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Correctional Institutions

Marissa Oudt

May 5, 2017

Correctional Institutions Marissa Oudt May 5, 2017

Correctional institutions have existed in the United States from the beginning and have evolved over hundreds of years. Facilities are run by the government as well as private corporations who comply with federal laws and regulations. These facilities range from low to maximum security and hold a wide range of criminals. This document provides a more in depth look at the correctional institution Industry in the private and public sectors beginning with an overview and continuing on with major players, services, target markets, market drivers, industry challenges, financial performance, international markets, industry threats, and trends.

Overview

History

While punitive imprisonment dates back to ancient Rome, Egypt, and Babylon, it was not until much later that more modern forms of correctional institutions were established (Correctional, 2016). During the Prohibition era, crime rates rose to new heights and it became clear the United States needed a stronger and more well established system, this lead to the creation of the Bureau of Prisons in 1930 (Correctional, 2016). The federal prison system was now under their jurisdiction.

Industry Evolution

Imprisonment has always been about punishment, but it wasn't until the second half of the twentieth century that rehabilitation became a focus. It became important to help these individuals learn from their mistakes and leave the facility in hopes that they will have a positive impact on the world and not return to the system. Supporters of the rehabilitation concept argue,

“given the proper treatment and social services, including educational, vocational, and psychiatric care, the criminal can be remolded into a well-adjusted and productive member of society” (Correctional, 2016). Institutions must give prisoners the opportunity to improve and grow as people. As time went on, for-profit/ private institutions came into play (Bryant, 2015). Given the United Statesextremely high incarceration rate, these private facilities were helpful alternatives when overcrowding became an issue in public prisons. Today, private and pubic institutions work with the government to maintain and better the correctional institution industry.

Major players

Private

There are two major companies in the private sector, the GEO Group and Corrections Corporation of America. According to Cohen (2016), these two privatized corporations made a combined $361 million in profits during 2015. In addition to managing their own correctional facilities, these private corporations also have the ability to buy out publicly owned facilities, targeting those who are experiencing financial hardships. The private sector works with the government under contracts to make profits and run their institutions.

The GEO Group

Established in 1984, the GEO Group’s headquarters can be found in its original location of Boca Raton, Florida (O’Hollaren, 2016). The private entity has 19,370 employees and approximately 624 shareholders; they provide services such as counseling, education, and treatment for inmates who struggle with drug and alcohol abuse (GEO, 2016). While this is a very particular industry,

it is extremely large because of America’s high incarceration rate. The programs provided in these institutions have grown and improved over the years to provide inmates with a greater chance of rehabilitation. The GEO Group controls many domestic markets, such as Australia, South Africa, and Canada; in addition they have “leading shares of privatized correctional and detention facilities management services market for the states of California, Florida and Texas”

(O’Hollaren, 2016). It is evident that this private institution holds a large sum of power in this industry.

Corrections Corporation of America

The CCA was founded in 1983 in Nashville, Tennessee (O’Hollaren, 2016). As shown in Figure 1, this company controls 34.9% of the private sector, making it the largest player. The CCA was the first private corporation to buy out a state owned prison. The purchase of Lake Erie Correctional Facility in Ohio came with a 20 year contract agreeing that the prison would be kept at 90 percent; this transaction allowed Ohio to save $3 million a year in prison operating costs. In addition, $72.7 million from the sale was used to patch a budget hole (Elbow, 2012). In addition to acquiring public facilities, the corporation also provides private prisoner transportation for government agencies (O’Hollaren, 2016). They offer several rehabilitation programs that focus on general education and training simulations for future employment. Inmates are able to get their GED while incarcerated, increasing their likelihood of having a normal life after being released. Although these individuals are being punished for their wrongdoings, it is fortunate that internal programs make an effort to put prisoners on a positive track.

Figure 1

it is extremely large b ecause of America’s high incarceration rate. The programs provided in these

Public

The public prison system is composed of four levels: federal, state, county, and city. Federal prisons include minimum, low, medium, and high security facilities. On the other hand, state prisons are designed to fit the needs of their area. City and county jails are local and used to hold individuals who have been arrested and are waiting for their trial. In addition, those who have been convicted of a minor crime and have a sentence of a year or less are often held in jails rather than prisons (Correctional, 2016). Because both the private and public sector work directly with the government, they share many similarities.

Market Elements

Products and Facilities

The different types of housing include a range of minimum to maximum-security facilities and community correctional facilities, also referred to as halfway houses. Medium security prisons are the most prevalent and have the highest demand as well. Halfway housing, used to transition

recently released prisoners back into the real world, are the second most expensive type of

facility to maintain and run. The largest “federal customers for the industry are the Federal Bureau of Prisons, the United States Marshals Service and the Bureau of Immigration and Customs Enforcement”; the figure below shows the size of the markets that buy the industry’s products or use its services” (O’Hollaren, 2016). Measured in terms of revenue contributed to the industry, state and local governments are the largest markets in this category.

Figure 2

facility to maintain and run. The largest “federal customers for the industry are the Federal Bureau

Market drivers

There are several market drivers including the incarceration rate, crime rate, and government

consumption the impact the prison industry. As the incarceration rate rises, “prisons become overcrowded and federal and state governments are more likely to employ industry services”

(O'Hollaren, 2016). The same concept applies to the crime rate; as crime increases, the number of arrests will follow the trend upward, meaning there will be a larger need for prisons. Because private correctional institutions depend on contracts with federal and state government to earn revenue, they are reliant on government consumption and investments; the graph below shows an optimistic prediction for the privatization sector (O'Hollaren, 2016). These market drivers are sensitive and subject to change based on current events and fluctuations in the economy.

Figure 3

facility to maintain and run. The largest “federal customers for the industry are the Federal Bureau

Financials

The two sectors of the industry differ when it comes to financials. Public prisons are non-profit institutions and private prisons, run by corporations, are motivated by profits. Target markets include government agencies as well as stockholders and politicians. Private institutions have contracts with the government to receive stipends based off of the number of prisoners they house or in some cases a fixed monthly or yearly amount (Bryant, 2015). For example, the government may agree to pay $150 per inmate a day, even though it may only cost $100 per day to house one prisoner; a contract like this occurs when the agreed dollar amount is less expensive than the cost of housing an inmate in a public prison (Bryant, 2015). In this case, the private facility would make $50 in profit per inmate everyday. In order to make the largest margins, price cuts are made in every department when the opportunity presents itself. Private corporations also make profits by becoming publicly traded, lobbying politicians to pass harsher laws, and encouraging the strict enforcement of laws to ensure a constant influx of prisoners. On the opposite side, public prisons often have higher operating expenses and only receive government money to cover unavoidable expenses.

Figure 4

Financials The two sectors of the industry differ when it comes to financials. Public prisons are

Source: IBISWorld

Challenges and Threats

Isolation of Inmates

Many people accuse private correctional corporations of abusing their power. Privatization in an industry vulnerable to criticism can be a tricky operation. In order to fill empty beds, private facilities form contracts with the states to move incarcerated individuals further away from their homes, causing many to lose contact with their families (Research, 2016). In addition, prison telephone companies charge unreasonably high rates making it extremely difficult for many prisoners to afford calls and video messages (Research, 2016). It seem as if the private sector is making an effort to further isolate inmates by adding obstacles that cut them off from society. There are concerns that limiting their contact to outside parties further could hinder rehabilitation efforts.

Lawsuits

The public tends to associate negative feelings with the correctional institution industry. Taking this into consideration and the nature of their business, it is no surprise lawsuits are a major

issue. The majority of lawsuits filed concern the quality of healthcare and education provided to inmates. In many incarceration centers, these programs do not meet government standards. Considering the entire industry works closely with the government, this should not be an issue. Society’s harsh view of prisons and jails increase the possibility of lawsuits being filed over technicalities and seemingly unimportant complications. Things that would most likely be overlooked in other industries are magnified and nitpicked, making it extremely important for companies and employees to do things by the book in order to avoid litigations.

Private Vs. Public

While the two sectors are in competition, the ties between private and public incarceration centers suggest that they rely on one another. If the government stomped out private corporations, public facilities would technically have a monopoly over the profits. However, when overcrowding becomes an issue, these public institutions would have no other choice but to bring back the private sector to compensate for the issue at hand. Government cuts in public prisons over the next five years will increase the need for private corporations to take in prisoners (United States, 2014). Rising incarceration rates and a lack of funding forces these two sectors to cooperate with one another in order to find viable solutions to the challenges presented.

International Markets

The Nordic Model

These prisons focus on the recovery and growth of inmates through various features within the

system. While their common areas include activities, such as “table tennis, pool tables, steel darts and aquariums” which are rarely found in incarceration centers, perhaps the most noteworthy

distinction is the way their staff acts towards the inmates (Aleem, 2015). Nordic prisons have the reputation of treating prisoners like people, rather than dehumanizing them. Not only are their staff members the guards and security, they also double as contact officers. Every inmate has an officer who helps insure that after their release, they will be successful in the real world and stay out of the system (Aleem, 2015). Having a one on one relationship with someone genuinely looking out for your best interest is a rare thing to have in prison. While this is very different from traditional prisons, the results reflect that this change may be a more effective way to run correctional institutions.

“Open” Prisons

This version of incarceration is exactly what it sounds like. “Open” prison refers to an institution

that bares more resemblance to college dormitories or small apartments as opposed to jails. Inmates have access to “televisions and sound systems and are able to commute to a job and visit families while electronically monitored” (Aleem, 2015). These individuals work closely with the staff and are not required to wear certain attire. These facilities grant prisoners more freedom in

hopes to rehabilitate them and place them on a path to success. This progressive environment is unique because inmates do not resent the system they have been placed into; instead, they are appreciative of the help it has provided to get them back on their feet.

Sweden’s Success Prisons in Sweden have taken a different approach to the way inmates are treated, focusing on rehabilitation rather than incarceration. After taking advantage these techniques, such as the Nordic Model and “open” prisons, Sweden’s incarceration rate has dropped significantly, going from 5,722 prisoners to 4,500 out of a population of 9.5 million (Aleem, 2015). In addition, the percentage of prisoners that do not return to the system after their release is much higher than that of the United States.

Trends

Outsourcing

The problem of overcrowding in US prisons and correctional facilities has become a major issue over the years. California prisons were operating at 144% capacity, forcing them to come up with alternate solutions for where to place prisoners (O'Hollaren, 2016). Releasing inmates that had minor charges against them helped to compensate the overflow, but it wasn’t enough. There was also a trend in turning to private detention centers for assistance. Private corporations are becoming more of a necessity to the industry. Our incarceration rate is rising at a rate we cannot keep up with, forcing the US to accept more expensive alternatives.

Immigrant Detention

Recently there has been a great deal of attention on immigration policy, specifically in relation to Trump’s presidency and privatized prisons. Since 9/11, Corrections Corporation of America and the GEO group have focused their efforts on immigrant detention and predicted large revenues’ specifically from Immigration and Customs Enforcement (Elbow, 2012). Privatized corporations have made contracts with the government to increase the detainment of immigrants into their facilities. While CCA has lost a great deal of support from activists and religious groups, it does not appear that this trend is dying down. Since Trump has been elected into office, the detainment of immigrants has skyrocketed and so has the stock of private prisons. With every memo, executive order, speech, or tweet from President Trump about the crackdown on immigration, stock prices of Core Civic and GEO group climb, reaching increases of up to 120 percent (Sommer, 2017). This political transition into the Trump presidency has been highly beneficial for the private sector of the industry.

Conclusion

Correctional Institutions are evolving in America and around the world. This system has been in place far before our civilization came about. Positive improvements, such as rehabilitation efforts, provide a positive vision for the future. It is often forgotten that these institutions are businesses and operate based on the same principles as any other corporation. Private and public, this complex industry has many moving parts that work together in order to operate effectively. America’s increasing incarceration rate is causing both sectors to expand and play a larger role in our society and economy.

References

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Bryant, Sean (2015). The business model of private prisons. Investopedia. Retrieved from

Correctional institutions (2016). Encyclopedia of American industries. Farmington Hills, MI:

Gale. Retrieved from Business Insights: Essentials.

Cohen, Donald (July 2016). It’s been a rough few weeks for the private prison industry. Huffington Post. Retrieved from http://www.huffingtonpost.com/donald-cohen/its-been-

Elbow, Steven (February 2012). Corrections corporation of America offers to buy state’s prisons. Madison Capital Times. Retrieved from ABI/INFORM collection.

GEO Group Inc. data report (2016). Mergent, Inc. Retrieved from Mergent Online Database.

O'Hollaren, K. (November 2016). IBISWorld Industry Report 56121. Locked up: Public outcry has forced some facilities to close, damaging revenue. Retrieved from IBISWorld database.

Research brief: How private prison companies increase recidivism (June 2016). In the public interest. Retrieved from https://www.inthepublicinterest.org/how-private-prison- companies-increase-recidivism/

Sommer, Jeff (March 2017). Trump immigration crackdown is great for private prison stocks. The New York Times. Retrieved from https://www.nytimes.com/2017/03/10/your-

United States correctional facilities market: Demand for private facilities will grow as prisons remain overcrowded (2014). Chatham: Newstex. Retrieved from ProQuest database.