GEO Group Reaps Higher Profit from New Mexico Prisons than Other States

New Mexico pays significantly more to house prisoners in private prisons than other states, concluded a 2007 state legislative report. “Business decisions across two administrations may result in New Mexico paying an estimated $34 million more than it should pay for private prison costs,” concluded the 100-page report from a Legislative Finance Committee audit team.

As of March 2007, New Mexico housed 6,574 prisoners. Of those, 2,790 prisoners, or 42 percent of the population, were housed in private prisons, which was the highest rate of private prison use in the nation.

Between Fiscal Year ’01 and Fiscal Year ’06, annual spending on private prisons increased 57%, from $34 million to $54 million. Yet, the number of prisoners over that period increased only 21% from 2,348 to 2,840. Increases paid to the private prison operator, GEO Group, were blamed.

The report found an increase in annual per diem rates was caused by the New Mexico Department of Corrections (Department) raising the rate yearly by an amount equal to 80% of the consumer price index (CPI) or other increase up to a five percent cap. This increase in the entire contract price limits the department’s ability to control cost increases, and there is nothing in the contract as to how the increase will be applied.

The price increase has not always been applied correctly. In some cases, the CPI rate was wrong, causing the department to pay a higher per diem than it should. Additionally, the structure of the per diem exceeded the allowed five percent cap in some years. Neighboring states that contract prison beds do not tie increases to the CPI, the report stated.

“Since the department has not segregated the facility per diem, it has ended up providing a price increase on what should have been fixed costs,” the report found. At issue here were increases on the debt service that is static.

Finally, the report found that New Mexico receives similar services in its private prisons as other states, but it pays a higher per diem. The reason for this is that New Mexico prisons are more staff-intensive. It appeared that more administrative and support program staff are used in New Mexico than in other states.

GEO also charged the department for services it never received. The report cited an agreement for a 116-bed residential sex offender program at a $304,160 annual cost. To provide these services, GEO was to hire four masters-level licensed mental health providers within 60 days. Rather than hire that staff, GEO shifted four mental health staffers to the program and left their posts vacant. It was not until six months later that GEO hired a new staff member.

Vacant staff positions were typical even in security posts. As of April, 2007, Lee County Correctional Facility reported a 37% vacancy rate for those posts. The Guadalupe County Correctional Facility had more than 17 vacant security posts for over 30 days in June, 2006.

“The department is paying for a full complement of staff and the services that they are supposed to deliver,” states the report. “If the facilities’ operational quality is not hampered due to high vacancy rates, then the department may be paying for staff that isn’t needed.”

The report recommended several points to address these issues. It estimated that restructured agreements could lower the cost of private prisons by at least $60 million over ten years without sacrificing quality and safety.

Source: Corrections Department Report #07-04, Review of Facility Planning Efforts and Oversight of Private Prisons and Health Programs, May 23, 2007. State of New Mexico Report to the Legislative Finance Committee