Good Afternoon.  Thank you, Chairman Fitzgerald for calling this hearing.  I appreciate the opportunity to testify along with my colleague, Senator Thomas. 

I appear today as a cosponsor of S. 346, and more importantly, as a representative of many people and businesses in Michigan that are being hurt by the current anti-competitive laws that prevent Michigan businesses from competing against the monopoly called the Federal Prison Industries, Inc.

Right now, there is an entity with over $500 million in annual revenues, which does not pay local, state or federal income taxes, is not required to abide by federal or state workplace rules, and pays employees between 23 cents and $1.15 an hour.  Mr. Chairman, this is not the Chinese government or a company in Mexico, but a government company established by the United States Congress and run by the U.S. Department of Justice’s Bureau of Prisons.  In other words our own government is undermining our nations manufacturing industry.

In 1934 Congress established Federal Prison Industries, Inc. (FPI) and placed it under the control of the Department of Justice’s Bureau of Prisons.  FPI’s purpose is to serve as a means for managing, training and rehabilitating inmates.  And I support this worthy goal.  Under current law FPI is a “mandatory source” for the federal government, making it the sole source for more than a half a billion dollars in Federal contract opportunities.  Unfortunately, FPI also has the power to determine whether its product and delivery schedule meets the federal agencies needs, instead of the buying agency.  Hundreds of small businesses from Michigan and around the country have seen FPI take jobs away from their companies and give them to inmates at federal prisons -- even when these businesses could have supplied the government with a better quality product on a better timeline, at a lower price. 

In 2002, FPI’s business in two industries that are critical to Michigan’s economic health, automotive components and furniture, grew by 216 percent and 24 percent respectively.   Furniture manufacturers in western Michigan are in the midst of their worst economic recession in history.  For example, in January, Steelcase, a west Michigan furniture manufacturer, announced that it was cutting 77 of its skilled trades workers, which are some of the most highly skilled and highly paid jobs in the factory.  The company also extended the lay-off warning for 60 days for another 360 employees.  Over the last three years the office furniture manufacturing industry has had to lay off approximately 30,000 employees.

The inability of Michigan businesses to fairly compete with prison industries exacerbates an already difficult economic situation.  According to February 2004 figures from the Bureau of Labor Statistics, Michigan’s unemployment rate is 6.6% -- a full percentage point above the national rate.  And last year, Michigan lost more jobs then any other state – 78,800 jobs lost in just one year.  Michigan also had the largest unemployment increase of any state.  In 2003, Michigan’s unemployment went up 1.0%, the highest increase of any state.  Michigan has lost over 175,000 manufacturing jobs since January 2001 – which is more than 19% of the state’s manufacturing job base.  This puts Michigan at the heart of America’s manufacturing jobs crisis.

Mr. Chairman, let me be clear, I am not opposed to the 1934 law that created Federal Prison Industries, Inc.  Prisoners should have work opportunities that build their job skills and enable them to make a successful return to society upon their release.  However, it is only fair that our small business owners and manufacturers be able to compete for these federal contracts if they can offer competitive products and services.  Our manufacturers are not asking for an advantage or to exclude FPI from competing.  All they want is the opportunity to compete fairly and on equal footing for these contracts.

Because of Sen. Levin’s leadership, the private sector can now compete for federal defense contracts.  An amendment to the 2002 Defense Authorization bill ended the prison industry’s monopoly over federal defense contracts so that businesses can compete.  We must continue to level the playing field between private companies and the prison industry to enable fair competition for federal government contracts.

At a minimum, it is time to give the private sector access to the playing field and let it compete for federal contracts the prison industry now monopolizes.   To do so, I am pleased to be cosponsor of S.346, along with Senators Thomas, Levin, Grassley, Chambliss, and Shelby.   This bill will ensure that businesses in Michigan and the rest of America have the opportunity to compete for contracts with their government.   The bill would also prohibit the prison industries from granting prison workers access to classified information or information that is protected under the Privacy Act.  This provision is important for national security and comes at a time when America’s security is a top concern for all of us.  The bill would also clarify that private sector businesses and their employees must be permitted to compete for federal contracts as well as prime contracts.  And finally, the bill would clarify that the general prohibition of sales of prison-made goods into private commerce is also intended to apply to sales of services.  This provision is important as the services sector represents a growing portion of our economy.

Mr. Chairman.  Thank you again for holding this hearing and giving me the opportunity to testify.  Eliminating FPI’s monopoly will make businesses eligible for more than a half-billion dollars in business opportunities.  This would be a much-needed shot in the arm for many Michigan and U.S. businesses.