McLennan County cuts jail pharmacy spending as doomsday deal devolves

The McLennan County Jail claims to have saved $1 million this year by prescribing fewer antipsychotic medications and other pharmacy costs. Reports KWTX.com, "In February 2010, pharmacy costs at the jail were $54,619. In September 2010, expenditures were down to $17,372." While I'm certain there's a great deal of waste on the pharmaceutical side of carceral healthcare, that's a 68% reduction, which seems like an astonishing number.

I wonder: Who can or more importantly will evaluate whether those reductions were medically justified or merely economically convenient? The Commission on Jail Standards doesn't have staff with medical training to evaluate such things. Unless there's a federal civil rights complaint and DOJ investigates, I can't even think who might look into such a thing. Maybe it's completely justified and inmates previously were being severely overmedicated. That happens in the juvenile system, and it wouldn't surprise me if there is some unnecessary medication in the adult system as well. But how do we know medically necessary medications weren't reduced? State regulators can't tell and there's nobody with oversight authority to doublecheck those decisions.

The question of whether medical necessity or economics drove the decline in pharmacy expenditures may well relate to the jail's larger economic situation - leveraged to the hilt with not enough revenue to cover its bond debt. Checking in with a day pass at the Waco Tribune Herald (now behind a subscription wall), I notice more jail related news ("County extends jail contract, accepts lower payout," Dec. 29): "McLennan County extended Tuesday an agreement to keep its downtown jail closed for another six months, but the arrangement will yield a substantially lower financial reimbursement than the original deal." "Lower" is relative, though. The county was supposed to receive $240,000 over the last six months and got nothing. Now they're supposed to receive $60K from the contract over the next six months, but could easily again wind up with nothing.

Regular readers will recall that McLennan County (Waco is the county seat) used the county's credit to issue bonds to build a large detention center, one not needed for their own purposes but built as a speculative venture to house inmates on contract, partnering with private prison company CEC to manage the facility. But the contracts never came, so McLennan actually closed their perfectly good, already-paid-for jail in order to move all the inmates into a pay per head contract facility, just so there'd be some revenue to pay the bonds. I found this mind-bogglingly irresponsible - a veritable doomsday deal, it's been called - but for several years before the recent economic bust the practice was all the rage.

Regrettably, the private prison company appears to hold all the cards in the negotiations and is threatening to walk away from the deal entirely, leaving county taxpayers holding the bag. Reports the Trib:

CEC Senior Vice President Peter Argeropulos told the court last week that CEC felt it would be unable to continue paying a monthly fee because the jail still was operating at a loss.

Most of the money that has come in through the facility has been sent to U.S. Bank to cover payments on the $49 million in project revenue bonds that paid for the jail’s construction.

After enough money is accrued to cover the $3.7 million annual bond payments, the county is paid the monthly fees and CEC keeps the rest.

The county is still awaiting its $240,000 that is due for the past six months of the contract. CEC has yet to receive any money from the jail and is covering payroll and operating expenses itself.

Last week, members of the court suggested alternatives to waiving the fee, including a 90-day waiver, deferring the due date of the payment or reducing the monthly fee to $20,000. Argeropulos said at the time he did not think the company would agree with those options.

Without the public really understanding the magnitude of what was happening, commissioners bet the economic farm on this deal. Said one commissioner, "What people have to understand is that so goes that jail, so goes McLennan County." Readers may recall that County Judge Jim Lewis claimed earlier this year that CEC, not the county, was on the hook to pay off the jail bonds. Now it's clear to everyone this was a pure corporate subsidy: The company profits if it succeeds, but if it fails they walk away and taxpayers must pony up for the debt or default and ruin the county's bond rating. In another recent story ("Company operating new Hwy 6 jail asks county commissioners to waive monthly fee," Dec. 22), the Trib reported that:

The county’s bond rating was used to secure the bonds. If the debt service payments go into default, then the county’s bond rating likely would be affected.

“People keep on saying it’s not going to be a debt of the county, but it is going to be a debt to the county if it goes under,” [commissioner Lester] Gibson said. “A whole lot is at stake with our bond rating. If this project fails, it will create a whole lot of systemic problems.”

No kidding! It's a situation so irresponsible that I'd almost say commissioners deserve what's happened to them except it's not really them who're harmed but the taxpayers whose money they were gambling with.

See prior Grits posts on McLennan County jail financing:

• Will county cost cutting doom speculative jail in Waco?
• McLennan County on the hook for bonds on privatized jail
• Waco taxpayers likely on the hook for jail they were promised would pay for itself
• 'Doomsday Deal': Prison for profit scheme in Waco going bust for lack of inmates
• McLennan County private jail deal creates perverse incentives