Proposition 194
Prison Inmates Unemployment Insurance

The information below was provided by the California Journal.

Background: The California Department of Corrections was given authority to contract with private businesses to hire prison labor under Proposition 139, approved by voters in November 1990. Prior to creation of this Joint Venture Program (JVP), such hiring was prohibited, and goods and services produced by inmates could be sold only to state or local governments. Organized labor historically has opposed the use of prison labor because of the potential for depressing wages and job opportunities for the rest of the work force. Up to 80 percent of inmate earnings under the JVP are subject to federal, state and local income tax withholding, restitution payments to crime victims, support payments to the inmate's family, and reimbursement to the state for incarceration costs. At least 20 percent is set aside for the inmate to receive upon his or her release from prison. Employers generally are required to pay all taxes they would otherwise pay for non-JVP employees, including unemployment insurance. Inmates employed by JVP employers are eligible under current law to receive unemployment benefits when they are released from prison, under the same law that applies to all employees in the state who lose a job through no fault of their own. Employer contributions fund the state's unemployment insurance program, with businesses whose former employees receive benefits more frequently paying higher rates than businesses whose former employees generate fewer payouts from the system. About 700 inmates have been employed under the Joint Venture Program since its inception.

Proposal: Proposition 194 eliminates the requirement that inmates who are employed by private businesses under the Joint Venture Program receive unemployment insurance benefits after their release from prison. In addition, employers would no longer be required to pay unemployment insurance taxes for prisoners they hire under this program.

Arguments for: Proponents -- including Senate Minority Leader Rob Hurtt, former Assemblyman Tom McClintock and the California Correctional Peace Officers Association -- say that payment of unemployment insurance benefits is a disincentive for businesses to hire prisoners under the Joint Venture Program. A JVP employer, who has no control over an inmate's release from prison, pays higher unemployment insurance premiums as a result of former inmate-employees receiving unemployment benefits. Eliminating this disincentive will increase the number of businesses participating in the JVP, creating more job training and earning opportunities for prisoners. Increasing the number of these jobs also will generate more revenues for victim restitution and reimbursement to the state for incarceration costs since these are two of the areas for which inmate earnings must be earmarked. Supporters of the proposition also argue that unemployment insurance was never intended for prisoners who were not laid off, but simply paroled out of their jobs.

Arguments against: Opponents -- specifically, the Friends Committee on Legislation --argue that the Legislature in 1977 approved payment of unemployment benefits to released prisoners based on the notion that the inmate's lack of skills, high unemployment rates and discrimination make it difficult to find work immediately upon release. Without the minimal financial assistance provided by unemployment benefits, an ex-offender is more likely to return to crime. Opponents state that JVP employers make little or no effort to retain inmates as employees after their release from prison, often because the business is not located in the county to which JVP employees are paroled. A concern also has been raised that denying unemployment benefits to former inmates may conflict with the Federal Unemployment Tax Act. If the federal government determines that this proposition puts the state out of conformity with the federal law, all businesses in the state that currently claim a federal tax credit on their unemployment insurance premiums would lose that credit, which could amount to a $1.7 billion loss for California employers.

For additional information please see:

Secretary of State Ballot Pamphlet

Campaign Finance Data from the Secretary of State

Original Legislation

California State Senate Office of Research

California League of Women Voters

Easy Reader Voter Guide

Related News Articles:

Campaign Web Sites:

Home | About This Guide | Search