GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

H	1 

HOUSE BILL 303*

Short Title:  Correction Enterprises.	(Public)

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Sponsors: Representatives Warner, McAllister, Mitchell, Nichols, Nye; and Shaw.

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Referred to:  Business and Labor.

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February 23, 1995

A BILL TO BE ENTITLED
AN ACT CONCERNING THE OPERATION OF CORRECTION ENTERPRISES.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 66-58 reads as rewritten:
"§ 66-58.  Sale of merchandise by governmental units.
(a)	Except as may be provided in this section, it shall be unlawful for any unit, department or agency of the State government, or any division or subdivision of any such unit, department or agency, or any individual employee or employees of any such unit, department or agency in his, or her, or their capacity as employee or employees thereof, to engage directly or indirectly in the sale of goods, wares or merchandise in competition with citizens of the State, or to engage in the operation of restaurants, cafeterias or other eating places in any building owned by or leased in the name of the State, or to maintain service establishments for the rendering of services to the public ordinarily and customarily rendered by private enterprises, or to contract with any person, firm or corporation for the operation or rendering of any such businesses or services on behalf of any such unit, department or agency, or to purchase for or sell to any person, firm or corporation any article of merchandise in competition with private enterprise.  The leasing or subleasing of space in any building owned, leased or operated by any unit, department or agency or division or subdivision thereof of the State for the purpose of operating or rendering of any of the businesses or services herein referred to is hereby prohibited.
(b)	The provisions of subsection (a) of this section shall not apply to:
(1)	Counties and municipalities.
(2)	The Department of Human Resources, the Department of Environment, Health, and Natural Resources, or the Department of Agriculture for the sale of serums, vaccines, and other like products.
(3)	The Department of Administration, except that said agency shall not exceed the authority granted in the act creating the agency.
(4)	The State hospitals for the insane.
(5)	The Department of Human Resources.
(6)	The North Carolina School for the Blind at Raleigh.
(7)	The North Carolina Schools for the Deaf.
(8)	The Greater University of North Carolina with regard to its utilities and other services now operated by it nor to the sale of articles produced incident to the operation of instructional departments, articles incident to educational research, articles of merchandise incident to classroom work, meals, books, or to articles of merchandise not exceeding twenty-five cents (25¢) in value when sold to members of the educational staff or staff auxiliary to education or to duly enrolled students or occasionally to immediate members of the families of members of the educational staff or of duly enrolled students nor to the sale of meals or merchandise to persons attending meetings or conventions as invited guests nor to the operation by the University of North Carolina of an inn or hotel and dining and other facilities usually connected with a hotel or inn, nor to the hospital and Medical School of the University of North Carolina, nor to the Coliseum of North Carolina State College, and the other schools and colleges for higher education maintained or supported by the State, nor to the comprehensive student health services or the comprehensive student infirmaries maintained by the constituent institutions of the University of North Carolina.
(9)	The Department of Environment, Health, and Natural Resources, except that said Department shall not construct, maintain, operate or lease a hotel or tourist inn in any park over which it has jurisdiction.  The North Carolina Wildlife Resources Commission may sell wildlife memorabilia as a service to members of the public interested in wildlife conservation.
(10)	Child-caring institutions or orphanages receiving State aid.
(11)	Highlands School in Macon County.
(12)	The North Carolina State Fair.
(13)	Rural electric memberships corporations.
(13a)	State Farm Operations Commission.
(13b)	The Department of Agriculture with regard to its lessees at farmers' markets operated by the Department.
(13c)	The Western North Carolina Agricultural Center.
(14)	Nothing herein contained shall be construed to prohibit the engagement in any of the activities described in subsection (a) hereof by a firm, corporation or person who or which is a lessee of space only of the State of North Carolina or any of its departments or agencies; provided such leases shall be awarded by the Department of Administration to the highest bidder, as provided by law in the case of State contracts and which lease shall be for a term of not less than one year and not more than five years.
				(17)	The North Carolina Air Cargo Airport Authority or a lessee of the Authority.
	(c)	The provisions of subsection (a) shall not prohibit:
(1)	The sale of products of experiment stations or test farms.
(2)	The sale of learned journals, works of art, books or publications of the Department of Cultural Resources or other agencies, or the Supreme Court Reports or Session Laws of the General Assembly.
(3)	The business operation of endowment funds established for the purpose of producing income for educational purposes; for purposes of this section, the phrase "operation of endowment funds" shall include the operation by public postsecondary educational institutions of campus stores, the profits from which are used exclusively for awarding scholarships to defray the expenses of students attending the institution; provided, that the operation of such stores must be approved by the board of trustees of the institution, and the merchandise sold shall be limited to educational materials and supplies, gift items and miscellaneous personal-use articles.  Provided further that sales at campus stores are limited to employees of the institution and members of their immediate families, to duly enrolled students and their immediate families, to other campus stores and to other persons who are on campus other than for the purpose of purchasing merchandise from campus stores.  It is the intent of this subdivision that campus stores be established and operated for the purpose of assuring the availability of merchandise described in this Article for sale to persons enumerated herein and not for the purpose of competing with stores operated in the communities surrounding the campuses of the University of North Carolina.
(4)	The operation of lunch counters by the Department of Human Resources as blind enterprises of the type operated on January 1, 1951, in State buildings in the City of Raleigh.
(5)	The operation of a snack bar and cafeteria in the State Legislative Building.
(6)	The maintenance by the prison system authorities of eating and sleeping facilities at units of the State prison system for prisoners and for members of the prison staff while on duty, or the maintenance by the highway system authorities of eating and sleeping facilities for working crews on highway construction or maintenance when actually engaged in such work on parts of the highway system.
(7)	The operation by penal, correctional or facilities operated by the Department of Human Resources or by the State Department of Agriculture, of dining rooms for the inmates or clients or members of the staff while on duty and for the accommodation of persons visiting such inmates or clients, and other bona fide visitors.
(8) 	The sale by the Department of Agriculture of livestock, poultry and publications in keeping with its present livestock and farm program.
(9)	The operation by the public schools of school cafeterias.
	(10)	The sale of textbooks, library books, forms, bulletins, and instructional supplies by the State Board of Education, State Department of Public Instruction, and local school authorities.
(11)	The sale of North Carolina flags by or through the auspices of the Department of Administration, to the citizens of North Carolina.
			(12)	The operation of the Correction Enterprises Program in accordance with the provisions of G.S. 148-70.1 and G.S. 148-70.2.
(d)	A department, agency or educational unit named in subsection (b) shall not perform any of the prohibited acts for or on behalf of any other department, agency or educational unit.
(e)	Any person, whether employee of the State of North Carolina or not, who shall violate, or participate in the violation of this section, shall be guilty of a Class 1 misdemeanor.
		(f) The North Carolina School of Science and Mathematics may engage in any of the activities permitted by G.S. 66-58(b)(8) and (c)(3)."
Sec. 2.  G.S. 148-70 reads as rewritten:
"§ 148-70.  Management and care of inmates; private enterprises.
(a)	The State Department of Correction in all contracts for labor shall provide for feeding and clothing the inmates and shall maintain, control and guard the quarters in which the inmates live during the time of the contracts; and the Department shall provide for the guarding and working of such inmates under its sole supervision and control. The Department may make such contracts for the hire of the inmates confined in the State prison as may in its discretion be proper.
(b)	In addition, the Secretary of Correction may lease one or more buildings or portions of buildings on the grounds of any State correctional institution or location under Department of Correction control, together with the real estate needed for reasonable access to such buildings, for a term not to exceed 20 years, to a private corporation for the purpose of establishing and operating a factory for the manufacture and processing of products or any other commercial enterprise deemed by the Secretary to provide employment opportunities for inmates in meaningful jobs for wages. A lease entered into pursuant to this section may include provisions for the remodeling or construction of buildings. Each lease shall be approved by the Governor and Council of State and may be entered into only after consultation with the Joint Legislative Commission on Governmental Operations. Each lease negotiated and concluded pursuant to this section shall include and shall be valid only so long as the lessee adheres to the following provisions:
(1)	All persons employed in the factory or other commercial enterprise operated in or on the leased property, except the lessee's supervisory employee and necessary training personnel, shall be inmates who are approved for such employment by the Secretary or his designee.
(2)	The factory or other commercial enterprise operated in or on the leased property shall observe at all times such practices and procedures regarding security as the lease may specify or as the Secretary may stipulate.
(3)	The factory or other commercial enterprise operated on the leased property shall be deemed a private enterprise and subject to all the laws and lawfully adopted rules of this State governing the operation of similar business enterprises elsewhere, except that the provisions of G.S. 66-58 shall not apply to the industries or products of such private enterprise.
The Secretary shall adopt rules for the administration and management of personnel policies for prisoner workers including wages, working hours, and conditions of employment.
Except as prohibited by applicable provisions of the United States Code, inmates of correctional institutions of this State may be employed in the manufacture and processing of products and services for introduction into interstate commerce, so long as they are paid no less than the prevailing minimum wage."
Sec. 3.  Chapter 148 of the General Statutes is amended by adding the following new sections:
"§ 148-70.1  Correction Enterprises.
(a)	Creation; Use of Labor. – The Correction Enterprises program is created within the Department of Correction.  Correction Enterprises may use the labor of inmates confined in the State prison system in work authorized under this section, either within or without the correctional facilities in the State prison system.
(b)	Authorized Enterprises. – Correction Enterprises may operate the following enterprises, subject to the applicable provisions of this section and G.S. 148-70.2.  No other enterprises may be operated except as provided in subsection (h) of this section:
(1)	License tag manufacturing.
(2)	Laundry services.
(3)	Sign manufacturing.
(4)	Paint manufacturing.
(5)	Printing and duplication.
(6)	Sewing.
(7)	Metal products manufacturing and installation.
(8)	Tailoring.
(9)	Shirt manufacturing.
(10)	Janitorial products manufacturing.
(11)	Upholstery.
(12)	Woodworking.
(13)	Reupholstery and mattress manufacturing.
(14)	Drapery manufacturing.
(15)	Canning.
(16)	Meat processing.
(17)	Agricultural operations.
(18)	Manpower services.
(19)	Packaging and distribution.
(20)	Forestry management.
(c)	Restrictions; Special Provisions. – The following restrictions or special provisions are applicable to laundry services, upholstery, woodworking, and open market sales:
(1)	Laundry services. – Laundry services may be provided only for agencies and instrumentalities of the State which are supported by State funds and for county or municipally controlled and supported hospitals presently being served by the Department of Correction, or for which services have been contracted or applied for in writing, as of May 22, 1973.  In addition, laundry services performed by the Department of Correction may be provided for the Governor Morehead School and the North Carolina Schools for the Deaf.
		Such services shall be limited to wet washing, drying, and ironing of flatwear or flat goods such as towels, sheets and bedding, linens, and those uniforms prescribed for wear by such institutions and further limited to only flat goods or apparel owned, distributed, or controlled entirely by such institutions and shall not include processing by any dry-cleaning methods; provided, however, those garments and items presently being serviced by wet washing, drying, and ironing may in the future, at the election of the Department of Correction, be processed by a dry-cleaning method.
(2)	Upholstery and woodworking. – The Department of Correction shall obtain its woodworking and upholstery requirements and those of its correctional facilities from Correction Enterprises, subject to the provisions of G.S. 148-70.2.  Notwithstanding the provisions of G.S. 148-70.2, all other State agencies may, but are not required to, purchase their woodworking and upholstery requirements from Correction Enterprises.
		The number of inmates and employees assigned to the woodworking and upholstery plants shall not exceed the number working in those plants as of July 1, 1994.
(3)	Open market sales. – Open market sales are permitted only for timber cut as a part of the forest management program and crops, livestock, poultry, and other products produced in agricultural operations.
(d)	Correction Enterprises Board. – The Correction Enterprises Board is created.  The Board shall consist of the members of the State Procurement Policy Council, as set out in G.S. 143-50.1, the Secretary of Correction or the Secretary's designee, and a representative of private industry appointed by the Governor.  A majority of the Board shall constitute a quorum.  The Board may meet at facilities provided by the Department of Administration or the Department of Correction.
The initial private industry representative appointed by the Governor shall serve an initial term ending June 30, 1996.  Thereafter, his successors shall serve three-year terms.
(e)	Expansion; Production Increases; Capital Investment. – Effective January 1, 1996, each significant production increase, new product, or capital investment requires prior approval by the Correction Enterprises Board.  Before granting approval, the Board shall determine the impact of the proposal on private vendors, after considering the following applicable factors:
(1)	The size of the government market and the private market for the product.
(2)	The projected growth in the government market's demand for the product.
(3)	The projected ability of the government market to sustain both Correction Enterprises and private vendors.
(4)	The proportion of the government market served by small and disadvantaged vendors.
(f)	New Enterprises. – The chair of any standing legislative committee to which a bill authorizing the operation of a new enterprise has been assigned may request the Correction Enterprises Board to analyze the need and merit of the new enterprise.  The Board's analysis shall be based on the factors listed in subsection (e) and the following:
(1)	The rehabilitative value of the proposed enterprise.
(2)	The inmate population and the placement needs of the State correctional system.
(3)	The availability and feasibility of alternative labor placements, such as road crews and other prison labor outside of Correction Enterprises.
(g)	Emergency. – When necessary to comply with legal requirements for prison population or inmate rehabilitation, the Governor may authorize a new enterprise, new products, increased production, or capital investment without prior approval of the Board or General Assembly, provided that the Joint Legislative Commission on Governmental Operations is informed in writing within 30 days of the emergency authorization and the legal need therefor.
"§ 148-70.2.  Market and use of Correction Enterprise products.
(a)	Market. – The goods and services provided by Correction Enterprises may be offered only to State and local governmental agencies in this State or other states, political subdivisions of this State or other states, and the United States and its governmental agencies.
(b)	State Agency Use. – A State agency shall purchase its requirements for a product from Correction Enterprises if:
(1)	Correction Enterprises produces the product;
(2)	The product produced by Correction Enterprises meets the applicable standards, specifications, tests, sample submissions, and other requirements imposed on private vendors of the product, as determined by the State Purchasing Officer; and
(3)	Correction Enterprises has sufficient quantities of the product and can meet the agency's reasonable delivery needs.
The State Purchasing Officer shall certify Correction Enterprises as a source on each State contract for which Correction Enterprises produces a product meeting the criteria of this subsection.  Correction Enterprises shall not bid against private vendors.  The Secretary of Administration, in accordance with rules adopted by the Correction Enterprises Board, shall establish the prices for all products consistent with the prices generally paid by agencies for those products in the public market."
Sec. 4.  G.S. 148-2(b) reads as rewritten:
"(b)	All revenues from the sale of articles and commodities manufactured or produced by Correction Enterprises shall be deposited with the State Treasurer to be kept and maintained as a special revolving working-capital fund designated 'Correction Enterprises Fund.' Revenue in the Correction Enterprises Fund shall be applied first to capital and operating expenditures, including salaries and wages of supervisory personnel, necessary to develop and operate prison industrial and forestry enterprises to provide diversified employment for prisoners, and incentive wages for non-Correction Enterprises inmates. Of the remaining revenue in the Fund, five percent (5%) of the net profits, before expansion costs, shall be credited to the Crime Victims Compensation Fund established in G.S. 15B-23 as soon as practicable after profits have been determined for the previous year, and at the direction of the Governor, the remainder shall be used for other purposes within the State prison system, subject to the approval of the Correction Enterprises Board pursuant to G.S. 148-70.1, or shall be transferred to the General Fund. The provisions of this section shall not apply to revenues generated from private prison enterprises conducted pursuant to G.S. 148-70 except for lease and rental income."
Sec. 5.  This act becomes effective January 1, 1996, provided that the Correction Enterprises Board shall be appointed within 60 days after ratification of this act and may adopt rules thereafter.