As we saw in Part 2 of this series, the United States has a long history of using the prison system to pad the profits of private businesses. Previously, it was done through in-house prison labor or the convict leasing system, but now there is an entire industry built on taking government out of the prison business entirely. This process is sold to state legislature & taxpayers as a “cost saving,” but someone still pays.
Need to catch up?
- Part 1: Profit & Politics in Alabama Prison Reform
- Part 2: History of Prison Privatization – Making Crime Pay
- Part 3: Who Profits from Prison Privatization?”
- Part 4: Private Prisons & Government – A Revolving Door of Influence & Insiders
- Part 5: Sweetheart Contracts Fill Beds & Pad Profits
- Part 6: Prison Shouldn’t Be A Picnic, But Also Shouldn’t Be A “Hell on Earth.”
The for-profit prison system is dominated by three companies:
- Corrections Corporation of America (CCA): The first company in the US to operate for-profit prisons, CCA is also the nation’s largest private prison provider.
- GEO Group: A full-service provider and “world leader in the design, development, financing, and operation of correctional , detention, and community re-entry centers worldwide.” The Web site suggests that the company can offer cost savings of “up to 30%.”
- Management & Training Corp (MTC): A private prison company that stresses its commitment to “rehabilitation through education and job training.”
The Web sites of all three companies stress three main points:
- Private-public partnerships save money.
- Private prisons are safe for inmates & employees.
- Don’t believe the first two? Let us show you studies to prove it!
Today, we’ll look at the first claim. Tomorrow, in Part 4, we’ll discuss how the private prison companies have become the darlings of Wall Street. And on Thursday, Part 5 will take a look at whether private prisons are a good deal for inmates and/or employees.
Private Prison-Funded Temple University Shows Private Prisons Save Money
All three companies cite a 2013 Temple University study that claims cost savings and other benefits from prison privatization. But they fail to note one important point: all three companies funded the study. After the study was complete, the authors submitted numerous op-eds to newspapers and did media interviews. Yet they admit that, in many cases, they failed to offer full disclosure about their funding source. This summer, the university investigated ethics complaints filed against the professors, but declined to publicize the results.
Another critic of the study emphasized problems with the methodology, and called the funding criticism a distraction and “low hanging fruit.” Here is his ”Open Letter to CCA” in PDF format.
The money quote:
First, the study fails to account for dramatic demographic differences among populations housed in any one of California’s 34 public adult facilities and your 4 private adult out-of-state facilities in which 8,600 CDCR prisoners currently reside.
Second, the research fails to acknowledge your company’s practice of securing health-related contractual exemptions, an exercise that effectively inoculates you from having to house exceptionally “high-cost” prisoners.
As I’m sure you’re aware, the practice of incarcerating the least expensive California prisoners artificially deflates your per diem rates while correspondingly inflating the cost of operating in-state public prisons, precisely the types of facilities that don’t have the financial luxury of “cherry picking” young and healthy individuals.
So which types of individuals are you contractually obligated to house?
The answer: 8,600 of the youngest, healthiest, and least expensive CDCR prisoners. These exemptions — exemptions negotiated by your company – represent significant financial externalities (re)absorbed by the state. Surprisingly, they aren’t once mentioned in the Temple report.
Despite their conspicuous absence from the study, these exclusions absolutely must be considered in any public-private cost-comparison analysis because prisoner health care outlays account for 31 percent of the entire CDCR budget and represent the single greatest line-item expenditure after “operations / security.
Some of this argument might sound familiar to people who have followed the debate over charter schools. It’s been constantly alleged that charter schools are essentially allowed to cherry-pick the “best” students – meaning those already motivated to do well and who have parents who are involved with the family and with the school itself. Special needs kids and those requiring remedial help often don’t last long at some charter schools – if they get admitted at all.
Public schools aren’t allowed to be selective: they take all comers. So do public prisons. So when we’re comparing costs of public vs private prisons, it’s important to understand exactly who is in which prison and why.
Another Temple University Study Explains The Difficulties Of Studying The Issue
Temple University’s Stephen Belenko conducted a survey of state reports and found what virtually every other researcher has found: it’s almost impossible to compare public & private prisons on a case-by-case basis because the variables… well… vary. How do you compare the operating costs of a 50 year old building housing maximum security inmates to a brand-new, energy efficient facility housing minimum to medium-security inmates?
Given the scope of cost items that need to be taken into account, and the difficulty of collecting the data to accurately estimate these costs, it is not surprising that some studies end to underestimate both public and private prison costs. The costs of land acquisition and construction for privately-operated prisons may not be fully accounted for if paid for with public funds. Public agency operating cost estimates often ignore land acquisition, construction, major maintenance, central administrative costs, and costs borne by other government agencies. Private prison costs are often underestimated by not including public agency administrative costs from those categories listed above. Capital outlays may be ignored for site purchase, design costs, construction, major expenditures for new equipment, urniture and fixtures, or allocation of depreciation for equipment purchased in previous years, although these costs may be amortized into the reimbursement rate to private prison operators.
Demographics Of Private Prisons
A 2014 study of inmate demographics in Texas, Ohio, Tennessee, California, Arizona, Colorado, Georgia, and Mississippi found that inmates in those states’ privately-run prisons are more likely to be young, healthy, people of color than inmates in state-run facilities.
A quick look at some of the contracts CCA & other companies have with states shows that the study’s conclusions are likely correct. A 2011 study by the Arizona Department of Corrections (PDF) notes on page 29:
Generally, state-run prisons house a higher percentage of inmates with higher medical and mental health needs than private prison units private prison units considered to be corridor facilities have access to off-site healthcare and can house inmates with more severe medical and mental health needs. Additionally, two private contracts have a $10,000 cap per inmate on health care services. When the health care cost of a single inmate exceeds this cap, the inmate is returned to a state-run prison unit and the state assumes all further medical treatment costs associated with the inmate.
Other contractual exemptions include:
- California: “…all expenses in excess of $2,500 annually per inmate for medically necessary, off site hospital or emergency care…all HIV or AIDS related inpatient and outpatient medical costs and the costs of providing AZT or other medications therapeutically indicated and medically necessary for the treatment of offenders with HIV or AIDS.”
- Mississippi: “MTC [Management and Training Company] will not be responsible or liable for providing counseling and/or mental health programs. MTC will not be responsible or liable for providing medical, mental health, optometry, pharmaceutical, dental, or similar services. MDOC shall provide security and control of inmates for outpatient needs and /or hospitalization.” In addition, private prisons in the state are only responsible for the first 72 hours of medical care for all inmates. After that, the state picks up the entire tab. (PDF, page 8)
- Oklahoma: “The contractor will be responsible for the treatment of offenders infected with HIV. … If the number of Hepatitis C positive offender population being treated at any one time is more than two (2) then the DOC will transfer those additional offenders out of the facility. When an offender reaches end stage Hepatitis C and can no longer be treated at the contractor’s facility, the DOC will transfer the offender out of the facility…The contractor may claim reimbursement from the department for the inpatient hospitalization in a licensed hospital, for the hospital charges only, not separate physician or other provider charges, for the amount which exceeds 50,000 per inpatient hospital discharge for each single hospital stay which originates while the contract for services is in effect between the contractor and the department.”
In addition, many private prison contracts are for minimum or medium-security facilities, which are less expensive to operate. That leaves the state to operate maximum-security facilities and artificially inflates the perceived cost savings of privatization. In Arizona, the DOC found that even lower-security private prison beds cost more. Minimum security beds save 3 cents per day, but medium-security cost $4.60 per day more in private prisons. 46% of private prison inmates were in medium-security facilities, meaning that prison privatization actually cost Arizona taxpayers.
It’s the same in other states too:
- A recent study for the state of Utah found no cost savings in private prisons.
- In Texas, a 2010 report by the Legislative Board found that private prisons in that state cost $6.65 a day less per bed than state prisons but noted the private-prison figure didn’t include costs carried by the state, such as transporting and classifying inmates.
Cost comparison between public & private prisons is almost impossible because contracts are written to favor the corporations. They get younger, healthier, less dangerous inmates, are protected from large health care costs, and aren’t subject to the same level of oversight and accountability as public prisons. These companies would have to be totally incompetent if they couldn’t show cost savings: they have a sweet deal whereby risk is socialized and profits are privatized.
This lack of accountability can have serious consequences for prison inmates, employees, and local communities. In Part 4, we’ll look how these for-profit corporations have managed to negotiate such sweet contract deals with public agencies.