Michigan: Private Prison More Costly than State-Run Prison, Attracts Out-of-State Contracts

by David Reutter

The GEO Group, one of the nation’s largest for-profit prison companies, has signed contracts with Vermont and Washington State to house prisoners at a GEO prison in Michigan, after a review by Michigan officials determined it would be more costly for GEO to run the facility than to house prisoners in a facility operated by the Michigan Department of Corrections (MDOC). That conclusion prompted the MDOC to shelve a proposal to move prisoners from three other prisons to the GEO-owned North Lake Correctional Facility in Baldwin.

Michigan lawmakers cleared the way for the contracts with Vermont and Washington by passing legislation to allow maximum-security prisoners to be held at the 1,740-bed North Lake facility. The GEO Group prison served as the Michigan Youth Correctional Facility until 2005 and later briefly held prisoners from California until it closed in 2011.

Vermont signed a two-year contract with GEO in May 2015 to provide “comprehensive correctional management services,” including offender rehabilitation programs. By June 30, 2015, the North Lake facility held 280 Vermont prisoners who previously had been incarcerated at the Corrections Corporation of America (CCA)-owned Lee Adjustment Center in Kentucky.

“Everything went very well,” said Mike Touchette, Vermont’s director of facility operations. “We encountered no problems with the population” of prisoners who were relocated, he added.

Vermont officials said the contract with GEO Group will cost the state $30.4 million annually, a savings of about $2,055 per prisoner compared to housing them at the CCA facility in Kentucky.

However, when Michigan lawmakers considered relocating nearly 1,000 prisoners from three facilities to either North Lake or a shuttered state prison in Standish, a budget review determined that neither GEO’s North Lake facility nor Management & Training Corp. (MTC), which bid to operate the prison in Standish, could provide savings to taxpayers.

“In fact, both bids cost substantially more than the current direct costs for MDOC to provide the services,” state budget office spokesman Kurt Weiss wrote in an email.

GEO Group bid $18.6 million to house the Michigan prisoners at North Lake, while MTC submitted a bid for $20.1 million to manage the Standish facility. The budget office review found the state could house prisoners at Standish and operate the prison for $12.9 million in the first year of operation.

“Great care was taken to ensure that the numbers in the price analysis were accurate,” said Weiss. “Our internal auditor reviewed the numbers and confirmed them. Because the required cost savings were not achieved, the state will not be pursuing either of the bids.”

“The goal here was never to privatize, the goal was to save money,” added state House Appropriations Committee Chairman Rep. Joe Haveman.

“I think this is a win for the taxpayers,” said Mel Grieshaber, executive director of the Michigan Corrections Organization, the union that represents state prison guards. “This helps show that the Michigan taxpayers are getting a good value with their dollar.”

Previously, officials in Arizona and Georgia had found that private prisons in those states were more expensive than publicly-operated facilities, and whether private prisons “save money” has been the subject of extensive debate. [See, e.g.: PLN, July 2012, p.45; May 2012, p.42; March 2011, p.36].

While Vermont officials touted cost savings with the new GEO Group contract, a former state legislator who now heads the advocacy group Vermonters for Criminal Justice Reform has urged the return of Vermont prisoners. Suzi Wizowaty said reducing the prison population by ensuring housing is available for prisoners due for release, and decreasing the number of people jailed on technical probation and parole violations, would create sufficient bed space to bring Vermont prisoners home from Michigan.

“The biggest problem continues to be the difficulty of getting information, and the lack of public oversight” of out-of-state prison operations, Wizowaty said.

The Washington State contract with GEO, signed on May 21, 2015, is a five-year deal to house up to 1,000 prisoners at North Lake if the state needs the bed space. The contract, based on occupancy, is expected to cost about $60 per prisoner per diem, or around $24 million annually; Washington prison officials said they do not anticipate needing to send prisoners to Michigan until mid-to-late 2016.

“We appreciate the trust placed in our company by the State of Washington with the signing of this important contract for the provision of correctional management services and industry-leading, evidence-based offender rehabilitation programs at our North Lake Correctional Facility,” GEO Group CEO George C. Zoley said in a press release.

“The group they’re contracting with is a private, for-profit prison company,” countered Doug Honig, a spokesman for the ACLU of Washington. “Their incentive is to make money, which could include cutting corners on services. It’s hard for the citizenry in Washington to hold them accountable.”

Sources: www.detroitnews.com, www.correctionalnews.com, www.businesswire.com, www.correctionsone.com, http://caledonianrecord.com, McClatchy-Tribune News Service, Associated Press, Seattle Times