PUBLIC-PRIVATE PARTNERSHIP IN CORRECTIONS
A SERIES OF EVALUATION STUDIES

“The Interrelationship Between Public and Private Prisons: Does the
existence of prisoners under private management affect the rate of
growth in expenditures on prisoners under public management”
April 2003
By James F. Blumstein and Mark A. Cohen
www.apcto.org/logos/Study.pdf
In this study the Vanderbilt University researchers, including a
professor of law and a graduate school professor of economics, concluded
that between 1999-2001 – the years for which the most accurate data
is available – states that utilized private prisons had considerably more
success in keeping public corrections spending under control than
states with no private prisons. The existence of prisoners under private
management in a state resulted in reduced growth in daily costs for the
public corrections system by 8.9%, about 4.45% per year (1999-2000 and
2000-2001 budget cycles). In 2001, the average Department of Corrections
expenditures in states without private prisoners were approximately $445
million. If the “average” state in that group were to introduce private prisons
to some extent, the potential savings for one year in the Department of
Corrections could be approximately $20 million in the public system’s
operating costs alone.
“The Pros of Privately-Housed Cons: New Evidence on the Cost
Savings of Private Prisons”
March 2003
Rio Grande Foundation - New Mexico
By Matthew Mitchell
www.riograndefoundation.org
Three-fifths of all U.S. states contract with private corporations to
house a portion of their state prisoners. This study, by research economist
Matthew Mitchell, takes a broad approach, by comparing state per-prisoner
department of corrections budgets across 46 states. The author conducted
an interstate econometric test of the relative efficiency of private-run
versus government-run prisons. The econometric test demonstrates to state
policy makers nationwide strong empirical evidence of potential savings
from privatization. Accounting for a number of cost factors, significant perprisoner savings were found in states that house a portion of their prisoners
privately. All other factors being equal, states such as New Mexico, with
forty-five percent of its prisoners in private custody, spent about $9,660
less per prisoner in 2001 than non-privatized states. Given New Mexico’s
prison population of 5,300, this is an annual savings of $51 million. Fortyfive percent privatization is expected to reduce the typical department of
corrections budget by about one-third.

“Lock In Savings With Prison Privatization”
Michigan Privatization Report , Winter 2003
Mackinac Center for Public Policy - Michigan
By Lawrence Reed and John La Plante
www.mackinac.org/5022
The Michigan Privatization Report gives an overview of all the
benefits of including a significant percentage of privatized corrections
management into a state’s corrections system. The Michigan Department
of Corrections, utilizing a total operating budget of $1.7 billion, operates 42
prisons and 11 camps including one private corrections facility that saves
the state between an estimated $6,975 and $19,125 a day or between
$2.5 million and $6.9 million annually. Michigan will see a budget deficit
in the next fiscal year of $1.8 million, largely due to economic shortfalls.
Using Michigan’s one private facility as a model of future opportunities,
outsourcing a portion of the criminal justice system could save taxpayers
millions while improving services.
Private Prisons and the Public Interest – Improving Quality and
Reducing Costs through Competition”
February 2003
Washington Policy Center - Washington
By Paul Guppy
www.washingtonpolicy.org/ConOutPrivatization/PBGuppyPris
onsPublicInterest.html
The state of Washington has very little correctional privatization in
its state, but the report does reference success with what privatization
does exist. A private 50-bed work release facility for a county has operated
for more than 10 years. It operates at $28 daily, compared to a charge of
$60 daily to keep that same inmate in the county jail. The report assesses
the current Washington prison system and the potential benefits of
public-private partnership. Washington’s correctional institutions face
overcrowding to some extent. The report identifies four principles that
show how competition can successfully improve quality and ease budget
constraints: lower cost; higher service levels; better management; and
changed government culture. Referenced in the report is recent data that
shows a measurable relationship between states that have invested in
private prisons and their ability to control the rise in total structural costs of
state government. The data indicates that states with 20% or more private
prison usage experienced a lower net cumulative increase in their overall
state budget.

““Privatizing Iowa’s Prisons - Policy Study”
January 2003
Public Interest Institute - Iowa
By Steven B. Garrison
www.limitedgovernment.org

“Corrections Privatization Generates Savings and Better Service”
Wisconsin Interest, Winter 2003
Wisconsin Policy Research Institute, Inc. - Wisconsin
By Marc C. Duff
www.wpri.org/WIInterest/Vol12No1/Duff12.1.pdf

The report indicates that Iowa has not experimented with
privatization of its corrections system, despite its high cost for managing
its system. Iowa’s prisons already are at 126% of capacity and rising. Iowa’s
prison costs are high when compared with other states around the nation.
Iowa’s per diem is $84.89, higher than neighboring Kansas’ at $83.38, and
Oklahoma’s is dramatically lower by almost half at $43.34. The difference
being that Oklahoma houses 30% of its inmate population with private
prisons, Iowa and Kansas use none at all. Iowa could recognize a significant
cost savings in prison construction through open bidding with the private
sector for future inmate housing, potentially utilizing private prisons for
approximately 34% of its inmate population by 2011.

This report assesses Wisconsin’s recent corrections system situation.
Wisconsin’s prison system began limited dealings with private prisons in
1998 and today has more than 20% of its inmate population managed
out-of-state by a private management company. The report states that few
leaders have led the change for increased corrections privatization due to
expected strong opposition from labor unions and liberal interests. But the
report states that, ironically, liberal interests could benefit from corrections
privatization because funds freed up by privatization efficiencies would
become available for spending in other areas, including education and
social services programs. The report states that Wisconsin should revisit
prison privatization with renewed interest.

“Developments in the Law – The Law of Prisons, Section III: A
Tale of Two Systems: Cost, Quality and Accountability in Private
Prisons”
May 2002
Harvard Law Review
www.correctionscorp.com/overview/
Harvard%20Law%20Review.pdf

“Weighing the Watchmen: Evaluating the Costs and Benefits of
Outsourcing Correctional Services (Parts I and II)”
January 2002
Reason Public Policy Institute - California
By Geoffrey F. Segal and Adrian T. Moore
www.rppi.org/ps290.pdf

A Harvard Law Review article about the benefits of the private-public
partnership in corrections is seen as one of the most compelling cases for
outsourced corrections management. The analysis in this article about
the cost effectiveness, quality, accountability and long-term viability of
the outsourced corrections management industry contends that private
management services produce cost savings, while maintaining or exceeding
quality and accountability levels in comparison to public corrections
agencies. The article asserts that private prisons are “a promising avenue for
the future development of the prison system.”
Statements from the Harvard Law Review article on references to cost,
quality and accountability include:
• “The most rigorous studies find clearly positive cost savings…
none of the more rigorous studies finds quality at private prisons
lower than quality at public prisons on average, and most
find private prisons outscoring public prisons on most quality
indicators.”
• “…private prisons are, if anything, more accountable for their
constitutional violations than are public prisons. The presence of
this additional judicial check should in turn increase private prison
quality.”
• “…The government should maximize the efficiency gains
from privatization and minimize opportunities for capture by
institutionalizing competition between public correctional
departments and private prison firms and making contract
monitoring independent of both the public and the private sector.”

This study identifies and examines 28 studies that analyze cost
data, and while each of the studies was not without flaws, many provided
comparable results related to cost savings in corrections privatization.
Virtually all studies find private prison costs to be lower – on average
between 5 and 15 percent. A wide variety of approaches, spanning over a
decade and a half, in states across the nation have repeatedly come to the
same conclusion: privatization saves money without reducing quality.
Factors such as quality, faster bed capacity, enhanced accountability,
better risk management, innovation, new service delivery acquisition,
improved efficiency and flexibility, and cost savings should collectively be
considered when assessing privatization, utilizing a best-value approach
to procurement. These factors may be as important as cost savings alone
in justifying privatizing. There is clear and significant evidence that private
prisons actually improve quality.