California prisoners, unlike law-abiding citizens, have a guaranteed market for the products they make behind bars: State agencies are required by law to buy them even if private workers can make them cheaper or better.

That monopoly is coming under fire as the state's shaky economy sparks widespread layoffs.

Pa Saetern, left, marks a portion of a modular building being made last week at the Prison Industry Authority compound at Folsom State Prison. State agencies must buy the prison-made products.(HECTOR AMEZCUA / Sacramento Bee)

The sale of prison goods and services has grown into a $234 million annual industry. Many small-business owners say they can beat the Prison Industry Authority, potentially saving millions, and that taxpayers deserve open competition based on cost.

"Everything should be on a level playing field - and the winner takes the bid," said Scott Hauge, president of Small Business California.

Pending legislation supported by the California Chamber of Commerce, Assembly Bill 1771, would ease the mandate.

PIA officials say their prices are competitive and that savings also should be measured by success in reducing prison violence and keeping paroled felons from reoffending and being reincarcerated at a cost of about $50,000 per year.

"There are lots of benefits beyond just, 'Can we go out and buy this stuff more cheaply?' " said Barry Krisberg, former president of the National Council on Crime and Delinquency.

The issue pits lawmakers' desire to prepare prisoners for gainful employment against recession-related pressure to bolster private businesses struggling to survive.

Nationally, the Federal Prison Industries program, responding to similar pressure, loosened a mandate on federal agencies in 2004 to allow purchases from private vendors offering lower prices.

Effect on inmates touted

Anthony Thomas, 56, incarcerated at Folsom Prison for assault, said California's PIA will give him construction skills and hope for the future.

"It's all about bettering yourself," Thomas said of PIA, which pays inmates up to 95 cents an hour, minus victim restitution and child support, if owed. "I feel that if they'd had a program like this a long time ago, I wouldn't be here."

Not all PIA inmates will be paroled any time soon, however: Thirty percent of them - about 2,000 - have been sentenced to life in prison.

In January, PIA voted to stop accepting undocumented immigrants who are scheduled for deportation upon release. It had 427 such inmates on its rolls at the time.

Twenty-three California prisons operate more than 60 manufacturing, service and agricultural industries through the PIA, whose 1,800 products include office desks, filing cabinets, clothing, eyeglasses, decals, dairy goods, license plates and modular buildings.

Besides its 6,800 inmates, prison industries employ about 600 civilian workers.

Price comparisons by State Auditor Elaine Howle in 2004 found that 12 of 19 PIA products or services could be bought for less from a private vendor - at savings ranging from 10 percent to 181 percent.

No state oversight agency routinely monitors PIA, which sets its own prices. A recent sampling by the prison agency, however, also found that some PIA products sell for more, some for less, than those of vendors contacted.

Seven agencies contacted by The Bee said they had no idea whether they could save money from private vendors. The mandate removes any incentive to seek bids on PIA-equivalent products.

Assemblyman Tony Mendoza, D-Artesia, argues that competition is needed to spark bargain prices.

Mendoza's AB 1771 would allow state agencies to fill contracts of up to $25,000 with small, micro or disabled-veteran-owned businesses that offer lower prices than PIA.

"You have to allow the free-market system to work," said Sen. Robert Dutton, R-Rancho Cucamonga.

Andrew Ellis, president of Champion Chemical Co. in Whittier, vows that he could whip PIA in a fight to sell bathroom and other disinfectants.

"I would say they're double my prices," Ellis said of PIA. The Department of Health Services has a different perspective about a separate product, eyeglasses, saying PIA's prices beat private vendors by up to 30 percent.

Comparisons called faulty

PIA Executive Director Chuck Pattillo said the agency has improved significantly since 2004. That year the California Performance Review, an advisory group appointed by Schwarzenegger, chided PIA's customer service and recommended the buying mandate be lifted, saying PIA prices were "consistently higher" than private vendors.

As examples, the group cited a law enforcement agency's purchase of $24,000 in safety decals that could have been bought for $2,200 from a private vendor; and a state agency's $19,566 bill for installation of a shelf system that could have been bought from the private sector for $9,538.

Pattillo said price comparisons often fail to consider sales taxes charged by private vendors or differences in raw materials or workmanship - a PIA desk might last a decade longer than a cheaper competitor, he said.

"And the biggest product that we're producing is an inmate who's less likely to come back to prison," Pattillo said.

Because it is self-supporting, PIA is not targeted by massive state budget cuts for other prison vocational programs. An 11-member board, led by the state prisons chief, oversees the agency.

PIA officials claim success stories but do not track how many participants end up working in the field for which they were trained - or land any kind of job.

To measure success, PIA touts that its inmates are up to 30 percent less likely to reoffend than the general prison population, citing multiyear studies of recidivism. The two groups differ somewhat, however, because PIA caters to motivated inmates, with no drug problems and good behavioral records in prison.

Pattillo said PIA faces challenges not typical of private industry, including prison lockdowns, high turnover from parole, expenses for prison guards when overtime is required, and major training and educational costs.

But Mendoza and others say the agency should not fear competition since the deck already is stacked in its favor. The agency pays token inmate wages, rents prison buildings at below-market rates, and is not billed for inmate health care.

"If they jack up prices so high that the private sector is cheaper, that says something is wrong," Mendoza said.