by Alex Friedmann*

It sounds like such a simple question: do private prisons save money? The answer, however, is dependent on a number of factors – including how “saving money” is defined.

Consider that in 2013, the nation’s largest for-profit prison company, Corrections Corporation of America (CCA), made $300.8 million in net profit on gross revenue of $1.69 billion. Thus, the company achieved $300.8 million in savings over operational expenses at its prisons, jails and other detention facilities. But how much of that $300.8 million went to taxpayers or reverted to state treasuries or county coffers?

None. Those “savings” went to CCA in the form of corporate profit.

Over the past three decades there have been dozens of studies and analyses of cost comparisons between public and privately-operated prisons – by academics, government agencies and independent organizations – all attempting to answer the elusive question of whether private prisons save money. This is not one of those attempts.

Instead, rather than trying to determine if prison privatization results in savings due to the shifting of costs from public agencies, this article takes an opposite approach by identifying costs that are shifted from privately-operated facilities to the public sector. An examination of such cost-shifting factors is essential when evaluating cost comparisons, to better understand how private prisons externalize expenses while internalizing profits.

Although this article focuses on private prisons, that is not to imply that public prisons are without their problems and faults; further, issues related to prison privatization are tied to the larger problem of mass incarceration in the United States, considering that the vast majority of correctional facilities are operated by public – local, state and federal – agencies.

 

I. Background

There is no dearth of research on whether privately-operated prisons are more cost effective or provide equivalent quality of service in comparison to public prisons; numerous studies have reached equally numerous and disparate conclusions. As noted by Alexander Volokh, an Associate Professor at Emory Law School, “somewhat surprisingly, for all the ink spilled on private prisons over the last 30 years, we have precious little good information on what are surely the most important questions: when it comes to cost or quality, are private prisons better or worse than public prisons?”

Or, as candidly stated by CCA vice president Steve Owen in reference to whether private prisons save money:
“[t]here is a mixed bag of research out there.... It’s not as black and white and cut and dried as we would like.”

A. Studies with Favorable Findings

That mixed bag includes studies that have identified cost savings and other benefits resulting from prison privatization, such as research conducted in the 1990s by Professor Charles W. Thomas at the University of Florida; a 2008 study by researchers at Vanderbilt University; various reports by the Reason Foundation; and most recently a study by two Temple University economics professors, published in July 2014. What do they have in common? All received funding from the private prison industry.

Professor Thomas served as director of the Private Corrections Project at the University of Florida, which studied the private prison industry and produced research and statistical data concerning prison privatization. He also owned stock in private prison firms, served on the board of Prison Realty Trust, a CCA spin-off, and received $3 million in payments from CCA/Prison Realty. Thomas retired after these conflicts became known; he was later fined $20,000 by the Florida Commission on Ethics.

The 2008 Vanderbilt study, which found competitive benefits through a shared system of public and privately-operated prisons, was partly funded by CCA and the Association for Private Correctional and Treatment Organizations (APCTO), an industry trade group. The Reason Foundation, which strongly favors privatization, has received funding from private prison companies; for example, a 2009 Reason Foundation donor list included the GEO Group – the nation’s second-largest for-profit prison firm – as a Platinum Level supporter, while CCA was listed as a Gold Level supporter. And the report by Temple University professors Simon Hakim and Erwin A. Blackstone, which found substantial cost savings through prison privatization, received funding from the nation’s three largest private prison firms: CCA, the GEO Group and Management & Training Corp. (MTC) – which was not disclosed in their initial working paper.

Of course, the mere fact that these studies received funding from the private prison industry does not mean their findings are faulty. Such studies do, however, stand in contrast to another body of research – not funded by for-profit prison companies – that has reached contrary conclusions.

B. Equivocal and Adverse Research Results

As early as 1996 a report by the then-U.S. General Accounting Office (GAO) reviewed five studies on prison privatization, and concluded that cost savings were inconclusive: “regarding operational costs, because the studies reported little difference and/or mixed results in comparing private and public facilities, we could not conclude whether privatization saved money.”

More recently, a meta-analysis by the University of Utah’s Criminal Justice Center, published in 2009, found that, “[c]ost savings from privatizing prisons are not guaranteed and appear minimal.” The researchers, who examined a dozen studies, concluded that “prison privatization provides neither a clear advantage nor disadvantage compared with publicly managed prisons. Neither cost savings nor improvements in quality of confinement are guaranteed through privatization.”

Yet a 2010 report by Arizona’s Office of the Auditor General, based on data from the state Department of Corrections, noted that privately-operated prisons were actually more expensive than their public counterparts. The report stated:
“[A]ccording to the Department’s Fiscal Year 2009 Operating Per Capita Cost Report, the State paid private prisons a higher per inmate rate than it spent on equivalent services at state-operated facilities in fiscal year 2009. After adjusting state and private rates to make them more comparable, the Department’s study found that rates paid to private facilities were higher for both minimum- and medium-custody beds – the two categories of beds for which the Department contracts.”

Specifically, after adjusting “for healthcare costs, depreciation costs, and costs for functions provided only by the State,” the Auditor’s Office reported that the fiscal year (FY) 2009 per diem cost for minimum-security prisoners at state facilities was $46.81, compared with $47.14 at private prisons, while the per diem cost for medium-security prisoners at state facilities was $48.13, compared with $55.89 at private prisons.

Apparently, the results of the existing body of research on public-private prison cost comparisons depend in part on who performs the study, and partly on what factors are considered when evaluating cost measures; for example, how per diem rates are calculated.

 

II. Difficulties in Public-Private Comparisons

Why are there such dissimilar research outcomes, with some studies finding cost savings through prison privatization, others not being able to determine if savings occur and yet others concluding that private prisons result in higher costs?

It is hard to compare private and public prisons unless they share similar security levels, population types (including gender, average age of offenders, medical and mental health care needs, etc.), staffing levels, programming, age of the facility and other relevant characteristics. Absent comparable facilities, researchers lack comparable data. Thus, some studies have attempted to analyze hypothetical public and private prisons rather than actual ones.

In other cases, studies have concluded that such comparisons simply are not possible; as noted by the GAO in an October 2007 report: “A methodologically sound cost comparison analysis of BOP and private low and minimum security facilities is not currently feasible because BOP does not gather data from private facilities that are comparable to the data collected on BOP facilities.... [W]ithout comparable data, BOP is not able to analyze and justify whether confining inmates in private facilities would be more cost-effective than other confinement alternatives such as constructing new BOP facilities or renovating existing BOP facilities.”

But private prison companies and their proponents make it sound so easy: as one theoretical example, say the average per diem cost for housing a prisoner at a state facility is $55 while the average cost at a private prison is $45. Thus the privately-operated prison saves money. That comparison, however, falls somewhere between the “damned lies” and “statistics” of the well-known aphorism, “[t]here are three kinds of lies: lies, damned lies and statistics.”

Some comparisons of public versus private prison costs rely heavily on statistical prevarication. Take, as an example, a joint report released by the Reason Foundation and the Howard Jarvis Taxpayers Association (HJTA) in 2010. The report advocated sending 25,000 California prisoners to out-of-state privately-operated facilities, claiming savings of up to $1.8 billion over a five-year period based on an estimated $162 per diem cost at in-state prisons.

The Private Corrections Institute (PCI), which opposes the privatization of correctional services, issued a press release on May 21, 2010, stating: “The report’s exaggerated per diem rate ... apparently includes prison design and construction expenses, which are not factored into private prison cost analyses. The report fails to consider that privately-run prisons do not house maximum-security California prisoners, death row prisoners, female prisoners, juveniles or prisoners with serious mental health or medical conditions, all of whom are more expensive to incarcerate. In the latter regard, medical costs for California inmates held in private prisons are capped at $2,500 per prisoner; the state must pay medical expenses above that amount, plus all treatment costs for inmates who are HIV-positive.”

In fact, the California Legislative Analyst’s Office (LAO) reported in a January 2007 letter that “the state now budgets on average about $56 per inmate per day for each additional prison inmate – often referred to as overcrowding costs per inmate. By comparison, the contracted rate for ... new out of state prison beds is higher, about $63 per inmate per day.”

This led PCI executive director Ken Kopczynski to observe: “[c]ontrasting the inaccurate per diem rate in the [Reason-HJTA] report with the cost of housing inmates in out-of-state private prisons cannot even be considered an apples-to-oranges comparison. It’s more like an apples-to-fish comparison.”

 

III. Cost-Shifting Factors

Typically, private prison contracts are based on a per diem model; the public contracting agency, such as a state Department of Correction or sheriff’s office, pays a set amount per prisoner, per day to the private prison company; therefore, to reduce costs, contracting agencies are incentivized to contract with the company offering the lowest per diem rate. But as indicated above and discussed below, there are a number of factors that can result in costs to public agencies beyond the contractual per diem rate.

Such cost-shifting factors, which include differences in prisoner populations and security levels, medical expenses, transportation costs and administrative overhead, serve to inflate the costs paid by the public contracting agency while deflating the expenses of private prison companies. The importance of adjusting for factors that shift costs from private prisons to the public sector is demonstrated by the following examples.

As noted above, a 2010 report by Arizona’s Office of the Auditor General found that privately-operated prisons were more expensive than public prisons when using an adjusted per capita rate. Using a non-adjusted rate, the report found the cost for housing minimum-security prisoners in private facilities was $54.78 – significantly less than the non-adjusted per capita rate of $58.80 at public prisons. The non-adjusted rate indicated cost savings to the state while the adjusted rate indicated a net loss, evidencing the need to adjust for cost-shifting factors.

Also, according to a 2009 report by the Hawaii Department of Public Safety related to expenditures for housing offenders in out-of-state private prisons, such costs were $48.04 million in FY 2009 based on contractual per diem rates. However, those costs did not include certain medical expenses, transportation expenses, staffing costs, the cost of prisoners’ wages and various overhead expenses. When those were factored in, the adjusted expenditures for housing Hawaii prisoners at private facilities totaled $57.38 million – a 19.4% increase.

Nor was this an anomaly. The Hawaii Department of Public Safety’s expenditure report for FY 2008 indicated a 14.7% increase between the contractual housing costs ($48.39 million) and adjusted expenditures including medical care, prisoner wages, transportation, staffing and other expenses ($55.52 million). For FY 2007, there was a 14.9% increase between contractual housing costs ($43.76 million) and adjusted expenditures ($50.29 million).

Given that prior research has found any cost savings resulting from prison privatization are often equivocal, even small variations due to cost-shifting factors can mean the difference between a net gain or loss by public contracting agencies. This is of heightened importance in states that have statutory cost saving requirements as a condition of prison privatization, including Tennessee (minimum 5% savings required), Ohio (5%), Florida (7%), and Mississippi, Texas and Kentucky (all 10%).

Yet even in states that require prison privatization to result in a minimum level of cost savings, it is still difficult to determine whether such savings are in fact realized; just because the law says private prisons must save money does not necessarily mean they do. As put bluntly by the Florida Center for Fiscal and Economic Policy in a 2010 report, which described in detail the state’s process for determining whether prison privatization results in cost savings: “[t]here is no compelling evidence that the privatization of prisons has actually resulted in savings.... It is very difficult to ensure that a private prison is in fact 7% less costly to operate than a comparable public prison.”

Of course there are also prison privatization-related factors that shift costs away from the public sector. As just one example, some research studies, including the Hakim and Blackstone study referenced above, have argued that prison privatization reduces costs to public agencies by cutting payroll, benefit and pension expenses associated with (typically unionized) public corrections employees. That argument assumes corrections employees are terminated when public agencies contract with private prison companies, but this is not always the case.

For instance, when Ohio privatized the North Central Correctional Institution (NCCI) in 2011, the state noted that it had vacant positions within the Department of Rehabilitation and Correction (DRC) to accommodate employees who did not want to work for the contractor. In fact, according to the DRC, when NCCI was privatized only 23 public employees lost their jobs.

Seventy state employees were hired by MTC, the company contracted to run NCCI, while 297 employees transferred to other state job positions.

Also consider that if public corrections employees do leave public service as a result of prison privatization, there may be costs associated with their departure. When Florida considered privatizing around one-quarter of the state’s prison system in 2011, affecting over 4,000 state workers, the Department of Corrections estimated the plan would incur $25 million in payments to departing staff members for “accumulated vacation time, sick leave and special compensatory time for working on holidays.”

The focus of this article, however, is on factors that shift costs from private prison companies to the public sector – and ultimately to taxpayers.

A. Prisoner Population Differences

To fulfill their public safety function, public prisons must house all types of offenders, including those with serious medical and mental health conditions, maximum-security prisoners, those on death row, female prisoners and juveniles. Prisoners in these categories are more expensive to incarcerate due to medical, security/staffing or programming-related costs. Thus, the average per diem cost at public prisons is inflated as it necessarily includes the more expensive prisoners that public prison systems must incarcerate.

In most cases, private prisons house minimum- and medium-security adult male prisoners. No privately-operated facilities house prisoners sentenced to death, and only a few hold maximum-security or female prisoners. As a result, the average per diem cost at privately-operated facilities is reduced due to differences in prisoner populations. Also as a result, private prisons have been accused of housing only healthier, lower-security prisoners who are less costly to incarcerate.

“It’s cherry-picking,” exclaimed Texas State Rep. Chad Campbell. “They leave the most expensive prisoners with taxpayers and take the easy prisoners.”

Or, as stated in an April 2010 policy brief by the Florida Center for Fiscal and Economic Policy, “[t]here are differences between inmates in private and public prisons: those who are more costly to handle are usually incarcerated in public prisons, such as those who are the highest security risks and those with extensive medical issues.”

An examination of public and private prison per diem costs in Florida illustrates how population differences impact cost comparisons. Table I, produced by the Florida Department of Corrections (FDOC), provides “average inmate costs” for FY 2012-2013. Approximately ten percent of Florida state prisoners are held in seven privately-operated prisons, including five facilities that house adult male offenders, one facility that houses adult females and one that houses youthful males.

The per diem figures in Table I “do not include indirect and administrative cost of $0.67 for private institutions and $2.75 for state facilities.” Thus, after adding the indirect and administrative costs, the total average per diem cost for all state prisons, excluding privately-operated facilities, is $50.25, while the average per diem cost for private institutions is $44.53.

It is apparent that the per diem cost at private institutions is lower than the cost at public prisons. However, the average per diem cost for state prisons includes the higher rates at reception centers (all of which are operated by the state), male youthful offender facilities (of which one is run by the state and one is privatized), adult and youthful female offender facilities (of which four are operated by the state and one by a private contractor) and specialty institutions (all of which are operated by the state). Therefore, due to the higher-cost facilities, the majority of which are publicly-operated, the average per diem cost at state prisons is skewed upwards while five of the seven private prisons house adult male offenders – the least expensive to incarcerate, according to the table.

For another example of the impact of population differences, consider Table II, the FY 2012-2013 per diem costs for housing adult prisoners in the Tennessee Department of Correction (TDOC), where almost one-quarter of the state’s prison population – approximately 5,000 of 21,000 prisoners – is held in privately-operated facilities.

The three privately-operated prisons – all run by CCA – are medium-security facilities that house adult male prisoners. Of the eleven public prisons, six are maximum-security, one is close-security (a step between medium and maximum) and four are medium-security. The four facilities with the highest per diem costs, all state prisons, include the Lois M. DeBerry Special Needs Facility (a prison hospital for offenders with serious medical and mental health needs); Riverbend (maximum-security and death row prisoners); Bledsoe County (an intake diagnostic center that also houses female prisoners); and Mark Luttrell (female prisoners).

Because state facilities house prisoners who are more expensive to incarcerate – maximum security, death row, medical and mental health patients and female prisoners – their average per diem cost is increased. As the CCA-operated prisons do not have such higher-cost populations, their average per diem costs are decreased. However, note that the per diem costs at medium-security state prisons (Northeast, Charles Bass, Turney Center and Northwest) are still higher than the costs at privately-operated medium-security facilities (South Central, Hardeman County and Whiteville). Why is this so? As discussed below, a number of other cost-shifting factors serve to further inflate per diem costs at public prisons.

B. Security Level Limitations

Security levels correlate with incarceration costs; minimum-security prisoners are usually the least expensive to incarcerate while maximum-security prisoners, including those held in segregation, are the most costly. With respect to security levels at public and privately-operated prisons, a 2004 article in the Federal Probation journal noted: “[T]he private sector houses approximately 21% fewer inmates at the maximum and close security levels and approximately 15% more inmates at the minimum security level than does the public sector. Thus, 90% of the private sector’s inmate population is classified at the medium or minimum levels, whereas only 69% of the public sector’s inmate population are so designated.”

The State of Hawaii contracts with private prison companies to house prisoners at facilities on the U.S. mainland. A January 2005 report by the Hawaii Department of Public Safety is instructive in regard to limitations on the types of Hawaii prisoners eligible for transfers to private prisons. Those limitations provided that no Hawaii prisoners above medium security, or with “Escape 1,” “Murder 1” or sex offenses, could be housed at facilities in Oklahoma. No maximum-security prisoners could be held in prisons in Arizona or Mississippi, and Colorado facilities only housed prisoners up to medium security with no “sex offenses with lengthy terms” and no life sentences.

This list of exclusions illustrates how only lower-security Hawaii prisoners who have not been convicted of the most serious offenses (murder, sex crimes), and are a lesser security risk (no life sentences, maximum security or history of escape) are transferred to privately-operated facilities. Public prisons, of course, must incarcerate the higher-security offenders not eligible for such transfers, which translates to higher costs for Hawaii’s state prison system.

Another example of security level differences in public and private prisons is found in a 2012 contract between Idaho and CCA to house offenders at the company’s Kit Carson Correctional Center in Colorado. In response to questions posed during the request for proposal (RFP) process, state officials wrote that the transfer criteria used by the Idaho Department of Correction to send prisoners to the privately-operated facility included: “2. No escape history from a secure facility ... [and] 4. No class A disciplinary actions (Disciplinary Offense Report) within last 12 months.” Thus, only lower-risk prisoners and those who were better behaved – i.e., did not have a recent history of serious institutional misconduct – were eligible for placement at the CCA facility. Those who were higher-risk and had committed serious disciplinary offenses remained in Idaho, and the cost of incarcerating such prisoners was shifted to the state.

C. Medical Cost-Shifting

Medical expenses represent a significant and growing portion of corrections agencies’ budgets. The FDOC, for example, spent 19.1% of its budget on healthcare services in FY 2012-2013. The California Department of Corrections and Rehabilitation (CDCR) allocated 24% of its $8.9 billion budget for FY 2013-2014 to medical, dental, mental health and ancillary health care services. As mentioned previously, public prisons must incarcerate all types of prisoners, including those with serious and expensive medical and mental health conditions. Frequently, though, private prison companies minimize medical expenses through various contractual provisions that shift those costs to the public sector.

This is a significant cost-shifting factor because medical care can be very expensive, especially treatment for diseases that are more prevalent in the correctional setting than in the general population, such as HIV and hepatitis C (HCV), as well as for costly medical procedures such as chemotherapy, dialysis and even organ transplants.

By capping the cost of medical care, excluding certain medical costs entirely and limiting prisoners with medical and mental health conditions from being housed at private prisons, the per diem costs at those facilities are decreased. This results in a corresponding increase in medical expenses for public corrections agencies. Consequently, cost comparisons of public and privately-operated facilities must include adjustments for contractual limits on medical expenses that shift costs to public agencies.

1. HIV, HCV and Other Medical Conditions

Private prison contracts often contain provisions that exempt private prison companies from costs associated with specified medical conditions, most commonly HIV and HCV. For example, a 2011 contract between the California Department of Corrections and Rehabilitation and CCA specifies that the CDCR is required to pay for “[a]ll HIV or AIDS related inpatient and outpatient medical costs and the costs of providing AZT or other medications therapeutically indicated and medically necessary ... for the treatment of offenders with HIV or AIDS.”

Similarly, a 2007 contract between the State of Tennessee and CCA to operate the South Central Correctional Center provides that “[t]he Contractor shall not be responsible for the cost of providing anti-retroviral medications therapeutically indicated for the treatment of inmates with AIDS or HIV infection.”

A 2008 contract between the Hawaii Department of Public Safety and Pinal County, to house prisoners at CCA-operated facilities in Arizona, states the company “shall not be responsible for the cost of medication or regimens specifically aimed at the treatment of conditions associated with Acquired Immune Deficiency Syndrome (AIDS) and Hepatitis C.”

And according to a 2011 contract between CCA and the Vermont Department of Corrections, “Provided that the VTDOC is aware or has been notified prior to the hospitalization of the inmate, the Contractor shall not be responsible for inpatient hospitalization costs, including any surgery and specialty services, associated with the treatment of persons with known Acquired Immune-Deficiency Syndrome (AIDS), as defined by the Center for Disease Control, organ transplants, renal dialysis, cancer treatment and Hep C treatment.”

2. Caps on Medical Costs

Some private prison contracts include caps on certain medical expenses paid by the private prison company, based on specified dollar amounts or time limits.

For example, a 2011 contract between CCA and the CDCR states the CDCR will pay “[a]ll expenses in excess of $2,500 annually per inmate for medically necessary, off site hospital or emergency care.” A 2013 contract between the State of Tennessee and CCA to operate the South Central Correctional Center specifies: “[i]f the inmate is hospitalized, the Contractor shall not be responsive for Inpatient-Hospital Costs which exceed $4,000.00 per Inmate per admission.” Also, a 2010 contract between the State of Texas and MTC to operate the West Texas Intermediate Sanctions Facility provides that, “[i]f an Offender requires continued hospitalization after the initial forty-eight (48) hour period, the [Texas Department of Criminal Justice] shall be responsible for all reasonable and appropriate medical costs.”

Both dollar amount and time limit caps were included in 2006-2007 contracts between Florida and CCA to operate the Gadsden, South Bay and Lake City correctional facilities. The contracts all stated: “The CONTRACTOR shall not be responsible for inpatient hospitalization costs, including any surgery and specialty services, in amounts greater than $15,000 per inmate per admission, or for costs incurred after five (5) days of hospitalization, whichever comes first.”

Notably, while medical care expenses may be capped for private prison companies, there is no cap on the amount public corrections agencies must pay for prisoner medical care.

3. Prisoner Eligibility Criteria

Some contracts go beyond exempting private prisons from costs associated with specified medical conditions, as discussed above, and exclude prisoners with certain conditions from even being housed at privately-operated facilities or limit the number of such prisoners.

For example, contracts between Florida and the GEO Group include restrictions on prisoners with specific medical and mental health classifications. The FDOC assigns a health classification to each state prisoner ranging from M1 to M5. Prisoners also receive a mental health grade, ranging from S1 to S6. According to the Florida Correctional Medical Authority, “[t]he number assigned to an inmate is based on the severity or acuity of the medical or mental health condition with one indicating the lowest level of need.”

The state’s current contracts with the GEO Group to operate the Bay, Moore Haven and Graceville correctional facilities include a population cap of 16% for prisoners with medical grade M3 (with a 2% variance), and 18% for those with mental health grade S3 (with a 5% variance). Florida’s 2010 contract with the GEO Group to house prisoners at the Blackwater River Correctional Facility provides that no prisoners with medical grade M3 or mental health grade S3 will be sent to the prison, and only 2% of the population can be HIV-positive.

Such provisions led Florida’s Office of Program Policy Analysis and Government Accountability (OPPAGA) to note that the state’s contracts with private prison companies do not “[A]ssure that private prisons serve inmates with comparable medical and mental health conditions as those housed in public prisons.... As special needs inmates are more expensive to serve than other inmates, the difference in the populations of public and private prisons results in the state shouldering a greater proportion of the cost of housing these inmates.”

As another example of prisoners with certain medical conditions being excluded from private prisons, UC Berkeley researcher Christopher Petrella published an “open letter” to CCA in July 2014 that addressed some of the shortcomings of the Hakim and Blackstone cost comparison study with a focus on California (which accounts for around 12% of CCA’s total revenue).

According to Petrella, a number of policies serve to exclude expensive-to-incarcerate California prisoners from being housed at out-of-state CCA facilities, including prisoners with certain medical and mental health conditions. Petrella found that 12% of prisoners held in state facilities had HCV, compared with 6.55% in CCA-operated prisons. In addition, Petrella found that California prisoners with “High Health Risk Priority 1 & 2” ratings comprised 11% of the state’s prison population, while those with a disability comprised 6%, those 65 years and older comprised 4.4% and those designated “Mental Health EOP” [Enhanced Outpatient] comprised 4.2%.

The percentage of California prisoners in those same categories housed at out-of-state privately-operated prisons? Zero.

D. Transportation Costs

The cost of transporting prisoners to and from privately-operated facilities is sometimes paid by the public agency rather than the private prison company. For example, a 2013 contract between the Tennessee Department of Correction and CCA to house prisoners at the South Central Correctional Facility specifies that, “[t]he Department will be responsible for all other Inmate transportation via connection at Turney Center Industrial Complex [the closest state prison] for Department-mandated moves of prisoner groups for assignment purposes.”

Transportation costs may be minimal, particularly when prisoners are moved to facilities within the same state. However, consider that over 10,500 prisoners were housed in out-of-state private prisons as of 2013, according to a report by Grassroots Leadership. Prisoners from California, Idaho, Vermont and Hawaii were held in CCA-operated facilities in other states, and transferred back and forth via ground transportation or airplane.

Who pays for these more expensive interstate transportation costs? According to a 2008 contract between the Hawaii Department of Public Safety and Pinal County to house prisoners at CCA facilities in Arizona, “[t]he STATE shall be responsible for the cost of transporting Inmates to and from the STATE.” A 2011 contract between California and CCA states that “CDCR shall reimburse CONTRACTOR for the cost of transporting offenders between the transfer point in California and Facility, and between Facility and transfer point in California....”

Such costs can be substantial. According to a 2009 report by the Hawaii Department of Public Safety, transportation expenses for sending prisoners to and from private prisons on the mainland totaled $1,506,144 in FY 2009 alone. Particularly with regard to interstate transfers to private prisons, the shifting of transportation costs to public agencies can be significant.

E. Prisoner Labor Costs

Most correctional facilities rely on prisoner labor to perform essential functions such as kitchen, laundry, janitorial, maintenance, clerical and grounds keeping services. While private prison companies benefit from prisoners’ labor, the wages that prisoners receive are sometimes paid or reimbursed by the contracting public agency.

Pursuant to a 2008 contract between the Hawaii Department of Public Safety and Pinal County to house prisoners at CCA facilities in Arizona, “[t]he State shall reimburse the [private prison contractor] for Inmate pay, which amount shall be included as a separate item on the monthly invoice.”

At immigration detention centers, private prison contractors benefit from detainees employed in “voluntary” work programs. Immigration and Customs Enforcement (ICE) reimburses private contractors for wages paid to such detainees, at the rate of $1.00 per day for each worker. For example, a 2010 Intergovernmental Service Agreement between ICE and Karnes County, Texas to house detainees at the GEO Group-operated Karnes County Civil Detention Center states that in addition to the per diem rate, ICE will provide compensation of one dollar a day for “Detainee Work Program Reimbursement.”

Prisoners’ wages, while typically paltry, add up due to the number of prisoners who work each day, year after year. According to a 2009 Hawaii Department of Public Safety report, the cost for wages paid to prisoners held at CCA facilities in FY 2009 was $607,344 – a cost shifted to the state, while CCA benefited from the prisoner labor.

Public prisons use prisoner labor, too, of course. But if private prisons had to pay for the prisoner labor they use and from which they benefit, their operating costs would be higher. Instead, expenses related to prisoners’ wages are sometimes shifted to the public contracting agency.

F. Administrative Overhead

According to one study, administrative overhead costs at correctional facilities range from eight to twenty percent, and not all of those costs can be shifted to private prison contractors.

Even when prisoners are housed at privately-operated facilities, there are certain functions that still must be performed by public officials. These administrative overhead duties, sometimes called central office functions, include, among others:

• Calculating prisoners’ sentences and applying good time credits;

• Recordkeeping related to prisoners’ institutional files and/or trust fund accounts;

• Intake and initial classification for prisoners entering the prison system;

• Reviewing grievance appeals;

• Reviewing and/or approving disciplinary decisions by private prison employees;

• Planning, procurement and budget development related to private prison contracts, including the development of RFPs and evaluation of bids by private prison companies;

• Parole hearings and parole-related services; and

• Responding to public records requests.

These tasks require the expenditure of staff time and resources by public contracting agencies and therefore should be factored into cost comparisons. Additionally, most private prisons are subject to monitoring by public corrections officials. In some cases those expenses are paid by the private prison company, while in others the public contracting agency is wholly or partially responsible for the cost of monitoring.

Costs associated with private prison monitoring may be minimal, such as when one or two employees are assigned to oversee one facility. But in other cases state prison systems have an entire department devoted to private prison contract monitoring and compliance, such as the Mainland/FDC Branch of the Hawaii Department of Public Safety, the Private Facility Contract Monitoring/Oversight Division of the Texas Department of Criminal Justice (TDCJ) and Florida’s former Correctional Privatization Commission.

As of 2010, California’s Contract Beds Unit (CBU) reportedly had 73 staff members assigned to monitor out-of-state private prisons – an usually high number with a correspondingly higher cost to the state. According to the CBU, monitoring costs are paid by the state and not by the private contractors. The CBU’s proposed budget for FY 2014-2015 was $398,284, representing costs shifted to the public sector.

Finally, public agencies sometimes must absorb administrative costs related to litigation involving private prisons. A 2013 report by Hawaii’s State Auditor noted that state prison officials were not including litigation expenses when calculating private prison-related costs. “[T]hese costs, if included, would have the biggest impact on per capita costs for housing inmates in out-of-state facilities, since the biggest lawsuits involve these facilities,” the Auditor wrote.

G. Law Enforcement and Criminal Prosecutions

Private prison contracts often include reimbursement provisions for costs incurred by public law enforcement agencies due to escapes from or riots at privately-operated facilities. One shortcoming of such provisions, however, is that they may only apply to the parties to the contract.

Thus, for example, if a state contracts with CCA and state employees assist in searching for an escapee from the CCA-operated facility, then the state can seek reimbursement for those costs. But if a county sheriff’s office, city police department or other public law enforcement agency assists in the search, reimbursements for those costs might not be covered by the contract. Contractual provisions may also limit reimbursements to public agencies.

A 2011 contract between CCA and the State of Vermont specifies that “[a]ny reasonable and actual costs up to $50,000.00 incurred by VTDOC in connection with any escape and or rendition and extradition process shall be chargeable to and borne by Contractor.” Costs above the $50,000 cap are shifted to the state, and the contract does not address costs incurred by federal or local law enforcement agencies – only by the VTDOC.

Further, public agencies may incur expenses related to escapes from privately-operated facilities located in other jurisdictions. The high-profile escape of three prisoners from an MTC-managed facility in Kingman, Arizona in July 2010 serves as an instructive example. The escapees, Tracy Province, Daniel Renwick and John McCluskey, were eventually captured – one (plus an accomplice) in Arizona, one in Colorado and one in Wyoming. While on the run they had murdered a couple, Gary and Linda Haas, in New Mexico. The escape resulted in a three-week nationwide manhunt involving dozens of law enforcement agencies. While news reports indicated that MTC had reimbursed some of the costs associated with the escape, it is highly unlikely that all of the law enforcement agencies that participated in the nationwide search, including the FBI, recovered their costs from the company.

The externalized cost of criminal prosecutions resulting from incidents at private prisons is another cost-shifting factor often overlooked in public-private prison cost comparisons. To continue with the example of the 2010 escape from the MTC-operated facility in Arizona, following their capture the three escapees were prosecuted in federal court in New Mexico for a number of crimes, including the murders of Gary and Linda Haas. Prosecutors sought the death penalty against McCluskey; death penalty cases are the most expensive types of prosecutions. McCluskey and Province were sentenced to life, while Renwick received a 48-year sentence in Colorado. Their accomplice, Casslyn Welch, was sentenced to 40 years in federal prison.

The costs of prosecuting the escapees, as well as their future incarceration costs (including life sentences for two of the defendants), were shifted to public agencies; MTC was not held responsible for those costs even though gross security lapses by the company had contributed to the escape.

Further, Hawaii prisoner Bronson Nunuha was murdered at the CCA-operated Saguaro Correctional Center in Arizona in February 2010. The two prisoners who killed him, Miti Maugaotega, Jr. and Micah Kanahele, were prosecuted by Arizona officials, who initially sought the death penalty. Four months after Nunuha was murdered, another Hawaii prisoner at Saguaro, Clifford Medina, was killed by his cellmate, Mahina Uli Silva. Silva also was prosecuted in Arizona and initially faced the death penalty. The County Attorney’s Office assumed the prosecution costs, and, although both murders involved Hawaii prisoners at a CCA facility, the future incarceration expenses for Maugaeotega, Kanahele and Silva will be borne by Arizona taxpayers.

As indicated by the above examples, the costs of prosecuting prisoners who commit serious offenses at privately-operated facilities are shifted to public agencies, as are incarceration costs resulting from those prosecutions – even when the offenses are due to security lapses by private prison companies.

H. Bed Guarantees

According to a September 2013 report by In the Public Interest (ITPI) titled Criminal: How Lockup Quotas and ‘Low-Crime Taxes’ Guarantee Profits for Private Prison Corporations, 41 of the 62 private prison contracts surveyed in the report (around 65%) contained minimum occupancy “bed guarantee” provisions. Such provisions ensure that private prison companies receive per diem payments for a minimum percentage of beds at a facility – even if they are not being used. The bed guarantees identified in the ITPI report ranged from 80 to 100%; for example, three private prison contracts in Arizona included 100% bed guarantees, while three in Oklahoma had 98% guarantees. The most common bed guarantee was 90%.

Since bed guarantees ensure a minimum profit margin for private prison companies, a more accurate term for such contractual provisions may be “profit guarantees.”

In some cases bed guarantees have resulted in cost-shifting by private prisons, as public agencies were required to pay for unused or unneeded bed space. As one example, following the 2010 escape from an MTC-run prison in Arizona described above, state officials removed hundreds of high-risk prisoners from the facility as a security precaution. However, MTC filed a claim against the state based on a 97% bed guarantee in its contract, and Arizona ended up paying the company more than $3 million for empty beds at the prison.

Also, The Tennessean reported that a 90% bed guarantee for female prisoners at the CCA-operated Metro-Davidson County Detention Facility in Nashville had cost taxpayers over $487,000 for vacant beds from 2011 to 2013.

Bed guarantees can also have a significant impact on long-term costs, as private prison contracts may extend up to 20 years. As part of Ohio’s 2011 sale of the Lake Erie Correctional Institution to CCA, state officials agreed to a 20-year lease agreement that includes per diem rates, an annual ownership fee and a 90% bed guarantee. In the latter regard, if Ohio’s prison population drops over the next two decades, and the state no longer needs to house offenders at the CCA facility – or decides to expand the use of less-costly sanctions such as community corrections or supervised release – it still must fill 90% of Lake Erie’s available beds pursuant to the bed guarantee provision in its contract with the company.

Public prisons, of course, do not have bed guarantees because they do not need to house a minimum number of prisoners to ensure a guaranteed profit margin.

I. Long-Term Costs

Comparisons between public and privately-operated prisons often focus on short-term expenses and may neglect the following long-term cost-shifting factors: 1) per diem increases, 2) deferred maintenance and 3) recidivism rates.

1. Per Diem Increases

The per diem rates specified in private prison contracts often increase over time as a result of contractually-required annual cost adjustments. For example, a 2012 article in The Spokesman-Review reported that Idaho’s budget for private prisons was expected to increase pursuant to “a contract requirement that per-inmate payments to the Corrections Corporation of America, which operates the Idaho Correctional Center south of Boise for the state, rise by 3 percent next year.” According to The Spokesman-Review: “Rep. Diane Bilyeu, D-Pocatello, noted that after the increase, the daily rate per inmate of $42.73 for the first 1,894 inmates [held at the CCA-run facility] will be slightly higher than the state’s rate to house state inmates in county jails.”

In fact, escalating per diem rates in private prison contracts are fairly common. Pursuant to a 2013 contract between the Tennessee Department of Correction and CCA to operate the South Central Correctional Center, the per diem rate that CCA receives increases from $45.69 in 2013-2014, to $46.70 in 2014-2015, then to $47.73 in 2015-2016, to $48.78 in 2016-2017 and finally to $49.85 in 2017-2018 (the latter two increases only apply if the contract is extended). This represents an increase of 9.1% over the potential five-year contract period, from a total annual contract amount of $27.38 million in 2013-2014 to $29.87 million in 2017-2018.

Similarly, per diem payments escalate in a 2009 contract between CCA and the Metropolitan Government of Nashville and Davidson County. The contract specifies per diem costs of $43.36 per male prisoner and $46.42 per female prisoner for the first year, increasing to $48.80 per male prisoner and $52.24 per female prisoner by year five – a 12.5% increase.

Thus, the contractual costs for private prisons are not fixed but tend to increase over time, which might not be reflected in short-term or “snapshot” cost comparison studies.

While costs at public prisons may increase over time, such as due to inflation, they also may decrease – for example, as a result of declining populations. According to the U.S. Department of Justice’s Bureau of Justice Statistics, beginning in 2009 the total state prison population in the United States began a very gradual decline, and twenty-eight states reported prison population reductions from 2011 to 2012. However, private prison contracts that include escalating per diem rates, such as those cited above, are guaranteed to result in higher costs over the term of the contracts, unlike public prisons which do not have contractually-required cost increases.

2. Deferred Maintenance

Another long-term cost is deferred maintenance by private prison companies that manage, but do not own, correctional facilities. When CCA decided in 2010 to terminate its contract with Hernando County, Florida, to operate the county’s jail, local officials found the facility was in need of significant repairs due to deferred maintenance by the company. CCA had managed the jail for 22 years.

Maintenance problems at the jail included “rusted doors, windows discolored and compromised by long-term water damage, cracked walls and floors, ceiling tiles and walls bubbled and stained by leaks from a faulty roof.” According to an engineering report commissioned by the county, CCA was responsible for almost $1 million in repairs due to deferred maintenance.

County officials withheld a $1.86 million final payment pending resolution of the repair work at the jail and CCA filed suit against the county. The case settled in 2012, with the company paying only $100,000. The county had to absorb the remainder of the repair costs.

3. Recidivism Rates

A different type of long-term cost rarely addressed in comparisons of public and privately-operated prisons relates to recidivism rates, and one researcher has argued that, “[i]ncreased criminal recidivism among inmates in private institutions presents perhaps the largest hidden financial cost of privatization.” At best, prior research has found that private prisons have no better recidivism outcomes than their public counterparts; at worst, based on recent studies, recidivism rates are higher at private prisons – meaning prisoners released from such facilities are more likely to be reincarcerated, resulting in significant cost-shifting from private prison companies to the public sector over the long term.

Beginning in 1999, a series of studies in Florida examined the recidivism rates of offenders held in both public and privately-operated prisons. The initial studies, which had various methodological weaknesses, concluded that private prisons achieved lower recidivism rates. The final study, jointly conducted by the Florida Department of Corrections, Florida State University and Florida’s Correctional Privatization Commission, and published in 2005, was “the most rigorous” of the Florida recidivism reports. The final study found there was little difference in recidivism rates between public and privately-operated facilities. “In summary, in only one of thirty-six comparisons was there evidence that private prisons were more effective than public prisons in terms of reducing recidivism,” the authors concluded in a December 2003 version of the study posted on the FDOC’s website.

A July 2003 study of for-profit, non-profit and public juvenile correctional facilities in Florida, published by the Economic Growth Center at Yale University, determined that “for-profit management has a statistically significant impact on recidivism as measured by both 1-year recidivism rates (approximately 5 to 8 percent higher than the other management types in terms of adjudications and charges) and by daily hazard rates (approximately 13 to 19 percent higher),” relative to non-profit and public facilities.

Further, a 2008 study of Oklahoma prisoners in public and private prisons found “a significantly greater hazard of recidivism among private prison inmates in six of the eight models tested.... In every categorical model (including the two that were non-significant), private prison inmate groups had a greater hazard of recidivism than did public inmate groups.” The study noted that the more time a prisoner spent at a private facility, the greater the hazard of recidivism; conversely, the more time served at a public prison, the lower the hazard of recidivism – though the effects were modest. The study, which controlled for prisoners’ age, education, race, prior incarceration, offense type, discharge conditions, sentence length, time served, time spent in public and private prisons, and proportion of sentence served, concluded that prisoners held in private facilities were up to 16.7% more likely to recidivate.

More recently, the results of a 2013 study conducted by the Minnesota Department of Corrections indicated
“[T]hat offenders who had been incarcerated in a private prison had a greater hazard of recidivism in all 20 models, and the recidivism risk was significantly greater in eight of the models. The evidence presented in this study suggests that private prisons are not more effective in reducing recidivism, which may be attributable to fewer visitation and rehabilitative programming opportunities for offenders incarcerated at private facilities.”

To the extent that prisoners released from private prisons in fact have higher recidivism rates, cost comparisons of public and privately-operated facilities should examine the reincarceration expenses that result due to those higher rates – which represent costs shifted to the public sector over the long term. Such costs can be substantial; according to a 2012 study by the Vera Institute of Justice, the average annual cost of incarceration is $31,286 per prisoner.

J. Fraud and Corruption

While some level of corruption is likely present in all corrections systems, both public and private, government-operated prisons do not have a profit motivation – the need to make money – that is conducive to fraudulent practices. Private companies do have a profit motivation. Unsurprisingly, then, there have been several examples of private prison contractors engaging in corruption, fraud or other unethical practices, which constitutes another cost-shifting factor when comparing public and private prisons.

In 2005, an audit by Florida’s Department of Management Services (DMS) reported that over an eight-year period, CCA and the GEO Group were overpaid around $12.7 million – including $4.7 million for vacant employee positions, $5 million in “salary additives” and $2.85 million paid to CCA for facility maintenance the company did not perform. “Our review showed numerous instances where [private prison] vendors’ interests were considered over the State’s interests,” the DMS stated. The GEO Group argued that the overpayments were authorized pursuant to its contract with the state, and agreed to repay only $402,541. CCA agreed to pay $1.55 million – leaving the state approximately $10.7 million short.

More recently, CCA issued a press release on April 11, 2013, acknowledging that employees at the company’s Idaho Correctional Center (ICC) had falsified staffing records and billed the state for almost 4,800 hours for vacant positions. “[E]mployees were being placed on the shift schedule who were not present within the building or who were actually working in other areas and in some cases were no longer employees of CCA,” said Boise attorney T.J. Angstman, who represents prisoners in a federal lawsuit related to high levels of violence at ICC.

As a result of the falsified records and understaffing at the prison, in September 2013 CCA was held in civil contempt in a class-action suit filed by the ACLU of Idaho, for failing to comply with the terms of a settlement agreement involving staffing levels at ICC. CCA agreed to pay $1 million to Idaho to cover the cost of the falsified staffing hours. However, it is unknown whether that compensated the state for all of its losses; state officials commissioned an independent audit, which estimated that CCA had understaffed ICC by more than 26,000 hours in one year alone. The company has contested the audit findings.

Another example of corruption involves Christopher B. Epps, former director of the Mississippi Department of Corrections and former president of the American Correctional Association, who was indicted in November 2014 on federal bribery and kickback charges. Epps was accused of accepting almost $2 million in bribes in connection with prison vendor contracts; he allegedly received the bribes from Cecil McCrory, who, among other positions, served as a paid consultant to Management & Training Corp. – a private prison firm with contracts in Mississippi. Epps’ indictment led to calls to examine the state’s private prison contracts. Epps and McCrory pleaded guilty to corruption charges in February 2015 but have not yet been sentenced.

Other forms of fraud and corruption involving private prison companies likely go undetected, and thus the associated losses – and costs to public agencies – are unknown and impossible to quantify.

 

IV. Quality of Service Comparisons

Thus far this article has focused on factors related to cost comparisons between public and private prisons. Whether or not private prisons “save money,” however, is not the sole consideration; whether they provide an equivalent quality of service is important, too. After all, cheaper is not always better with respect to our criminal justice system, and we tend to get what we pay for.

As stated in the 1996 GAO report: “Although comparative costs are very important, they are not the only factors considered by policymakers in deciding the direction or extent of corrections privatization. A principal concern is whether private contractors can operate at lower costs to the taxpayers, while providing the same or even a better level of service as the public sector, particularly with respect to safety and security issues.”

Notably, cost and quality of service are directly related: lower costs typically lead to lower quality, while a performance-based contract that calls for higher quality service outcomes can be expected to result in higher costs. When public agencies contract carceral functions to the lowest bidder, high quality of service should not be expected.

As with cost comparison studies, research on quality of service in public versus private prisons has reached equivocal conclusions. According to the 2009 meta-analysis by the University of Utah, “Our conclusion is that prison privatization provides neither a clear advantage nor disadvantage compared with publicly managed prisons. Neither cost savings nor improvements in quality of confinement are guaranteed through privatization. Across the board, effect sizes were small, so small that the value of moving to a privately managed system is questionable.”

A. Violence Levels

While quality-of-service comparisons are often subjective, some benchmarks, such as levels of institutional violence in public and private prisons, can be more readily analyzed. Several studies have found higher rates of violence at privately-operated facilities despite the fact that they usually house minimum- and medium-​
security prisoners while public prisons hold offenders of all security levels, including maximum-security.

For example, a 2004 article in Federal Probation found that private prisons had more than twice as many prisoner-on-prisoner assaults than in public prisons, and a 2001 Bureau of Justice Assistance report found privately-operated facilities reported 50% more prisoner-on-prisoner assaults and almost 50% more prisoner-on-staff assaults than in public prisons with comparable security levels.

According to a 2008 report by Idaho DOC investigator Tim Higgins, known as the Higgins report, “[s]ince the beginning of 2008, incidents of violence at the Idaho Correctional Center has [sic] steadily increased to the point that there are four incidents for every one that occurs in the rest of the Idaho state operated facilities combined” (emphasis added). The CCA-operated Idaho Correctional Center, discussed previously, was also called the “Gladiator School” due to such high levels of violence.

Further, a Human Rights Defense Center analysis of violent incidents at public and private prisons in Tennessee, conducted by this author based on data provided by state officials pursuant to public records requests, found that rates of violence at private prisons were 29% higher in 2010, 15.7% higher in 2011, 22.7% higher in 2012 and 15.8% higher in 2013 compared with state prisons. The analysis used data related to prisoner-on-prisoner assaults, prisoner-on-staff assaults and institutional disturbances, and violent incident rates were calculated based on the population levels at public and privately-operated Tennessee prisons.

B. Staff Turnover

Staff turnover rates can constitute another quality of service benchmark. High staff turnover means there are fewer experienced staff at a facility, more new “green” employees and thus potentially greater institutional instability. Increased staff turnover may also reflect employee dissatisfaction with the quality of the prison work environment, including safety and security.

Historically, private prisons have had significantly higher staff turnover rates than public prisons. According to the last available self-reported data from private prison companies, from The 2000 Corrections Yearbook, the average turnover rate at privately-operated prisons was 52.2% while the average rate at public prisons was 16%.

More recently, according to a December 2008 Texas Senate Committee on Criminal Justice report: “[d]uring FY 2008 the correctional officer turnover rate at the seven private prisons [in Texas] was 90 percent (60 percent for the five privately-operated state jails), which in either case is higher than the 24 percent turnover rate for TDCJ correctional officers during FY 2008.”

Other examples include a 2013 report by Ohio’s Correctional Institution Inspection Committee, which noted higher staff turnover rates at the CCA-owned and operated Lake Erie Correctional Institution. “In December 2012, the staff turnover rate for total staff exceeded 20 percent. Correctional officer turnover rate was reported as 19.7 percent,” the report found. “In comparison, the DRC [state corrections department] staff turnover rate is reportedly 12.7 percent.”

Further, a March 2013 report by MGT of America, commissioned by New Hampshire officials to evaluate responses to the state’s RFP for a private prison contract, stated: “In prior MGT studies of private correctional facility operations, we have found private correctional facilities with annual staff turnover rates of 42 percent compared to 13.3 percent for nearby public facilities. High turnover, which can result from non-competitive compensation levels, produces a chronically inexperienced work force with direct implications for the integrity of facility security and safety.”

Consequently, when comparing quality of service at private versus public prisons, staff turnover and the impact it has on facility operations can constitute a useful performance measure.

C. ACA Accreditation

The Hakim and Blackstone study cited standards established by the American Correctional Association (ACA) as an appropriate measure for quality of service, calling ACA accreditation a “robust and useful practical indicator of quality in the operations and management of prisons.” However, using ACA accreditation as a benchmark for correctional quality is problematic and impractical for several reasons.

The ACA is a private organization, primarily composed of and directed by current and former corrections officials, that establishes its own standards with no oversight. The ACA basically “sells” accreditation to correctional facilities (both public and private) by charging substantial fees. According to an ACA pricing chart, accreditation fees range from $8,100 to $19,500 depending on the number of days and auditors involved, and the number of facilities being accredited. The ACA relies heavily on such fees; it reported receiving more than $4.5 million in accreditation fees in 2011 – almost half its total revenue that year. The organization thus has a financial incentive to “sell” as many accreditations as possible.

There is also a potential conflict of interest relative to ACA accreditation being used as a quality of service measure for private prisons, because close connections exist between the ACA and the private prison industry. The ACA’s past president, Davidson County, Tennessee, Sheriff Daron Hall, is a former CCA program manager, while CCA vice president Harley Lappin and CCA warden Cherry Lindamood serve on the ACA’s Standards Committee.

Further, the ACA accreditation process is basically a paper audit; the ACA does not provide oversight or ongoing monitoring of correctional facilities, but only verifies whether a facility has policies that comply with the ACA’s self-promulgated standards.

According to a 2003 report by Abt Associates, an independent research firm, “Achieving ACA accreditation is not an outcomes-based performance goal. Rather, ACA standards primarily prescribe procedures. The great majority of ACA standards are written in this form: ‘The facility shall have written policies and procedures on....’ The standards emphasize the important benefits of procedural regularity and effective administrative control that flow from written procedures, and careful documentation of practices and events. But, for the most part, the standards prescribe neither the goals that ought to be achieved nor the indicators that would let officials know if they are making progress toward those goals over time.”

As a result, some facilities have experienced significant problems despite being accredited. For example, the CCA-operated Otter Creek Correctional Center in Kentucky was accredited by the ACA in 2009 when at least five prison employees were prosecuted for raping or sexually abusing prisoners. Two states withdrew their female prisoners from Otter Creek following the sex scandal, but the facility retained its ACA accreditation.

The privately-operated Walnut Grove Youth Correctional Facility in Mississippi was accredited by the ACA even though the U.S. Department of Justice found “systemic, egregious practices” at the facility, including “brazen” sexual activity between staff and offenders that was “among the worst that we’ve seen in any facility anywhere in the nation.”

And as noted above, the ACA-accredited, CCA-operated Idaho Correctional Center has been cited for extremely high levels of violence, understaffing and fraudulent reporting of staffing hours. A video of CCA officers failing to intervene while one prisoner was brutally beaten by another has been widely circulated. CCA was held in contempt by a federal court in September 2013, and a separate suit alleges that CCA employees collaborated with gang members to maintain control at the prison. Regardless, the prison remained accredited by the ACA.

These examples illustrate that ACA accreditation is a poor measure of quality of service, whether for public or privately-operated correctional facilities.

D. Recidivism Rates Redux

As discussed previously, a number of studies have measured recidivism outcomes in public and private prisons. Yet recidivism is typically not used as a quality of service benchmark with respect to prison privatization; only recently has one state decided to adopt recidivism rates as a performance measure.

In 2013, Pennsylvania officials announced they would provide financial incentives to privately-operated community corrections facilities – halfway houses – that are able to reduce recidivism rates of offenders released from those facilities.

The initiative followed a report that found high recidivism rates in the state, with prisoners released from halfway houses (most of which are privately-operated) having higher rates than those released directly from prison. An average recidivism rate based on data from the report is used as a baseline, and privately-operated community corrections facilities must meet the baseline rate within a standard deviation or risk losing their contracts. Those that achieve rates at least 10% lower than the baseline will receive a financial bonus of one percent of the contract amount.

“It’s not unreasonable for us to expect them to have an impact on crime, because that’s what we’re paying them to do,” said Pennsylvania Department of Corrections Secretary John E. Wetzel. “We want to measure performance. We want quantifiable performance,” added Kristofer Bret Bucklen, director of the DOC’s Office of Planning, Research and Statistics.

The DOC’s community corrections contracts were rebid in 2013 to include the recidivism rate performance measure provisions. According to Bucklen, the initial performance measure period was based on recidivism data for an abbreviated three-month span from December 2013 to March 2014, while future periods will cover six-month spans.

Bucklen said the state’s approximately 40 privately-operated community corrections facilities achieved an average 16.4% reduction in the benchmark recidivism rate during the initial three-month performance measure period. This indicates that, given the proper incentives (financial bonuses) and disincentives (potential loss of contracts), private contractors can be motivated to meet specified performance standards.

 

V. Opportunity Costs

Finally, there is one last cost factor that should be taken into consideration when comparing public and privately-operated prisons: the opportunity cost of contracting with for-profit prison companies rather than pursuing alternative solutions to prison overcrowding. Opportunity cost is the relative cost of selecting one option over another, given multiple choices.

The prison and jail population in the United States has increased dramatically over the past several decades, from around 646,000 in 1983 to around 2.2 million as of 2015, coinciding with our nation’s incessant War on Crime and War on Drugs. In the 1980s and 1990s, a series of I-can-be-tougher-on-crime-than-you laws were enacted, spurred by the aforementioned domestic wars and a steady drumbeat of violent crime coverage by the news media. Such laws included mandatory minimums, truth-in-sentencing statutes and three-strikes laws, which require lengthy prison terms or life sentences for certain offenders.

Consequently, more people were arrested (mainly for drug-related offenses), prosecuted, convicted and sent to prison, where they served longer sentences. Prison release policies concurrently became more restrictive; for example, parole in the federal prison system was abolished in 1987. With more people entering the prison system to serve longer sentences and fewer leaving, the U.S. prison population expanded rapidly – increasing about 350% from 1983 to the present.

The growing prison population in turn created a market for additional prison and jail beds, and for-profit companies such as CCA and the GEO Group were established to capitalize on that market demand.

At the beginning of the 1980s there were no privately-operated adult correctional facilities in the United States. As of 2013, approximately 124,000 state and federal prisoners were held in for-profit lock-ups – around 8.3% of that total population. This does not include thousands more in privatized immigration detention centers and local jails.

So long as public officials confronted with expanding prison populations could house their excess prisoners in privately-operated facilities, they did not have to pursue politically unpopular “soft-on-crime” options such as sentencing reforms, early releases or alternatives to incarceration.

Absent private prisons and the additional bed space they provide, policy makers would have been forced to turn to other solutions to address problems associated with prison overcrowding and mass incarceration – solutions that are only now being implemented due to the recent Great Recession and its impact on government budgets.

Such solutions include sentencing reform, early prisoner releases, justice reinvestment initiatives, expanded clemency projects, alternatives to incarceration, more funding for reentry programs, and even marijuana decriminalization and legalization. A growing number of states are reducing their prison populations and even closing correctional facilities.

Private prison companies, however, have little incentive to seek reductions in incarceration levels. As stated in CCA’s 2014 annual report, with respect to business and industry risk factors, “Our growth is generally dependent upon our ability to obtain new contracts to develop and manage correctional and detention facilities. This possible growth depends on a number of factors we cannot control, including crime rates and sentencing patterns in various jurisdictions, governmental budgetary constraints, and governmental and public acceptance of privatization. The demand for our facilities and services could be adversely affected by the relaxation of enforcement efforts, leniency in conviction or parole standards and sentencing practices or through the decriminalization of certain activities that are currently proscribed by criminal laws.”

Specifically, CCA noted that risk factors for the company included “changes with respect to drugs and controlled substances or illegal immigration,” which “could affect the number of persons arrested, convicted, and sentenced, thereby potentially reducing demand for correctional facilities to house them.”

In summary, by providing additional overflow bed space for the past three decades the private prison industry has helped to stymie sentencing and other criminal justice reforms that would have reduced the prison population, and thus the overall cost of our justice system – which is currently estimated at around $80 billion annually.

This is the opportunity cost of contracting with for-profit prison companies rather than pursuing other options to address our nation’s reliance on mass incarceration.

 

Conclusion

Ultimately, cost comparisons between private and public prisons may best be accomplished by examining actual costs incurred during separate time periods when the same facility is privately and publicly operated, and houses a similar prisoner population. That would, in theory, constitute an apples-to-apples comparison rather than apples-to-oranges – or fish. Fortunately there are several instructive examples in this regard.

CCA managed the Hernando County jail in Florida for 22 years, until the company and county parted ways in 2010. According to the Tampa Bay Times, one year after the switch from private to public management, “[i]n total, with an annual jail budget of $10.9 million, jail officials say they’re saving taxpayers more than $1 million this year, compared to what CCA would have charged the county.” According to another news report, CCA’s “actual costs” for operating the Hernando County jail in 2009 were $12.3 million, with projected costs of $11 million for 2010. County officials confirmed that after the Sheriff’s Office assumed management of the jail, the budget in FY 2011 – the first full year of operation – was $10.9 million. The budget for FY 2012 was $10.62 million, while the budget for FY 2013 was $10.53 million – all less than what the county had been paying CCA.

CCA also operated the Bay County Jail in Florida until 2008, when the sheriff took over management of the facility. Local officials confirmed that during the last year of CCA’s contract (FY 2007–2008), the county paid the company $16.6 million. During the first year after the Sheriff’s Office assumed management at the jail (FY 2008–2009), actual operational costs were $15.9 million; during the second year (FY 2009–2010), actual operational costs were $16.5 million. The county noted that “if CCA had continued operating the jail at the figures it had proposed before an impasse was reached and they walked away,” the costs would have been $16.7 million in FY 2008-09 and $17.1 million in FY 2009-10.

In spite of these real world examples, and this article’s extensive discussion of cost-shifting factors, the original question remains: do private prisons save money? Considering the numerous and complicated factors involved in cost comparisons of public and privately-operated facilities, and the corresponding difficulties in conducting such studies, it is possible that we are simply asking the wrong question.

The right one may be: should we incarcerate people in private, for-profit prisons even if they do save money?

Regardless, to paraphrase the late Richard Culp, Associate Professor at the John Jay College of Criminal Justice, if three decades of experience with and research related to prison privatization have not led to demonstrable cost savings or quality of service outcomes, resulting in the continued need for articles such as this one, then we need to take a different approach relative to our nation’s carceral policies, practices and priorities.

Ed. Note: In August 2016, the Office of the Inspector General of the U.S. Department of Justice issued a report that was sharply critical of privately-operated federal prisons, finding higher levels of violence and use of force incidents, and questionable cost savings (see the following article). Based in part on that report, on August 18, 2016, Deputy Attorney General Sally Q. Yates issued a memo stating the government would begin reducing and ultimately ending the use of private facilities to house federal prisoners. [See: PLN, Sept. 2016, p.28].

* Alex Friedmann serves as associate director of the Human Rights Defense Center and managing editor of Prison Legal News. He also serves in a non-compensated capacity as president of the Private Corrections Institute (www.privateci.org), which opposes the privatization of correctional services. He served ten years behind bars, including six years at a CCA-operated prison in Tennessee, prior to his release in 1999. This is an edited version of a longer, footnoted article published in the Fordham Urban Law Journal (Vol. XLII, No. 2).