The analysis revealed that the PIA operated 31 types of enterprises at 23 of the State's 31 prisons as of July 1, 1995. It employed about 7,000 of the State's 131,000 inmates as well as 674 State staff. After some years of fiscal problems, the PIA has measurably improved its financial position. However, the State has received little direct financial return from its investment in the PIA. In addition, the PIA's good financial performance has come at the expense of other State goals such as lower State costs or the rehabilitation of large numbers of inmates. Factors that hamper the PIA include civil service restrictions, constraints on inmate productivity, and managerial weaknesses. Three legislative actions are recommended to address these problems. First, the legislature should define the PIA goals as financial self-sufficiency and reduction of recidivism through improving inmate employability. Second, it should privatize the PIA as an independent, nonprofit organization and free it of existing constraints so that it can become more entrepreneurial and create new forms of private-sector partnerships. Third, it should focus a revamped PIA on providing job training and other services for second-strike offenders to prevent their recidivism. Table and figures