Private Prison Corporation Offers Cash In Exchange For State Prisons
by Chris Kirkham from The Hffington Post
As state governments wrestle with massive budget shortfalls, a Wall Street giant is offering a solution: cash in exchange for state property. Prisons, to be exact.
Corrections Corporation of America, the nation's largest operator of for-profit prisons, has sent letters recently to 48 states offering to buy up their prisons as a remedy for "challenging corrections budgets." In exchange, the company is asking for a 20-year management contract, plus an assurance that the prison would remain at least 90 percent full.
The move reflects a significant shift in strategy for the private prison industry, which until now has expanded by building prisons of its own or managing state-controlled prisons. It also represents an unprecedented bid for more control of state prison systems.
Corrections Corporation has been a swiftly growing business, with revenues expanding more than fivefold since the mid-1990s. The company capitalized on the expansion of state prison systems in the '80s and '90s at the height of the so-called 'war on drugs,' contracting with state governments to build or manage new prisons to house an influx of drug offenders. During the past 10 years, it has found new opportunity in the business of locking up undocumented immigrants, as the federal government has contracted with private companies in an aggressive immigrant-detention campaign.
And Corrections Corporation's offer of $250 million toward purchasing existing state prisons is yet another avenue for potential growth. The company has billed the "corrections investment initiative" as a convenient option for states in need of fresh revenue streams: The state benefits from a one-time infusion of cash, while the prison corporation wins a new long-term contract. In addition, supporters of prison privatization have argued that states can achieve cost savings through outsourcing, as prison corporations give fewer benefits to employees.
"We believe this comes at a timely and helpful juncture and hope you will share our belief in the benefits of the purchase-and-manage model," reads the letter from Harley Lappin, CCA's chief corrections officer, who was a former director of the Federal Bureau of Prisons.
Ohio sold off one of its largest prisons to Corrections Corporation last year as a way to plug holes in its budget, and government officials estimate that outsourcing the prison could save the state $3 million annually. Louisiana Gov. Bobby Jindal (R) proposed putting three state prisons on the block last year to generate one-time revenue, but he failed to persuade state lawmakers to endorse the plan.
Others have raised serious doubts about the wisdom of selling off and privatizing state prisons, which could give private corporations substantially more bargaining power in long-term contracts with states. Prison management contracts can be canceled or re-bid frequently, with the state still retaining ownership of the prison as an asset. But if a private company owns the prison, the state would have fewer options if it wanted to cut ties. Any alternatives for housing prisoners would likely cost more, such as building a new prison from scratch or finding another company to take in its inmates.
A series of studies has also cast doubt on the private prison industry's main selling point: efficiency. Research across numerous states has shown that the promised savings from private prisons can be illusory at best. Cost comparisons often fail to account for extra administrative expenses borne by the state, or differences in health care costs for sickly inmates who normally remain in state supervision.
Yet critics point to inherent problems in such long-term contracts, particularly provisions that require a prison to be 90 percent full throughout the life of an agreement. In Ohio, for example, contractors are guaranteed payment at the 90 percent rate "regardless of the actual number of inmates at the institution at that time."
The mandate to keep prisons full raises questions about cost efficiency -- what if there aren't enough inmates? -- but it also presents a moral question about maintaining a constant supply of new prisoners.
"It becomes a self-fulfilling prophecy," said Shakyra Diaz, policy director of the American Civil Liberties Union of Ohio. "In order to have it at 90 percent, you need to be able to make criminals to fill it at 90 percent."
Corrections Corporation's filings with the Securities and Exchange Commission clearly point out that business success is tied to a status quo in criminal justice policy.
"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 our criminal laws," the company's most recent annual filing noted. "For instance, any changes with respect to drugs and controlled substances or illegal immigration could affect the number of persons arrested, convicted, and sentenced, thereby potentially reducing demand for correctional facilities to house them."
At this point, it's unclear how many states will be interested in selling off prisons. Arizona, New Hampshire and Florida are considering privatizing the management of state prisons, but so far none have specifically broached the topic of a sale.
State corrections officials who were contacted in California, Pennsylvania, Virginia, Montana, Georgia, Texas, Illinois and New York all said they were not considering such prison sales at this time. In Illinois and New York, laws prohibit state inmates from being housed in private prisons, according to corrections officials.