On The Money: Trade Secrets

By Mike Luery

SACRAMENTO (CBS13) -- California is deep in the red, but taxpayers are largely in the dark when it comes to just how much money we are spending on state health care contracts.

California spends more money on prisoners than any other state – about $51,000 a year to lock up each inmate, according to the California Department of Corrections and Rehabilitation.

The federal courts have ordered California to improve medical care behind bars – or run the risk of releasing prisoners early. The State responded by signing a health care contract that is reportedly worth hundreds of millions of dollars for the doctors, nurses and medical technicians treating the inmates.

But exactly how much money are taxpayers shelling out for that contract?

"The amount of money in the contract is actually confidential information," said Nancy Kincaid, Communications Director for the California Prison Health Care Services.

It's confidential because of an obscure government code that allows private health companies to claim their pricing information is a trade secret that cannot be revealed, even under California's Public Records Act (PRA).

Government Code Section 6254(k) and Evidence Code Section 1060
The PRA exempts from disclosure "… Records, the disclosure of which is exempted or prohibited pursuant to federal or state law, including, but not limited to, provisions of the Evidence Code relating to privilege."  (Gov. Code, § 6254, subd. (k).)
The Evidence Code protects claims of trade secret:
"If he or his agent or employee claims the privilege, the owner of a trade secret has a privilege to refuse to disclose the secret, and to prevent another from disclosing it, if the allowance of the privilege will not tend to conceal fraud or otherwise work injustice." (Evid. Code, § 1060.)

Kincaid told CBS 13, "This statute is used by many state departments when they have contracts with private industry, who have technology or some equipment that they believe is a trade secret."

"I was surprised to hear about this law," said Derek Cressman, Regional Director for Common Cause, a government watchdog group.

Cressman told CBS 13 Common Cause may consider a lawsuit.

"The public needs to know how we're spending our money, so that we can be sure we're spending it in a way that makes sense," Cressman said.

"It's frustrating," said Bob Blumenfield, who chairs the Assembly Budget Committee. But even Blumenfield doesn't know the total cost of the prison health care contract.

CBS 13 asked the assemblyman if he intends to change the law.

"It's certainly something we're looking into," the Van Nuys Democrat said.

"We're also going to be looking at ways to change the budget process and to change the laws so that there can be more transparency and more oversight," Blumenfield stated.

The Trade Secrets law has been on the books since the 1960s. It prohibits lawmakers and state agencies from revealing exactly how much taxpayers are spending on health care contracts that private companies consider to be trade secrets.

If you have questions about government spending, send us an e-mail to onthemoney@kovr.com. You can also follow On The Money stories in progress via Twitter at http://twitter.com/#!/mikeluery