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Prison Privatization in the United States

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The existence of private prisons alongside public facilities has become a contentious public policy debate in recent decades in the United States. Proponents of privatization argue that by having private, for-profit businesses run jails and prisons, taxpayers end up paying less for incarceration of inmates. However, opponents argue that cost savings haven’t manifested as promised and that private prisons have a detrimental impact on society by failing to focus on rehabilitation of inmates, but instead on warehousing offenders in exchange for a fee per inmate.

What is Privatization?

Privatization of prisons involves either having private for-profit entities take over operation of an existing public facility or having private companies build and operate new facilities that they own. Contracts for private jails, prisons, and detention facilities usually involve the local, state, or federal government paying the private company a fee per prisoner.

Privately operated prisons have become a multi-billion industry in the United States over the last few decades. According to an investigation by nonprofit news organization ProPublica, the two largest private for-profit detention companies together make more than $3 billion per year by housing inmates through contracts with state and federal governments.

The largest, Corrections Corporation of America, owns 66 detention facilities in the United States. The second largest, The Geo Group, Inc., owns 65 facilities. Together, they have the capacity to house nearly 157,000 prisoners or roughly 10 percent of the nation’s 1.6 million state and federal prisoners.

History of Privatization

The privatization of corrections facilities isn’t a new phenomenon in the United States. Privately owned and operated jails and prisons have existed alongside state-run prisons since the 19th century. Prisons in the nation’s early days were profit-driven regardless of whether they were run by private entities or by the government. Prisoners had to work to pay the cost of their imprisonment, and in the South a system arose in which prisoners were leased out for a profit and performed hard labor on farms or projects requiring cheap physical labor. Reformers advocated for laws to eliminate the profit-seeking motive from prisons, and in the 1920s and 1930s laws were passed that shifted the emphasis from labor to rehabilitation.

By the 1970s, laws were in place that allowed some services to be provided by private companies under contracts with state-run prisons, and that opened the door for the modern trend of privatization of prison operations to take root in the 1980s. In the 1980s, the Reagan administration’s “War on Drugs” plus a trend toward states implementing mandatory sentencing and “three strikes” laws had resulted in an increasing number of offenders being jailed, and in many instances for longer sentences. The national incarceration rate already had been on the rise since 1970, and continued to do so until 2005 — statistics show a 700 percent increase over that 35-year period. By the 1980s, overcrowding became a problem, and costs were rising along with a rising number of people incarcerated. How to tackle the prison problem became a focal point of vigorous public and political debate.

With an administration in place in the 1980s that favored free market solutions to national issues, the idea of increasing the capacity to incarcerate offenders through privately operated prisons was politically attractive. Private prisons offered the potential benefit of more efficient, businesslike operations at reduced costs per prisoner.

The first federal prison contract was awarded in 1983, and by the following year laws had been passed in Texas, Florida, and Tennessee that allows private companies to run correctional facilities. By the mid-1990s, more than 30 states had such laws, and the private prison industry was booming.

The Cost Argument

Proponents of private prisons have argued that when private companies are allowed to operate prisons, they can offer better service at lower costs than government-run facilities. Cost-savings are usually a focal point of the arguments in favor of privatization.

There are a couple of mechanisms whereby advocates say that private facilities can save money compared to government facilities.

  • Decreased labor costs — Private prisons use non-union labor compared to state-run facilities that typically employee union personnel. The use of non-union labor can save costs on wages and benefits, which do not have to be negotiated through collective bargaining.
  • Lower construction costs — Typically, private companies are covering the cost of building the facilities they run, which saves governments from having to finance construction through bonds or taxes. That may save governments money in the long-term by not having to pay interest on bonds, and frees up capital funds in the government’s budget that can be used toward other needs or projects.
  • Lower costs for goods and services — Private companies argue that because they are not bound to government bidding rules, they can more competitively contract for goods and services needed for prison operations, such as clothes, food, or health care for prisoners.

When it comes to empirical evidence of cost savings, data on the cost of private vs. public prisons has yielded mixed results. A number of academic studies have found private prisons do result in costs savings to taxpayers of as much as 10 to 20 percent compared to public prisons. However, a study by the federal Bureau of Justice Assistance found just a 1 percent cost savings compared to public facilities.

Another pair of studies looked at the cost per day, per inmate to operate public facilities versus private. These studies conducted by Abt Associates Inc. on behalf of the National Institute of Justice and one by the Bureau of Prisons both looked at the same four institutions, three public and one private. The Abt study found that the cost to run the public facilities was on average about 15 percent higher than the private prison. However, the Bureau of Prisons study found just a 2 percent average difference. An analysis by the National Institute of Justice of the two studies found that the private facility had significantly more prisoners than the public facilities and therefore could benefit from an economy of scale and resulting lower overhead costs per prisoner.

However, the Abt report and separately the U.S. Government Accountability Office have noted that comparisons between private and public prisons are challenging because the facilities differ in several ways and the available data isn’t really conducive to an apples-to-apples comparison.

Critics of privatization argue that companies that contracted to operate prisons have been able to selectively choose to operate low-security or medium-security facilities that inherently cost less to run and require less staffing, while public facilities have continued to bear the expense of operating higher security facilities. Critics also argue that cost analyses don’t take into account hidden costs to the companies, such as the costs to prepare and submit proposals or to negotiate contracts, or the costs to communities when private companies are given tax breaks or other incentives to build a prison.

Other Arguments in Favor of Privatization

In addition to the financial arguments, advocates of the trend toward privatization of prisons often focus on arguments related to the efficiency of business operations compared to government bureaucracy and the benefits of free market competition. Some of the main arguments in support of private prisons and jails include:

  • Accountability — Privatization supporters argue that contracts between governments and private companies that operate jails and prisons include performance measures that the companies must meet to be in compliance with their contracts. Further, private prisons must meet minimum standards set by the American Correctional Association to remain accreditation. Contracts for private prisons typically include a cap on the number of inmates so that overcrowding doesn’t become a problem, but public facilities are bound to no such caps.
  • Tax base — Advocates of privatization say that private prisons contribute to local tax bases by paying income and property taxes, or sales taxes during construction of facilities. Employing people in a community also can contribute to the local tax base.
  • Competition — Supporters of privatization have said the existence of private prisons creates competition with public facilities that may spur public facilities to run more efficiently.

Criticisms of Private Prisons

Several of the arguments against privatization of prisons focus on outcomes, such as the potential for greater recidivism among inmates incarcerated in private jails and prisons. Among the primary arguments made against privatization are:

  • Profit motive — Because private companies typically are paid per inmate incarcerated in their facilities, there is an incentive for private prisons to incarcerate as many people as they can. A September 2013 report by In the Public Interest, a group that advocates for transparency and accountability in private-public contracts, looked at private prison contracts and highlighted provisions in which governments guarantee that private prisons will have 80 to 100 percent occupancy, or else the private company is paid an “empty bed” fee. Opponents of privatization argue that these contract clauses act as incentives to convict more people and counteract public policy goals of reducing prison populations and rehabilitating offenders.
  • Quality of services — Some studies have shown that the quality of services provided in private facilities is no better than those provided in public ones. Opponents of privatization argue that private prisons have underperformed public prisons on some measures, particularly when it comes to health care. Some research has shown that treatment of mental health disorders and HIV/AIDS among prisoners in private facilities lags behind public facilities. Additionally, a 2005 census conducted by the Bureau of Justice Statistics showed that private facilities provided fewer educational programs, opportunities for work, and sex offender treatment programs than public jails, prisons, and detention centers.
  • Lack of safety — Some evidence indicates that a higher number of inmate-on-inmate assaults occur in private facilities, and privatization opponents argue this is because private prisons have fewer guards and those guards aren’t adequately trained. ProPublica notes that a prison run by Corrections Corporation of America in Idaho had three times as many inmate-on-inmate assaults as a state-run prison with the same number of inmates. The Geo Group Inc. settled with the federal government in early 2014 over allegations that it intentionally understaffed its facilities, underequipped its staff, and failed to fix dangerous conditions such as malfunctioning locks, resulting in hazards to prison staff that was alleged to have violated occupational safety rules.
  • Higher rates of recidivism — Some studies have shown a greater risk of re-offending among offenders who were incarcerated in private facilities. Opponents of privatization argue that inmates in private prisons aren’t getting the same emphasis on rehabilitation and education as those in public prisons, and therefore are being released with fewer skills for living productive lives.

Facing Charges in Ohio or Northern Kentucky? Call Brad.

If you have faced criminal charges in the past, know that the right defense makes all the difference. Attorney Brad Groene has been working in the Cincinnati and Northern Kentucky area for years, representing countless clients avoid fines, jail time, and life-altering consequences. If you’re ready to learn how Cincinnati criminal defense lawyer Brad Groene can help you, call today at (513) 338-1890 for a free, initial legal consultation.