Privatization of State and Federal prisons Spring 2012, 4/23/2012 The United States continues to have the highest

prison population in world, sitting at about 1.6 million people in 2010 (Glaze 2011). For every 100,000 people, 715 of them are in prison (Glaze 2011). The United States tough-on-crime policies are creating a problem for State and Federal governments to house the increasing population. It stems from policies that favor the Three Strikes rule and mandatory minimum sentencing, while under emphasizing parole and probation (Brickner 2011). The most recent data shows that the United States spends about 62 billion dollars a year on adult and juvenile corrections and incarceration (State corrections spending 2005). With such high costs and rising incarceration rates, the government is increasingly looking towards the privatization of the prison industry in hopes of lowering overall costs. Traditional economic theory argues that privately run markets can be more costeffective and efficient than a publicly run market for various reasons. The question is whether or not this principle would be successful when applied to the market of incarceration, and if it is responsible for the government to entrust the private sector with imprisonment of people for profit. The situation is the same throughout the country, many State and Federal prisons house inmates over capacity and the Federal and State budgets cannot afford to build costly facilities. Since 1986, expenditures for renovating or building new prisons have decreased while the per capita prison expenditure has more than doubled (Spivak 2009). This is partly the reason for the government moving towards an increasing Private prison industry to help alleviate the overcrowding facilities, and hopefully at a lower cost. The Private prison population was very low when it first began in the early 90s. Only about 7,000 prisoners were held nationwide

(Brickner 2011). This number jumped substantially and by June 2010, 9% of the prison population or 126,000 people were incarcerated in a private facility (Brickner 2011). Private prisons are meeting the market demand for incarceration allowing exponential growth that will continue the United States trend of mass incarceration. The most common argument for privatization is that it fills the gap when government failure occurs. When the government allows private firms entry to a market that is typically public, they are able to expand it, which creates competition and efficiency. The theory is established that, Privatizing the U.S. prisons has an effect on two inefficiencies that usually go along with a government run market, the principal agent problem and rent seeking (Morris 2007). Efficiency is the key term used by proponents of privatization and is expanded upon by specific reasons why the private sector could run the facilities more efficiently. Unfortunately is it not apparent that privatization necessarily fixes these inefficiencies. The characteristics of the industry do not guarantee anything considering the extensive regulations put in place. The regulations restrict the market to operate in a purely competitive way, which to some extent hinders the theory of efficiency. It is also important to note that any of the so called cost saving techniques could have a negative impact on quality of the prisons, and treatment of inmates. One of the most common arguments for privatization is less expensive start up costs. The private prisons advocate that there is less bureaucracy than in public prisons, which saves taxpayers money (Antonuccio 2008). It usually takes a private corporation 18 months to build a prison facility while a public project on average takes two years (Antonuccio 2008). The costs and budgets of private prisons do not require voter approval unlike the public sector (Spivak 2009). Since they do not require voter approval the private facilities can also test and employ

new philosophies and methods for more efficient incarceration. Next, the private facilities are not bound by a public entity like public facilities are. This allows them to buy necessary commodities at cheaper prices on the open market (Morris 2007). They are able to get the economies of scale effect that most corporate offices receive (Morris 2007). Another cost saving technique being used by the private facilities, is keeping its variable costs low by paying its employees less than public prisons. This is the highest cost of operating a prison because labor expenses make up 60%-80% of total operating costs (Camp 2002). The employees of private prison are all non-union so they are able to keep wages low, and control fringe benefits (Cheung 2004). Having non-union laborers allows for many advantages of wage control, and gives the private prisons power to not give overtime and limit employee benefits. It should be possible for the Private firm to keep costs low by operating with fewer employees, using them more efficiently, or a combination of both. But this may not be the case. Corporate prison industry companies deny that they lobby for incarceration, but their day-to-day operations and revenue depends on imprisonment. When it comes down to it, the only thing that matters to these companies is the shareholder. Currently there are 13 private prison companies in the united States and the two largest, Wackenhut, and corrections corporation of America (CCA), have gone public (Perrone 2003). Wackenhut Corrections Corporation (WCC) runs 33 facilities in the United States and in 2000 made a profit of 135 million Dollars (Perrone 2003). CCA is the largest in the nation with 60 facilities in the United States (Perrone 2003). Ethical issues arise when talking about private incarceration. It is controversial in itself that privatization is given the power to take away a persons freedom and rights. Traditionally the only entity that has the power to imprison its citizens is the Federal and

State government, but now companies like CCA and WCC are holding 9% of the U.S. prisoners. Even though they are under the supervision of the government, these companies have an agenda to incarcerate more people to increase their profits. There is big money in incarceration and both CCA and WCC have become experts in exploiting the overcrowded government facilities. It is difficult to compare and measure public and private prisons because they are different from each other in a few aspects. Their differences also skew cost reports and outcomes because of their operation techniques. Private prisons have some advantages over public facilities right out of the gate, in particular is the contracts. The contracts that are established before any facility is built and operated allow the private company to operate with some flexibility. The guidelines that are initially set produce consistent outputs unlike the public facilities that are always changing. This is part of the government market failure, because they cannot value their output unlike the private sector (Morris 2007). Stress on resources is eliminated with contracts because a minimum and maximum capacity cap is set at an exact number (Wright 2010). One of the biggest problems with the public facilities is that they usually operate above their maximum capacity levels, and that adds to their costs. Contracts also allow private prisons to control their inmate population and take those in that are the least costly. This gives them a huge advantage over the public facilities. Low-risk, healthy, and non-violent prisoners fill the cells within a private prison, and allow the facility to operate with the most desired population. Medical expenses are costing prisons millions of dollars per year and account for much of their costs. No matter if an inmate is in a private or public prison, the government is always responsible for the bills (Morris 2007). Medical expenses are only

covered by the private facility for the first 72 hours of illness. After 72 hours the government is required to reimburse the company for the costs (Morris 2007). This is why State and Federal prisons usually carry a more expensive prisoner population because it costs the State more to reimburse the private companies than to just take on these costly inmates themselves (Morris 2007). The State holds inmates that have known psychological or medical history as to avoid extra expenses. The Private facilities usually hold only minimum or medium security prisoners. These inmates on average are less expensive because they require less observation and are less of a risk (Morris 2007). Additionally, power is given to the private prison to reclassify any inmates security level at anytime. They use this power to remove more costly and threatening inmates back to public incarceration (Morris 2007). Ten inmates were reclassified on average every month from medium to maximum level. Usually this was due to an encounter between a prisoner and a guard where the guard was injured in the event. There are only a handful of studies that have investigated the costs of incarceration between private and public facilities and all vary with mixed results. The problem is that the public and private facilities operate differently from each other, hold different inmate populations, and are housed in various facilities. The Federal Senate Bill 2005 outlined requirements stating that private prisons must run at a cost 10% cheaper than public facilities. This piece of legislature is useless because the private facilities are not required by law to release their financial records to the State, so there is no accountability (Morris 2007). Overall, private facilities are cost saving but they do suffer in quality (information summarized in table 1). The State of Arizona did a study in 1997 and 2000 that found the average cost per inmate per day at a government run facility was $43.08 as compared to $35.90 in 1997(Mcfarland 2002). In 2000 the same results, $45.85 for public and $40.88 in the private (Mcfarland 2002). Both

studies found a cost lower than 10%, which is the 2005 bill requirement. There was also a study in 1994 and 1998 by the CCA that claims to have saved $248 million in costs, although the study is biased (Mcfarland 2002). Finally The State of Louisiana did a study in 1996 claiming that per diem costs of a public facility was $26.76 where as the private saved money only costing $22.96(Mcfarland 2002). All these results are very differentiated because there is no consistent study method between public and private facilities. Many of these measurements are case studies and not a general way of measurement. Although the Studies do show a cost saving affect with the use of private prisons, the savings may not be worth the lost quality and measurement of benefits. Private prisons could be increasingly valuable if they have higher turnover rates as compared to public facilities. If the prisoners are more likely to be rehabilitated from their stay at a private prison, than they will be less likely to commit more crimes and end up back in the system, costing more. Recidivism rates are highly important in measuring the rehabilitation efforts made by private and public prisons. The focus should be put on programs that will prepare inmates to become productive members of society once they are released. The Bureau of Justice Statistics surveyed this important aspect of prisons in 2005 and found that educational programs were more available at public facilities than private (Wright 2010) Educational programs would consist of vocational, special education, and adult education. The standards are higher for publicly run prisons, 0% of Federal prisons are without educational programs and only 8.8% of State prisons. These numbers are impressive considering that 12.4% of private facilities were without educational programs (Wright 2010). Along with the lack of educational programs the private facilities were less likely to offer psychological treatment for sex offenders and HIV inmates (Wright 2010).

Finally the government offered more work programs than did private. Although the private facilities offer slightly less anti-recidivism programs, they are also dealing with a more tolerable prison population. Recidivism studies between public and private facilities have only been done in the states of Florida and Oklahoma. The results are mixed and summarized in table 2. Using data from the Florida Department of Corrections, the first three studies found a small incidence of lower recidivism rates for private prisons, but the next was inconclusive (Spivak 2003). The difference came from the follow up time after their release. The first three studies only followed the 396 males for a year after release, while the next study followed up after 4 years (Spivak 2003). The most extensive studies are by Bales et al. in Florida, and by Spivak and sharp in Oklahoma. These two studies found opposite results. Bales was indifferent and Spivak and sharp found that prisoners incarcerated in private facilities have higher recidivism rates (Spivak 2003). No conclusion can be made on the issue until there is further research measuring other states. The other side of the spectrum is the quality of employment and incarceration. The differentiation of labor costs between public and private prisons is often cited as the biggest cost saving technique. Non-union guards and staff can be paid less, given less or no benefits, and overtime is not available. One of the benefits that are associated with the prison industry is job creation and employment opportunities that drive our economy. In the long run, the higher labor costs of public prisons can be seen as an investment into society. They provide long term job security and support higher incomes that are spent into our market economy. Public and private prisons have about the same employment levels but a highly different turnover rate. Figure 2 shows that the total staff per 100-inmate ratio is about the same when comparing private

prisons to BOP (public) prisons (Camp 2002). The effect of savings obtained by cutting wages is reduced because of the costs associated with continuous training of new staff. The staff turnover rate for private facilities is 53 percent while public facilities is only 16 percent (Brickner 2011). This could have a further negative impact on quality because the private prisons usually have a less experienced workforce. It is hard to determine if Privatization is in fact cost-effective because of the skewed information and the differences between the public and private facilities. Although overall costs per inmate incarcerated is lower in private facilities compared to public, this outcome should be expected because of the institutional differences. Because of the long twenty-year contracts, each private facility whether it is CCA or WCC is operating as if it were its own monopoly because the contract ensures they will get paid. The Savings that comes from the private facilities is created by the advantages established in the contracts. They deal with an overall less expensive prisoner population and do not have to worry about over exhausting their resources because of the population caps that ensure they do not operate over capacity. Public prisons offer more rehabilitation opportunities than do private, while not lacking in quality. Private Prisons do fill an important niche roll that does help keep costs lower and open up new space for the overflow of inmates. The government should not switch to a system of entirely privatized prison industry because when it comes down to it, it is the States responsibility to take away the rights of an individual. Private entities alone cannot have the power to control the imprisonment of people that the State has indicted. A complete privatized system would lead to incentives for imprisonment and a demand for criminals. The United States is the most imprisoned country in the world and the government needs to implement solutions to alleviate this problem, but privatization only feeds it. Without the growth of the private facilities, the

Government will be forced to look elsewhere for a solution and towards a system of alternative punishment like parole, probation, and house arrest.

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Table 1 Arizona costs per inmate per day Louisiana per diem per inmate costs

Private 1997 $35.90

Public 1997 $43.08

Private 2000 40.88

Public 2000 $45.85

Private 1996 $22.96

Public 1996 $26.76

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Table 2

Florida
Lanza-Kaduce, Parker, & Thomas Lanza-Kaduce & Maggard, 2001 Farabee and Knight (2002)

Follow up time 12 months

Test sample 198 males pairs 148 male pairs 8848 matched pairs ---------------

Male results Lower recidivism rate Lower recidivism rate Indifferent recidivism rates Indifferent recidivism rates Greater recidivism rates

Women results

4 years 3 years

25% less likely recidivism Indifferent recidivism rates

Bales et al. (2005)

6o months

Oklahoma
Spivak and Sharp (2008)

36-84 months

5,189

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Abramsky, Sasha. "Incarceration Inc." The Nation, 19 July 2004. Web. <http://web.ebscohost.com.hmlproxy.lib.csufresno.edu/ehost/pdfviewer/pdfviewer?sid=9d6ddc6 b-a648-4e38-99e3-91ed581dd25f%40sessionmgr11&vid=1&hid=12>.

Andrew, Spivak L., and Susan Sharp. "Inmate Recidivism as a Measure of Private Prison Performance." Crime & Delinquency. SAGE, 28 Feb. 2009. Web. 23 Apr. 2012. <http://cad.sagepub.com/content/54/3/482>.

Antonuccio, Rachel. "Prisons for Profit: Do the Social and Political Problems Have a Legal Solution?" 2008. Web. <http://web.ebscohost.com.hmlproxy.lib.csufresno.edu/ehost/pdfviewer/pdfviewer?sid=28fc67b d-8993-46a7-b0cd-db300417f57c%40sessionmgr4&vid=2&hid=19>.

Brickner, Michael, and Shakyra Diaz. "Prisons for Profit Incarceration for Sale." Web.ebscohost.com. Aug. 2011. Web. <http://web.ebscohost.com.hmlproxy.lib.csufresno.edu/ehost/detail?sid=acb158c4-8425-4b8ea2c73cfc74ffd179%40sessionmgr15&vid=1&hid=12&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d# db=aph&AN=71530930>.

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Camp, Scott, and Gerald Gaes. "Growth and Quality of U.S Private Prisons: Evidence from a National Survey." Http://www.bop.gov/. Federal Bureau of Prisons, 2002. Web. <http://web.ebscohost.com.hmlproxy.lib.csufresno.edu/ehost/pdfviewer/pdfviewer?sid=57f6cd4 0-67d0-483c-87b8-ec43781fc087%40sessionmgr13&vid=1&hid=12>.

Camp, Scott D., Gerald G. Gaes, and Jody Saffran. "Comparing Private and Public Prisons Using Inmate Survey Data in Assessing Prison Performance a Case Study." Http://cjr.sagepub.com/. Http://www.sagepublications.com, 1 May 2002. Web. <http://cjr.sagepub.com.hmlproxy.lib.csufresno.edu/content/27/1/26.full.pdf+html>.

Cheung, Amy. "Prison Privatization and the Use of Incarceration." WWW.SENTENCINGPROJECT.ORG. Western Prison Project, Nov. 2004. Web. <http://www.sentencingproject.org/doc/publications/inc_prisonprivatization.pdf>.

Glaze, Lauren. "B U Correctional Population in the United States, 2010." Bjs.ojp.usdoj.gov. Bureau of Justice Statistics, Dec. 2011. Web. <http://bjs.ojp.usdoj.gov/content/pub/pdf/cpus10.pdf>.

Mcfarland, Stephen, and Chris Mcgowan. "Prisons, Privatization, And Public Values ." Prisons, Privatization, And Public Values. Dec. 2002. Web. 23 Apr. 2012.

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<http://government.cce.cornell.edu/doc/html/prisonsprivatization.htm>.

Morris, John C. "Government and Market Pathologies of Privatization: The Case of Prison Privatization ." Government and Market Pathologies of Privatization: The Case of Prison Privatization. Blackwell Publishing Inc., 2007. Web. 23 Apr. 2012. <http://onlinelibrary.wiley.com/doi/10.1111/j.1747-1346.2007.00062.x/abstract>.

Perrone, Dinna. "Know, Why We Do Not Know More, and Where to Go from HereComparing the Quality of Confinement and Cost-Effectiveness of Public Versus Private Prisons: What We." Http://www.sagepublications.com. 1 Sept. 2003. Web. <http://tpj.sagepub.com.hmlproxy.lib.csufresno.edu/content/83/3/301.full.pdf+html>.

"State Corrections Spending." Www.pewpublicsafety.org. 2005. Web. <http://www.pewcenterontheStates.org/uploadedFiles/Statistics%20and%20Facts.pdf>.

Wright, Kevin. "Strange Bedfellows? Reaffirming Rehabilitation and Prison Privatization." ERIC Worlds Largest Digital Library of Education Literature. Journal of Offender Rehabilitation, 2010. Web. 23 Apr. 2012. <http://www.eric.ed.gov/ERICWebPortal/search/detailmini.jsp?_nfpb=true>.

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