Donovan Prison Businesses in the Red

State-run businesses employing inmates at the Richard J. Donovan Correctional Facility on Otay Mesa lost nearly $1.4 million last year, one of the largest deficits in the statewide prison work program, a recently released audit shows.

But officials for the Prison Industries Authority, which runs the jobs program for inmates, blamed the losses on one-time start-up costs and predicted the businesses would show a profit for the current fiscal year ending June 30.

“That’s not unusual for a business to lose money the first year or so,” said Richard Lowry, the authority’s assistant general manager for administration and marketing. “You have the learning curve of the inmates, and some of them need more training than others.”

Overall, the prison industries system lost $276,156 for the fiscal year ending last June 30, according to an independent audit by Deloitte & Touche released Friday.

The 1989 deficit would have been much worse, however, if not for an unexpected rebate of nearly $4 million from the public employees retirement system--money returned to authority civilian employees whose pension deductions had been excessive over several years. Without that windfall, losses would have been more than $4.27 million.

Big money losers among the state’s 70 prison-based businesses included the metal products shop, $761,809; the auto shop, $572,157, and the bakery, $531,147, at the California Medical Facility in Vacaville.

At Donovan, the new auto body shop, which posted a $461,548 loss, was also one of the bigger losers for the authority, according to the audit. The four other Donovan enterprises lost money as well: the laundry, $145,404; the bakery, $238,734; the optical laboratory, $438,683, and the computer data entry service, $65,609.

Robert Duggan, a prison authority production manager at Donovan, said Tuesday that it “isn’t fair” to judge the prison businesses based on those figures because all five started last year. He said that the authority was hiring civilian staff and buying equipment during many of the months covered by the audit.

Now that the businesses have increased their production, Donovan’s enterprises are projected to turn a profit of $434,000 for the 1990 fiscal year, officials said Tuesday.

The Donovan businesses range from the auto body shop, which Duggan said repairs vehicles for local public agencies, to the laundry, which handles 18,000 pounds of clothes daily for the prison and two state psychiatric hospitals, including Edgemoor. Inmates also make up to 400 pairs of eyeglasses daily for Medi-Cal clients and bake 8,500 loaves of bread daily for Donovan and three other state prisons.

Lowry and other Prison Industry Authority officials also said they will take a second look at possibly shutting down the auto body shops in San Diego and Vacaville. Estimates show the Donovan body shop will break even by the end of the fiscal year.

The $276,000 loss for 1989 comes on the heels of a $3.5-million loss in 1988. Lowry said the prison industries system is expected to lose $1.7 million in 1990.

Meanwhile, the authority is refining its proposal for a $97-million trash-to-energy and recycling plant at Donovan.