FPI's product is comparable to that offered by private 
sector vendors in terms of quality, price and delivery. If the 
buying agency determines that the product is not comparable, 
then competitive procurement procedures apply.
    The impact of these provisions was felt primarily by FPI's 
office furniture program, where sales decreased by nearly 40 
percent since 2002. As a result of these sales decreases, FPI 
has eliminated almost 2,400 jobs in office furniture factories.
    More recently, the National Defense Authorization Act of 
2008 included a provision that amends the process by which the 
Department of Defense purchases certain products from FPI. This 
provision requires DOD to use competitive procedures for 
products for which FPI has a significant market share, defined 
as more than 5 percent of the DOD purchases in a product 
category.
    DOD recently issued a listing of the Federal supply 
classification codes in which FPI sales met this market share 
criteria. Based on that, we believe a minimum of $140 million 
in sales and commensurate 3,250 inmate jobs are potentially at 
risk. This would represent approximately 17 percent of the FPI 
program's annual sales and 14 percent of its inmate workforce.
    It is difficult to say with certainty how much of the FPI 
program sales that are potentially affected by section 827 may 
be lost. While sales in some product areas may decline, the 
product impact of this provision will be difficult to predict 
until DOD is fully aware of these procurement changes.
    Modernization of the FPI program should be accomplished 
through a comprehensive strategy guided by Congress' judiciary 
Committees. As the Administration has previously articulated, 
any modifications of the FPI program should simultaneously 
provide Federal agencies with this balance that the judge and 
you have referenced with greater flexibility in buying 
products, increased access by private sector companies to 
government purchases, and ensure that the attorney general 
maintains adequate work opportunities in prisons to reduce 
recidivism and counter the potential dangerous effects of 
inmate idleness.
    Chairman Scott, this concludes my formal comments. Mr. 
Laird and I would be pleased to answer questions for you and 
other Members of the Subcommittee.
    [The prepared statement of Mr. Lappin follows:]
                 Prepared Statement of Harley G. Lappin

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Scott. Thank you.
    We have been joined by the gentlelady from Ohio, Ms. 
Sutton.
    Mr. Gage?

TESTIMONY OF JOHN GAGE, NATIONAL PRESIDENT, AMERICAN FEDERATION 
            OF GOVERNMENT EMPLOYEES, WASHINGTON, DC

    Mr. Gage. Thank you, Mr. Chairman.
    On behalf of the more than 39,000 Federal correctional 
officers and staff who work in the Bureau of Prisons, thank you 
for the opportunity to testify today on the Federal Prisons 
Industries inmate work program and its critical importance to 
the safety and security of Federal correctional officers, 
Federal prison inmates, and the local communities surrounding 
our BOP correctional institutions.
    Prison inmate overcrowding and correctional officer 
understaffing are creating dangerous conditions inside the 
walls of Federal prisons. As the Chairman noted, and I 
reiterate, more than 200,000 prison inmates are confined in the 
114 BOP institutions today, up from 25,000 in 1980, 58,000 in 
1990, and 145,000 in 2000. By 2010, it is expected there will 
be 250,000 inmates incarcerated in Federal prisons.
    To make matters worse, the number of Federal correctional 
officers and staff who work in BOP institutions is failing to 
keep pace with this tremendous growth in the prison inmate 
population. The BOP system is currently staffed at an 86.6 
percent level, as contrasted with the 95 percent staffing 
levels in the mid-1990's.
    Moreover, the current 86.6 percent staffing level, or 
34,098 filled positions, is well below the 90 percent staffing 
level, or 35,444 filled positions, that BOP believes is the 
point where the safety and security of correctional officers, 
as well as prison inmates, could be in jeopardy.
    This inmate overcrowding and correctional officer 
understaffing is resulting in the significant increase in 
Federal prison inmate assaults against correctional officers 
and against other inmates. In December, 2007, the BOP 
intelligence section of the Department of Justice issued a 
report documenting that inmate-on-inmate assaults in fiscal 
year 2007 had increased 15.5 percent over the previous year, 
and inmate-on-staff assaults in fiscal year 2007 had increased 
6 percent over the previous year.
    This unsafe work environment is the reason why we at AFGE 
strongly support the FPI prison inmate work program. FPI is a 
self-supporting government corporation that provides work 
opportunities and job skills training to BOP prison inmates by 
producing goods and performing services for Federal agencies. 
By statute, Federal agencies are required to purchase from FPI 
any product listed in the FPI schedule of products, a sole-
source requirement referred to as mandatory source preference.
    The FPI prison inmate work program is the essential 
management tool that Federal correctional officers and staff 
use to help deal with the huge increase in the prison inmate 
population. This program keeps 23,152 prison inmates, or about 
18 percent of the eligible population, productively occupied in 
labor-intensive activities, thereby reducing inmate idleness 
and the violence associated with that idleness.
    It also provides strong incentives to encourage good inmate 
behavior, as those who want to work in FPI factories must 
maintain a record of good conduct. Unfortunately, last year 
Congress approved section 827 in the National Defense 
Authorization Act that will significantly reduce the 
application of the FPI mandatory source preference with regard 
to DOD. This reduction will necessarily result in a substantial 
decrease in the number of FPI prison inmate jobs.
    The FPI board in 2003 adopted a resolution that ended the 
application of the FPI mandatory source preference for those 
products where FPI's share of the Federal market exceeds 20 
percent. Section 827 ends the application of mandatory source 
preference with regard to DOD purchases for those products 
where FPI's share of the Federal market is greater than 5 
percent.
    It is estimated that this reduction from 20 percent to 5 
percent will result in the potential loss of up to $241 million 
in FPI sales, or a 33.6 percent decrease in total FPI sales 
revenues. This FPI sales decrease in turn will result in a 
potential loss of up to 6,500 prison inmate jobs, or a 30.6 
percent decrease in the number of prison inmates employed by 
FPI.
    AFGE has long opposed any legislative attempt to eliminate 
the mandatory source preference for FPI-produced goods because 
it would seriously endanger the safety of our members, the 
Federal correctional officers and staff who work inside BOP 
institutions. However, in the past couple of years we have come 
to accept the idea of eliminating the FPI mandatory source if 
and only if a strong work-based training program is developed 
to supplement the FPI program. This strong work-based training 
program must necessarily create a sufficient number of new 
Federal prison inmate jobs to replace the prison inmate job 
positions that would be lost if the FPI mandatory source 
preference is eliminated.
    A meritorious reform proposal was included in the May 11, 
2006 discussion draft of Representative Hoekstra's H.R. 2965. 
The proposal would authorize a private business to train 
participating Federal prison inmates by producing a product or 
performing a service if such product or service is being 
currently produced or performed outside the U.S. by or for 
private business and has been so produced or performed for a 
period of 3 years.
    This proposal would be intended to provide employment for 
the greatest number of Federal prison inmates as long as no 
single private industry is forced to bear an undue burden of 
competition from the products or services of Federal prison 
factories or workshops, and competition with private industry 
or labor is reduced to a minimum.
    This concludes my statement. I thank you for your attention 
and would be happy to answer any questions.
    [The prepared statement of Mr. Gage follows:]
                    Prepared Statement of John Gage

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Scott. Thank you.
    Mr. Morial?

            TESTIMONY OF MARC H. MORIAL, DIRECTOR, 
              NATIONAL URBAN LEAGUE, NEW YORK, NY

    Mr. Morial. Thank you very much, Chairman Scott and Ranking 
Member Gohmert.
    I am Marc Morial, president and CEO of the National Urban 
League. The National Urban League is the nation's largest civil 
rights organization, with affiliates in over 100 cities from 
coast to coast. Each year, we serve about 800,000 people in 
workforce development, youth and education programs, health and 
wellness initiatives, civil rights, and diversity training.
    At present, we work very closely in about 30 cities with 
about 2,000 people who were formerly incarcerated. So we know a 
little bit about not only rehabilitation, but habilitation of 
people who have been in prison.
    I come before you today to express strong support for this 
FPI program. I do so and ask you to consider that this program 
has been around since 1934 and represented an effort that long 
ago to rehabilitate Federal prisoners on a large scale without 
an appropriation of Federal dollars. Consider that this is the 
kind of innovation and initiative we talk about a lot in the 
21st century--finding ways to confront difficult challenges 
without an appropriation of taxpayer dollars.
    Now, the Bureau of Justice statistics tell us that six 
times as many Black men as White men are incarcerated in this 
nation's penal institutions. Without a question, for the 
African American community in this nation, any sensible effort 
which helps people who are incarcerated to get a GED, secure 
skills, and do something productive will go a long way in 
ensuring that recidivism, which is a problem in America today, 
is not enhanced or increased.
    By the very same token, I would suggest to you that this 
initiative, as the statistics demonstrate, helps to reduce 
recidivism and help to make inmates much more productive in 
society. I would point out that a very important feature of 
this program is the idea that those who participate in it have 
to attain a high school diploma, and that half of the money 
that they earn goes to pay debts in many cases toward child 
support and other very important things.
    I also urge this Congress to separate and not scapegoat 
this program because of foreign competition and failed trade 
policy. We should keep a focus on the fact that this is a 
program which works, which gets the kind of results it was 
intended to get, and which should remain not overly fettered 
and overly burdened because of some concerns that really arise 
out of what is happening in the global economy today.
    So the National Urban League supports this initiative. We 
support this program. I would also urge this Committee to 
reassert its authority and its jurisdiction, not only over this 
program, but over this very important issue. This problem of an 
increasing number of citizens in this nation who find 
themselves incarcerated, and in fact we lead the world in the 
number of citizens who are incarcerated.
    The increasing number of recidivists that are preying on 
our communities all across the nation point to the fact that we 
need much more of an emphasis, much more support, and much more 
approaches like that embodied in this initiative in our penal 
institutions. I think this Congress can indeed lead the way in 
demonstrating support for that.
    So with that, I urge your support, and I will be happy to 
entertain any questions you might have.
    [The prepared statement of Mr. Morial follows:]
                  Prepared Statement of Marc H. Morial

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    Mr. Scott. Thank you, and I thank all of our witnesses for 
your testimony.
    We have been joined by the gentleman from Georgia, Mr. 
Johnson.
    We will now begin questions, and I will recognize myself 
for 5 minutes.
    Mr. Lappin, can you tell us how important it is to have 
incentive programs in prison and how that helps the 
administration of the prisons? Is FPI one of those incentives 
that is helpful?
    Mr. Lappin. Two primary objectives: We want to run safe 
prisons and we want to send people home from prison. The 
majority of the folks in prisons are going to go home. This 
past year, we released about 62,000 inmates--50,000 to the 
United States--and we certainly want to try to send as many of 
those offenders home with the skills and abilities they need to 
be more successful in the community.
    So without a doubt, incentive programs, opportunities for 
inmates to improve their skills and abilities during a period 
of incarceration, are critically important, not only in the 
effort to reduce recidivism, but in the effort to run safer 
prisons.
    As you heard, we have had some challenges here in the last 
few years in the financial area, which has resulted in a little 
lower staffing than we would prefer to have. The only way to 
compensate for that, or one way to compensate for that, is to 
keep inmates productively occupied. Federal Prison Industries 
is one of the largest programs we have at keeping inmates 
productively occupied, one, and two, show the results that you 
have discussed of reducing recidivism upon release.
    I know a lot of folks want to focus on how many inmates 
participate. What I tend to focus on is on how many do not 
participate. That is what concerns me, given the fact that here 
we have these folks incarcerated for a period of years 
sometimes, pretty much total control of their life, and we are 
unable sometimes to get them into a program that improves work 
skills.
    It comes down to a number of issues, but three primary 
ones: literacy/education, vocational training, and work skills. 
Many, many of the offenders that come into our custody lack one 
if not all three, along with a few other skills that they need. 
Certainly, the education programs we provide, the vocational 
programs we provide, and certainly the work program we provide 
like Prison Industries, have a positive impact on their 
successfully returning to the community, as well as we see 
those offenders being less disruptive during that period of 
incarceration.
    Mr. Scott. Does it in fact reduce recidivism?
    Mr. Lappin. Yes, it does.
    Mr. Scott. Does it reduce recidivism enough? The program 
pays for itself, is that right?
    Mr. Lappin. There is no cost to the taxpayer in providing 
this program. In fact, in many ways it creates more business in 
many communities. Let me be real clear, though, without a doubt 
we want to have as little impact as we possibly can on 
citizens' businesses in this country. If there is anything that 
we can do to limit that, we are certainly open and receptive to 
that.
    On the other hand, we want to be able to provide a work 
opportunity, a productive noteworthy work opportunity for 
offenders during this period of incarceration. I believe, with 
some of the authorities that have been discussed over the 
years, that we could strike that balance. It may not be perfect 
at the beginning. It may take some tweaking along the way, 
given the utilization that mandatory source has had for the FPI 
for years
    So I am hesitant to say that the immediate result is to 
eliminate mandatory source and move into these authorities. 
However, I think there could be some phase-out of that in a 
manner that limits the impact of not only requiring mandatory 
source, but limits the impact on citizens' businesses in this 
country, as well as affords us the opportunity to ramp-up to 
increase our utilization of these other authorities until they 
compensate for what mandatory source has provided in the past.
    Mr. Scott. Well, mandatory source gives you the ability to 
maintain a constant flow of work. If you were to have to bid 
for all of your contracts, you might win some and lose some. 
How would you accommodate the ups and downs of the needed level 
of employment?
    Mr. Lappin. Let me ask Paul, because I think Mr. Laird will 
mention the fact that when you look at our entire product-to-
service lines, you will find that much of what we do is not 
under mandatory source. We have learned a lot over the last few 
years about how to be competitive, how to measure the ups and 
downs and still afford opportunities for work. So I will turn 
it over to Mr. Laird.
    Mr. Laird. Thank you, Mr. Chairman.
    That is true. Our sales in fiscal year 2007 were generated 
from 50 percent non-mandatory sources. That is an indication 
that we are continuing to venture out into these areas which 
lessen our dependency on mandatory source and further get us 
out into arenas where we are competing for the work that we are 
receiving.
    Mr. Scott. Well, if you had ups and downs, how would you 
accommodate those in terms of laying people off and bringing 
them back? If you changed the nature of the product in one 
institution, what complications arise when you cannot control 
the flow of work?
    Mr. Laird. That is a very good question. As the director 
mentioned, our main goal is to employ as many inmates as 
possible. In situations where we have work that has tapered 
off, we have been creative in hiring inmates to work part-time, 
so at least we had their presence in a factory, so one inmate 
may work in the morning and another inmate may work in the 
afternoon. So we haven't really reduced the number of inmates 
that were working. We simply adjusted the hours. Now, that is 
not ideal, but nonetheless it gives us a presence in the inmate 
population in the exposure to the work programs that we are 
offering in those facilities.
    Mr. Lappin. I think Mr. Laird would agree with the fact 
that we are very diverse and have I don't know how many 
different products and service areas. There are fluctuations 
that occur all the time. We are able to compensate sometimes in 
those areas that are very active, at those locations that may 
not be active, depending on their similarity to a certain 
product or service. So some of that can occur without huge 
expense. Wouldn't you agree, Paul?
    Mr. Laird. Right.
    Mr. Lappin. And still offer us the opportunity to provide 
productive work opportunities for those inmates, even though 
there may be some fluctuations, some peaks and valleys across a 
large variety of product lines and services.
    Mr. Scott. But just very quickly, and my time has expired, 
but if you switch product lines, you would have to get new 
equipment and things of that nature. If you lose a bid in one 
product, how quickly can you transition to another product?
    Mr. Laird. It would depend on the type of product line that 
we are placing into a factory. A perfect example would be our 
emphasis on recycling. Recycling does not involve a lot of 
overhead. It does not involve a lot of equipment. We can set up 
a factory relatively quickly, as opposed to, for instance, a 
vehicular components-type factory which requires a lot of 
significant equipment to be installed.
    In recycling, in some services businesses where we do 
sorting and real hands-on work that does not require a lot of 
machinery, those factories can be updated relatively quickly.
    Mr. Scott. Thank you.
    Mr. Gohmert?
    Mr. Gohmert. Thank you, Mr. Chairman.
    It is a difficult issue and requires a lot of balance. Mr. 
Chairman, I also wanted to submit that a witness who was 
invited was unable to attend--Frederick Puente, president of 
Blind Industries and Services of Maryland. He was not able to 
be here, but asked if we could enter his letter-statement into 
the record.
    Mr. Scott. Without objection.
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    Mr. Gohmert. I thank you.
    Mr. Lappin, you mentioned, as I understood it, 60,000 
prisoners are released, and 50,000 are released to the United 
States. Where to the other 10,000 go?
    Mr. Lappin. Deported.
    Mr. Gohmert. Okay.
    Mr. Lappin. So of our 200,000 inmates, about 26 percent are 
non-U.S. citizens, about 50,000 inmates. So of that 62,000, 
12,000 to 14,000 are non-U.S. citizens. They are deported. The 
other 50,000 or 51,000 or 52,000, depending on the fluctuations 
from year to year, are released into the United States as U.S. 
citizens.
    Mr. Gohmert. Okay. So about 17 percent of the people you 
release, or one-sixth, are deported?
    Mr. Lappin. Are deported.
    Mr. Gohmert. Okay. You mentioned you want to best minimize 
the effect on jobs in the private sector. How do you suggest 
that best be done?
    Mr. Lappin. There have been a number of other authorities 
discussed. Some involve greater utilization of products and 
services that are performed offshore. There are other 
authorities, and Paul, if you wouldn't mind mentioning them in 
more detail to best inform the Committee.
    Mr. Laird. Sure. As you mentioned, director, probably the 
single most important authority that we feel would be 
beneficial to Federal Prison Industries would be for us to have 
the ability to produce items that are currently being 
manufactured offshore. The impact we feel on the private 
sector, on American workers, would be minimized. In fact, we 
feel it would actually be beneficial to the local communities 
in which these factories are located because we would rely on 
the raw materials, the services that would need to be provided, 
as well as the equipment that would need to be purchased for us 
to engage ourselves in those types of manufacturing activities.
    Mr. Gohmert. Is there any prevention from doing that now?
    Mr. Laird. Yes, sir.
    Mr. Gohmert. What is preventing them from doing those jobs 
now that are mainly done offshore?
    Mr. Laird. Our manufacturing components that we are engaged 
in right now are only available to be sold to the Federal 
sector, to the Federal Government. This new authority that 
would be beneficial to us would allow us to sell outside of the 
Federal sector.
    Mr. Gohmert. Okay. That is really nice, and I think a lot 
of us would love to have a policy. I love that. That is nice.
    Mr. Lappin. That is why I brought him along, to provide 
cover. [Laughter.]
    Mr. Gohmert. I need a Paul to follow me around.
    Mr. Lappin. I have lots of Pauls in the Bureau of Prisons. 
[Laughter.]
    Mr. Gohmert. I am sorry, Paul. You had something else?
    Mr. Laird. Yes, Congressman Gohmert. Another beneficial 
authority for us would be to allow us to participate in the 
Prison Industry Enhancement Program, or the PIE program, which 
is currently available to State correctional industries. It 
essentially allows outside private industry to come in and 
partner-up, pay inmates prevailing wages, and actually do the 
work inside the prison fences.
    Mr. Gohmert. Okay, thank you.
    Mr. Morial, if you a get a sense of my heart, I understand 
everything you are saying. I think I really appreciated what 
you were saying about you weren't just rehabilitating, if I 
understood you. Some folks have never been habilitated in the 
first place, and our prisons really have to habilitate. Is that 
the point you were making with that comment?
    Mr. Morial. Yes. It is very interesting. In the primary 
program where we work with both high school dropouts and people 
who were formerly incarcerated, we find that they come to us as 
young adults--23 years or 24 year old--one, they are reading on 
a fourth-or fifth-grade level; two, they have never been in any 
sort of regular W-2 employment. So for the first time when they 
come to us, we have to not only help them get basic reading 
skills, basic comprehension skills to get a GED, but we also 
have to give them what are called life skills and those sorts 
of things.
    So there is no question that the prison system is not just 
called on to rehabilitate, but to habilitate people so that 
when they are released, they are less likely to be recidivists 
because they have a chance of being gainfully employed.
    Mr. Gohmert. It seems like one of the problems in prisons 
has been over the years like the old days of, well, they will 
make license plates. There is not a lot of call for license 
plate makers once they get out of prison. So we do need to have 
them learn trades, educated as you say.
    And I think being more familiar with the Texas prisons as I 
have been, that is one of the areas that Texas has fallen down, 
from the old days when everybody went out and did farm work and 
it was completely self-sustaining for their own food, to the 
days after this Justice order and they couldn't go out and work 
like that. We never really have gotten back to where we avoid 
fights, avoid problems by having adequate training or education 
of the inmates. This is the balance we are looking for.
    Mr. Morial, you surely have people that you know that have 
also lost their jobs because there was competition from FPI.
    Mr. Morial. Let me say, and let me address this in this 
way. I think it is important to look at the loss of jobs as not 
scapegoating FPI. There are larger global trade and foreign 
competition issues at play in a lot of the businesses where 
they provide services. But then secondly, the effect because of 
the market share of FPI is so small. Has it cost a job-loss 
here or there? I don't think anyone can argue that it hasn't, 
but the benefits, the up-side is significant.
    I would suggest to you that there are not a lot of 
initiatives out there that habilitate and give prisoners skills 
that don't require direct appropriations. We are spending on 
average on the low side probably $20,000 or $25,000 a year to 
incarcerate and house people. So this kind of investment is 
offset.
    Mr. Gohmert. That may be low, too.
    Mr. Morial. Yes.
    Mr. Gohmert. I agree with everything you say. It is just a 
matter of balance.
    Mr. Morial. It is a matter of balance, but I think it is 
easy to say it is FPI, but the more important thing is one just 
need go into any store and look at where things are 
manufactured.
    Mr. Gohmert. Sure. No, you are exactly right. A bunch of us 
went to China and were talking to the CEOs over there, why did 
you move from the U.S.? I expected the answer to be low labor 
costs, but no, quality control in the U.S. is a lot better and 
labor is cheaper here, but it is because they cut a deal--we 
have no corporate tax for 5 years and it will never go above 17 
percent; we are paying 35 percent back in the U.S.; we can pay 
for our plant in 5 years.
    So there are a lot of other factors for people losing their 
jobs, I agree. But if you happen to be one of those who lost 
your job, then it is hard not to have resentment to FPI, 
despite all the good this program is doing.
    Mr. Morial. I think keep in mind, and for any worker or 
person who may lose their job in an industry, they would tend 
to want to assign blame. But the role of the Congress is to 
balance in a very, very difficult environment where we have too 
many people in jail, and too many repeat offenders. It is 
costing us money. It is costing lives and families. This 
initiative, if this could be done in some States----
    Mr. Gohmert. That is why we are having the hearing, to try 
to strike that balance. That is why we are asking the questions 
we are of those of you who deal with these issues. That is what 
we want to do. I appreciate your participation here today.
    Mr. Morial. Thank you, sir.
    Mr. Scott. Thank you.
    We want to acknowledge the presence of the gentleman from 
North Carolina, Mr. Coble, who will have questions in just a 
minute.
    The gentlelady from Ohio?
    Ms. Sutton. Thank you, Mr. Chairman.
    Thank you all for your testimony----
    I just want to address Mr. Gohmert's observation about our 
tax laws and that that is a contributor to the decisions to 
relocate, just not to get side-tracked very much here, but I 
would just like to point to the Bloomberg article back on 
December 14, shortly after we passed a trade deal with Peru. It 
quotes the president of Peru. The paragraph reads that mining, 
agriculture, fishing and manufacturing firms should now flock 
to this nation of 29 million people, which has a per capita 
income of less than $3,000 a year. Garcia said, `` `Come and 
open your factories in my country, so we can sell your own 
products back to the U.S.,' Garcia told business executives 
today.'' I would be happy to enter this into the record.
    Mr. Scott. Without objection.
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    Ms. Sutton. I do think it is an interesting discussion that 
we are having. Mr. Laird, I begin with you on this because I am 
not sure I completely understood what you were saying when you 
were talking about the competition with perhaps offsshore jobs. 
Are we suggesting now that the way that we might compete with 
offsshoring of jobs would be through the FPI program? That that 
would be the adjustment that we would be making? That that is 
the best we could do?
    Mr. Laird. I think it is a great opportunity for us to 
partner-up with American companies and offer ourselves as a 
labor source to keep these types of manufacturing jobs from 
going overseas and keeping them in the United States. It is not 
a cure-all for the burgeoning inmate population that is 
automatically going to raise us up to our goal of 25 percent, 
but it is one of those ideas that I think warrants 
consideration to help us meet our goals of employing 25 percent 
of the inmate population.
    Ms. Sutton. I would just say, just so you understand where 
I am coming from, I intend to be a supporter of the FPI 
program. I understand its value and I share the concern about 
how these things get wrapped up together, and we have problems 
in many directions that need to be dealt with and, as you point 
out, not scapegoated.
    Mr. Gage, in your testimony, you talk about these issues 
also. You addressed the opponents' argument that FPI is not the 
cause of U.S. private companies' sales losses and non-inmate 
workers' job losses in the areas of office furniture and 
textiles and apparel industries, that they are being lost due 
to foreign competition.
    Do you see the potential, then, that perhaps if we 
eliminate the mandatory source requirement for FPI that those 
jobs would go to Mexico or offsshore?
    Mr. Gage. Well, I really don't know, but I do think--and I 
am also a vice president with the AFL-CIO, and I have been 
talking with some of the unions who have brought up a lot of 
opposition to FPI--Unite Here, for instance, in the apparel-
making industry. I think the compromise that this whole issue 
needs, that Mr. Lappin has been suggesting, just repatriating 
our work. That is work that is out of the barn and gone. It is 
something that could have no impact on jobs in America and 
still revitalize FPI.
    So I think this whole issue really, when you look at the 
minimal impact on jobs and even some of the unions have seen 
that FPI is good for American workers--the Teamsters, for 
instance, delivering supplies, et cetera, for FPI. So there is 
a real balance there.
    But I think my members would like to not cost anybody a 
job, but have certainly these inmates working and working hard 
at productive jobs. I think there is enough work that has gone 
overseas not to come back that we could really resolve this 
problem.
    Ms. Sutton. Okay.
    Mr. Morial, you stated, and I think correctly, that the 
Federal prison system is broken and that the Federal Prison 
Industries program is one of the nation's only large-scale 
efforts at rehabilitation that is working at this moment in our 
prison system. A study that you cited in your testimony 
indicates that working in FPI is more important to minority 
inmates who are at a greater risk of recidivism, if I am not 
mistaken. And we heard a little bit about this discussion a few 
moments ago with Representative Gohmert.
    The concerns that FPI takes jobs away that might otherwise 
be filled by non-inmate minorities is on balance still one that 
has you here testifying in favor of obviously maintaining the 
program.
    Mr. Morial. I don't think any suggestion that this program 
takes jobs should be dismissed lightly, but it ought to also be 
put in the context of the fact that, one, FPI represents a 
very, very small share of overall Federal procurement. There is 
a lot of business that the Federal Government is doing that is 
available to private sector firms.
    Number two, with a number of products that they produce, 
you cannot escape the effect of foreign competition, 
globalization, and trade; and then, three, we have to confront 
the fact that the penal system, the prison system, the systems 
of incarceration in the United States are broke and busted 
because of the great numbers of people who are in jail and the 
recidivism rate which is shockingly high at both the Federal 
and State levels.
    So anything that we can do, particularly if it doesn't 
require direct appropriation of money, to help people gain 
skills, gain education, is on balance I just think something 
that we need to support. I think we need to confront the fact 
that the benefits far outweigh any costs--not to dismiss the 
suggestion of jobs, but also those that suggest that it has 
cost jobs need to be able to demonstrate that, not just suggest 
it.
    Ms. Sutton. I will close, but I thank you because I really 
do think it is important. This discussion is not the discussion 
about instead of reforming our trade policies, which is another 
issue for another day. Thank you.
    Mr. Scott. Thank you.
    The gentleman from California?
    Mr. Lungren. Thank you very much, Mr. Chairman, and thank 
you for having this hearing. I am sorry we didn't have hearings 
and the Senate didn't have hearings on this before they passed 
their amendment last year with virtually no discussion 
whatsoever in Committees that have never studied this issue 
whatsoever.
    I don't apologize for having a tough stance on crime, and 
don't apologize for the fact that we have the increase in 
prisoners, both at the State and the Federal level. At the same 
time, we have an obligation to deal with those people. I am 
sorry, but I keep hearing these excuses.
    Mr. Lappin and Mr. Laird, I am surprised that you so easily 
seem to suggest that legislation that has gone into effect, 
that gets rid of the mandatory purchasing program is not going 
to affect you very well, and that you can easily do this if we 
just reach out to get all those jobs that we are losing 
overseas.
    Frankly, it sounds like a bunch of rhetoric to me. Tell me 
how you are going to do it? We are now in a situation where in 
1998, FPI employed 20,200 inmates. We now have a larger inmate 
population and we employ less. And you have had effort after 
effort in this Congress under both Democrats and Republicans in 
the Senate and the House to try and stop your program.
    Frankly, I am disappointed because when you stand here and 
tell us that it is an easy thing to handle, all you do is give 
sustenance to those people who want to destroy this very 
program. So how is it so easy for you to sit there and say, 
well, all we have to do is reach out and get these jobs that we 
lose overseas and we can do it?
    Mr. Lappin. First of all, let me back up and apologize if 
my message was that it is easy to do. I don't think it will be 
easy to do.
    Mr. Lungren. Well, it sure sounds like it from what I heard 
from both of you.
    Mr. Lappin. Okay. Let me back up again, then. I don't think 
we can afford to lose mandatory source until, one, there is 
authority to explore these other areas, and in taking advantage 
of these new areas, have time to ramp those areas up to 
compensate for that which we lose as mandatory source is 
eliminated, if in fact it is eliminated.
    So it won't be easy. It is going to take time. We don't 
invest a whole lot of time and effort in advertising and 
marketing. We would have to shift because in the past our 
advertising and marketing had primarily been driven by the 
mandatory source, which we ultimately would lose if they move 
in that direction.
    So again, let me be clear. We advocate for mandatory 
source, the continuance of mandatory source, unless mandatory 
source is going to be replaced with authorities such as the 
ones we have mentioned.
    Mr. Lungren. Okay, well, that is the answer I wanted. That 
sounds more factual, because if we lose mandatory source as we 
have begun to lose mandatory source, you lose members of that 
population that are working, thereby making it safer for the 
inmate population and for the prison employees, and giving them 
the opportunity to have a job when they get out. Honest to God, 
if we don't start taking this seriously, I don't know what we 
are going to do.
    Mr. Morial, are you aware of any studies that show actual 
loss of jobs as a result of FPI? I asked Mr. Miller, who was 
testifying before us at the last hearing, representing the 
furniture industry, could he give me any real data to show how 
the FPI program is harming the industry, and he could not give 
it. To this day, I have not seen it. Are you aware--?
    Mr. Morial. I am not aware of any data.
    Mr. Lungren. See, we keep hearing this, that jobs are lost. 
The furniture industry in the United States, according to a 
Member of Congress who testified before us, is enormous 
compared with what FPI is doing. The furniture industry is 
somewhere in the neighborhood of a $12 billion to $14 billion 
industry. Office furniture and FPI was $250 million. Does that 
sound like we are really taking a huge chunk out of private 
industry, Mr. Morial?
    Mr. Morial. I noticed the same figures. I mean, obviously 
if you get the facts out here, the effect is not significant. I 
am not aware of any jobs, any studies, and any data that 
demonstrates job loss.
    Mr. Lungren. Here is the concern I have. When we have had 
an economy that has been moving along very well for 50-some 
months, and we have had the lowest unemployment over a 
sustained period of time we have ever had. We have had more 
people working than we ever had. In that environment, we have 
legislation coming here to cut FPI. And now as we are going 
down in an economy that is not as strong for some period of 
time--and I hope we are going to recover shortly--it is much 
easier for people to attack FPI and use it as the reason why we 
are losing jobs.
    As someone committed to putting people away who commit 
crimes, I am also committed to treating them humanely. If we 
don't do something to rehabilitate and habilitate these folks, 
it is on us.
    Mr. Morial. And I would continue to make this point. No 
matter where you stand on criminal justice issues, it is in no 
one's interest to see people repeat offend.
    Mr. Lungren. Absolutely.
    Mr. Morial. One of the reasons why they repeat offend is 
because they come out in many cases no better educated, with no 
more skills, and no better ability to navigate and function in 
society than they had when they went before. So we see it, the 
National Urban League, helping people gain education and skills 
as being essential to eliminating recidivism in this country. 
That is where we are, and that is a public safety issue. It is 
a criminal justice issue. It is a human compassion issue. You 
can put any label on it. I say it just makes good common sense.
    Mr. Lungren. Mr. Gage, since you represent the employees 
who work in the prisons, can you tell us, representing them, 
that this program does in any real way assist in reducing 
tension in the institutions, assist in any way making it a 
safer environment for prisoners and for your employees?
    Mr. Gage. Oh, yes. There is no question about it. Talking 
to any of our officers, they think this program is a real 
carrot for the inmate. It produces better behavior. You can't 
just get one of these jobs. You really have to have a good 
record. To qualify for the program, and then to get the job and 
to stay out of trouble to keep the job. Our officers are, to a 
man and woman, committed to this program.
    Mr. Lungren. Mr. Chairman, thank you for the indulgence of 
the time. All I would say is if we didn't have this program, we 
would be falling all over ourselves to create it. We would be 
talking about the promise of such a program, and we would be 
asking these people in front of us, how can you be sure that it 
is going to do these things?
    Maybe we ought to start a small pilot project to see if it 
helps inmates, if it brings down recidivism, if it actually 
improves the environment, if it protects the prisoners, if it 
protects those who are employed here. And maybe if it really 
worked, we could get a representative of the unions of the 
employees to come and testify, Mr. Chairman. But of course, it 
doesn't exist, so we will have to wait until they actually 
create the program.
    Thank you very much, Mr. Chairman.
    Mr. Scott. What you didn't add is have the program pay for 
itself. [Laughter.]
    Mr. Lungren. Mr. Chairman, I am a Republican. That goes 
without saying. [Laughter.]
    Mr. Scott. The gentleman from North Carolina?
    Mr. Coble. Thank you, Mr. Chairman.
    Mr. Chairman, I apologize for my belated arrival. I was on 
the floor with an intellectual property bill.
    Mr. Scott. We can excuse Mr. Morial, who indicated that he 
would have to leave just before 3 o'clock. So thank you very 
much for your testimony.
    Mr. Coble. As I said, Mr. Chairman, I was on the floor with 
an intellectual property bill and my absence does not indicate 
my lack of interest in this proposal. I have worked with the 
Chairman, as he knows, regarding repeat offenders. I think that 
is a very serious problem that we need to address, and I think 
FPI does a good job of that.
    Mr. Director, as you know, when I was elected, my bread and 
butter issues in my district, Mr. Chairman, were tobacco, 
furniture and textiles. All three are now beleaguered. I have 
always tried to keep a sharp lookout to the end that FPI's 
success would not be to the detriment of my furniture and 
textile folks back home. I am by no means opposed to 
rehabilitation. I think it is necessary. But that is where I am 
coming from, as you know, Harley. We have talked about this 
several times before.
    Mr. Director, has the number of Federal inmates 
participating in FPI increased in recent years?
    Mr. Lappin. The percentage has actually decreased. Probably 
15 or 20 years ago, we employed 40 percent of the eligible 
inmates in Prison Industries. Today, we are employing about 18 
percent. So we have added 150,000 inmates and we are employing 
actually percentage-wise far fewer than we did before.
    Mr. Coble. To what do you attribute that decrease?
    Mr. Lappin. Pardon?
    Mr. Coble. To what do you attribute the decrease?
    Mr. Lappin. Well, there are a couple of things I think 
ongoing. One, there has been a lot of debate over the 
legislation and what limitations there are. There have been 
obviously some legislative initiatives that have limited our 
ability to grow in some of those areas, as well as decisions 
made by the board to try to help strike this balance of 
providing opportunities for inmates, as well as being mindful 
of the impact these programs have on furniture and textiles and 
electronics in particular.
    So again, I go back to the door opening for many other 
opportunities. I will go back to your comments, to your 
questions about what the options are. Let's take call centers 
as an example. It wasn't that long ago that call centers were 
not performed at all in this country. A few years ago, 
customers came to us--I should say providers, companies--came 
to us and said, listen, we would like to utilize your workforce 
in lieu of using the workforce on the other side of the world 
to provide call center work.
    We took advantage of that opportunity. Now, there are seven 
or eight or nine call centers. They are not textile factories. 
They are not furniture factories. They are call centers. The 
more opportunity that we can take advantage of that, the more 
potential there is for us to reduce the impact in some of these 
product areas that exist on a larger scale in this country.
    I think whether it is recycling or call centers or other 
opportunities we are taking advantage of, I think those are 
ways to limit or reduce the impact on those businesses that 
continue to operate in this country.
    Mr. Coble. How many BOP facilities offer FPI programs, 
approximately?
    Mr. Lappin. Yes, about 110. We are committed to having a 
factory in every secure general population facility. So we 
exclude jails, which are short-term facilities. We exclude 
medical centers, which typically are short-term and many of the 
inmates are not able to work. We emphasize the need for these 
factories, especially in medium-and high-security institutions, 
which is a bit inconsistent with what you see sometimes in the 
States because this is risky business. It is risky business 
giving inmates tools and access to things that can assist some 
who misbehave in injuring others and escaping.
    On the other hand, these are the inmates that need it the 
most, those that are in our mediums and highs. Typically, they 
are the more violent, the less educated, lack more of the 
skills we have discussed today. So we try to focus the 
enhancement of those skills as much, if not more so, in those 
facilities than others, given the fact that those inmates tend 
to be the ones that need it the most. So certainly all of our 
mediums and highs, and as many of the low-security institutions 
as we can. With less opportunity in camps, because a lot of 
those offenders are more highly educated, more skilled, white-
collar offenders oftentimes, tend not to need the types of 
skills that they are acquiring in Prison Industries.
    Mr. Coble. I got you.
    Mr. Director, section 827 lowered the threshold from 20 
percent to 5 percent, but that is exclusively applicable to 
DOD, is it not?
    Mr. Lappin. Yes, it is.
    Mr. Coble. So in other words, mandatory source is still 
available to FPI beyond the confines of DOD.
    Mr. Lappin. Yes. Now realize, though, that over half of our 
sales are Department of Defense.
    Mr. Coble. I realize that is your largest customer, then.
    Mr. Lappin. A huge portion of our business is generated by 
the Department of Defense. So this limits mandatory source to 
only the 5 percent. Again, our concern obviously is that opens 
the door for the 15 percent no longer protected by mandatory 
source for it to go elsewhere, without the ability to grow 
other areas to compensate for the loss of jobs potentially in 
those areas that we are selling to DOD.
    Mr. Coble. Mr. Chairman, again I want to reiterate the fact 
that I am pro-FPI, but I think we will agree that mandatory 
source, however, Mr. Director, does give you a leg up, does it 
not?
    Mr. Lappin. It depends on how you approach it. I can argue 
it either way. Without a doubt, visibly to the public, it 
appears as though we have a preference. On the other hand, 
managed properly, we try to limit that preference. Again, we 
rely very little on advertising and marketing, I think $2 
million to $3 million a year for an $800 million organization--
a drop in the bucket. So we have relied on that traditionally.
    So again, it will not be easy to do away with that. If it 
is decided we do away with it, it will certainly require us to 
change our operational business model. It should be done 
gradually as we learn more about how to take advantage of the 
non-mandatory services and products. But then again, some 
certainly see it as, and I can understand why, an advantage.
    We are not opposed to competition as long as it is a level 
playing field. We need to have the opportunity and the 
authorities to do so. Again, I want to reiterate in regard to 
Mr. Lungren here that it needs to be done gradually, with 
thought, and assessment to ensure that we are making that 
transition in a manner that allows us to continue to provide 
the number and types of jobs we need to provide in our 
institutions.
    Mr. Coble. Mr. Chairman, I see that infamous red light, so 
I will yield back.
    Mr. Scott. Thank you.
    I want to ask Mr. Gage just one other question. You 
indicated that we should be going after different kinds of 
work.
    Mr. Gage. Yes.
    Mr. Scott. Could you give us some examples?
    Mr. Gage. Some are talking about furniture, but they say 
that casters--you know, the casters on furniture, there is not 
one made in this country. So there are niche products that I 
think we could convert. I think that would probably be an easy 
conversion on the casters.
    But Mr. Chairman, if I may, just one point. The 
appropriation for BOP is not quite where it should be. There 
could be a----
    Mr. Scott. Let me just say that I think in the next few 
days we are going to try to deal with that.
    Mr. Gage. You are going to try to deal with it. I just want 
to make this perfect storm argument that when we decrease 
correctional officers, and it is already a very drastic 
situation, but this budget as it is would cause a further 
significant decrease, and you add to it lessening FPI, I think 
you really have a formula for violence.
    Mr. Scott. I appreciate your comments. As I indicated, we 
recognize that the budget as it is for the Bureau of Prisons is 
in a crisis situation and we are going to try to deal with that 
in a matter of days.
    Are there other questions? If not, I want to thank our 
witnesses. We will keep the record open in case there are other 
questions which may be sent to you in writing. We would ask for 
you to respond to them as soon as possible so the answers can 
be made part of the record.
    We will keep the record open for 2 weeks for other 
additional materials.
    The gentleman from Texas?
    Mr. Gohmert. In light of the submission regarding the 
Peruvian invitation to come work there, I note that according 
to Nation's Encyclopedia, the basic corporate tax for Peru is 
27 percent, and that the average in the area is normally about 
5 percent to 10 percent. So there are a number of reasons that 
draw people in that direction, but apparently we share the same 
concerns about the program on both sides and the need for 
balance here.
    Thank you.
    Mr. Scott. Thank you.
    We will now adjourn. Without objection, the Subcommittee 
hearing will be adjourned, and we will convene a markup of 
several bills at this time.
    [Whereupon, at 3:07 p.m., the Subcommittee was adjourned.]
















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