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February 14, 2012

"Private Prison Corporation Offers Cash In Exchange For State Prisons"

The title of this post is the headline of this notable and lengthy new piece recently posted on The Huffington Post.  It gets started this way:

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, according to a copy of the letter obtained by The Huffington Post.

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.

By now we all should know the lessons of these kinds of stories: "Follow the money"

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February 14, 2012 at 02:55 PM | Permalink

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Comments

"plus an assurance that the prison would remain at least 90 percent full"

Let's make sure they stay full by housing CCA management in them.

Posted by: C.E. | Feb 14, 2012 9:28:50 PM

Well informative and educative post. Thanks for this.

Posted by: Cv examples | Feb 15, 2012 4:28:26 AM

As a prosecutor I enjoy putting criminals who deserve it in jail, but the idea of making a deal with a prison corporation to keep the jail 90% full strikes me as nothing less than insane. We have already seen this problem in Pennsylvania with one county's juvenile
court where the judges actually got kick backs from a private corp. for sending kids to their detention facility.

Posted by: Dennis Skayhan | Feb 15, 2012 8:45:11 AM

It sounds like the contagion has spread from Greece.

Posted by: Fred | Feb 15, 2012 11:22:39 AM

Correction: The contagion has been here for several years. But now the asset-stripping going on Greece has come here.

Posted by: Fred | Feb 15, 2012 3:33:38 PM

What controls would be in place to contain cost increases over 20 years - or can CCA increase its rates as much as it likes?
What's the recourse if they provide crappy service? Can they import dangerous criminals and sex offenders to fill up additional prison beds in the state? (And who pays if the imported criminals escape?)
Doesn't this limit the ability to reform sentencing if you are committing to 20 years at 90% occupancy?
Isn't it short-sighted to enter into a 20 year contract because of a current budget shortfall? (How have other infrastructure privatization initiatives paid off for the govts entering into them?)
Any savings come from reduced labor costs. Isn't it short sighted to close a short-term budget gap by reducing the economic basis of the state: trading public jobs for lower-paying, fewer-benefits, less pension jobs (plus sending a bunch of money to pay multi-million dollar salaries for executives who live in a different state?
Why don't states reduce their prison populations and rent out their empty prisons to compete with CCA? (Many states did this before private prisons came onto the scene and built up their inventory of beds. Maybe there are some non-competition clauses stuck in some contracts?)

Just a few questions for those who are undecided and think this deserves further consideration. I've co-authored a book on private prisons that is a more sustained critical examination. Part of it notes:
Median earnings for all correctional officers and jailers were $35,760, but private prisons paid $25,050. But private prison firms also pay their executives substantially more than the head of a Department of Corrections who manages substantially more inmates. For example, the cash pay (excluding stock awards and options) of the CEO for the GEO Group was almost $3 million in 2007 for having 54,000 beds under supervision. The Director of Corrections for Michigan was paid just over $200,000 that year for having almost 52,000 inmates under supervision and a parole and probation caseload of another 200,000 people.

Paying those at the top substantially more while paying those at the bottom substantially less directly contributes to income and class inequality. This process is exacerbated by additional fees at the top to the Board of Directors, who make $50,000 a year at CCA and $60,000 a year at GEO, plus fees for attending various meetings (including a compensation committee that decides how much the executive gets paid). In comparison, the median household income in 2007 was $50,230, so the pay for the part-time director position of a private prison was more than what half of all U.S. households earned from all their employment responsibilities. Overhead costs for the directors, SEC lawyers, consultants, mergers and acquisitions, “customer acquisition” (advertising and lobbying), shareholder lawsuits, and shareholder relations mean a wide variety of criminal justice workers will have lower wages and less economic security than if they had a government job.
http://www.paulsjusticeblog.com/2010/03/punishment_for_sale-private_prisons.php

Posted by: Paul | Feb 15, 2012 4:33:06 PM

Governments usually get the short end of the stick when they get involved with private companies like this. Running a prison is not cheaper nor more efficient simply because a company does it rather than the government.

Posted by: Bryan Gates | Feb 16, 2012 12:09:59 PM

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