Tuesday, October 17th, 2017

Follow Us

Private Prisons: Lowering the Bar to Turn a Buck?

Read Part 1: “State Prisons Saving Money by Shaving Time”

Like California, most states are facing budget problems; however, some are turning to the private prison industry for help. We have public and private prisons on both the state and federal level. On average, state prisons run at 110 percent capacity, and federal prisons at 137 percent. It is much cheaper for states to contract with a private prison rather than build a new one.  According to Reuters, “States can save between 10 percent to 20 percent on the cost of housing an inmate from outsourcing to private players.”

After the 2001 recession, states saw a wave of prison privatization. With our current recession, the states must also deal with already overcrowded prison systems. Not to mention the fact that the recession could still cause an increase in crime. Today, nearly ten percent of U.S. prisons and jails have been privatized.

In 2009, the largest private prison corporation, the Correction Corporation of America or CCA, saw their revenue increase 4 percent, up to $427 million. However, even though private prisons may be cheaper for states, states with no money simply have less money to spend. Many states have cut their corrections budget; including money to private prisons. CCA has seen some setbacks this year: they lost a contract with Washington and their contract with Arizona is expiring this spring.

Many investors believe that private prison companies, such as Correction Corporation of America, Geo Group and Cornell, are all stocks to watch. Most private prisons are publicly traded companies—this means you can own stock in a prison. Private prisons have a steady profitability. Even with individual state’s facing budget dilemmas and this recent decrease in crime, prisons are still overcrowded and most people believe that demand for prison beds will only increase. The echo boomers, sons and daughters of baby boomers, are entering the 18 to 24 age range, the years when people commit the most crimes. A few years ago the Federal Bureau of Prisons predicted they would have a 36,000 bed shortfall by this year (2010) because of this trend alone.

The Corrections Corp of America (NYSE: CXW) is the nation’s largest private provider of correctional facilities to government agencies. They started the private corrections management industry over 25 years ago. The CCA doesn’t just house prisoners; in fact, they call themselves “a full-service corrections management provider” and, according to their website, work in “design, construction, expansion and management of prisons, jails and detention facilities, as well as inmate transportation services through its subsidiary company TransCor America.”

CCA is the fourth-largest corrections system in the country. The top three are the federal government and two states. They have a 95 percent contract renewal rate (which makes their success pretty much a sure thing). According to their website, “CCA houses approximately 75,000 offenders and detainees in more than 60 facilities, 44 of which are company-owned, with a total bed capacity of more than 80,000.” The CCA is currently facing a lawsuit filed by the ACLU.

The Geo Group (NYSE: GEO) operates correctional facilities around the world, including Europe, Africa, Canada and Australia. They offer other services such as home detention, electronic monitoring and the development of mental health institutions. GEO has approximately 49,000 beds worldwide. Most investors believe that the company is solid.

Cornell Companies (NYSE: CRN) has provided a corrections and treatment programs for adults and juveniles, including low and medium security prisons, detention centers, residential re-entry centers, drug and alcohol treatment programs, juvenile detention and alternative education. At the end of 2009, Cornell saw their revenue increase 6.6 percent to $412.4 million. They have been awarded a 10-year contract by the Federal Bureau of Prisons and recently completed a new facility in Colorado.

Morally wrong?

While private prisons may be solid investments, many people believe that they are morally and ethically wrong, not to mention unsafe. They have fewer regulations to follow and since they are about making a profit, they often are understaffed and undertrained. Guards are not paid well; therefore, there is a higher turnover and they don’t care as much as they should.

The Prison Policy Initiative and Western Prison Project published The Prison Index: Taking the Pulse of the Crime Control Industry (2003), in that book they discovered that the turnover rate of correctional officers in private prisons was 40.9 percent per year while in public prisons it was only 15.4 percent per year.

Proponents argue that private prisons bring much-needed tax revenue to underfunded communities. Building private prisons creates jobs. In fact, entire towns have sprung up around prisons. With the census going on there is currently a debate as to who gets to count the prisoners: counting prisoners would give areas where there are prisons more representation and more funding.

The main argument against the private prison industry is that it is immoral and fundamentally wrong. That instead of deterrence it becomes about profits. The more prisoners they house, the more money they make. Some argue that private prisons attempt to maximize profit by reducing essential services, such as food, clothing, medical care, and staff costs.

The nation’s prison demographics are also disturbing. According to a 2008 Washington Post article, “Minorities have been particularly affected: One in nine black men ages 20 to 34 is behind bars. For black women ages 35 to 39, the figure is one in 100, compared with one in 355 for white women in the same age group.”

 And then there is convict leasing. Convict leasing was prevalent in the Southern U.S. in the late 1800’s and involved leasing out prisoners to private companies that paid the state a fee. The convicts worked for free for the companies and were returned to the prisons at night. While that system is no longer in place, many private prisons have their prisoners working for pennies, usually as customer service representatives. Many private prison opponents claim there is no difference between this and slave labor. It is just one more way private prisons maximize profits.

Finally, taxpayers argue that private prisons allow prisons to be built with less accountability to the public. Taxpayers don’t vote on prison bonds to raise construction money and have less say where the institutions are built. Politicians then don’t have to deal with a constituency that doesn’t want prisons in their area. In addition, private companies are often given nice tax breaks and incentives. Meanwhile, the community has to pick up the tab for dealing with the social services and agencies that come into play when taking care of children whose parents are in prison.

No matter what you think about the private prison industry, it’s most likely not going anywhere.

Read Part 1: “State Prisons Saving Money by Shaving Time” which explores the crime rate reduction and early release of prisoners due to lack of money.

Cara Bruce is the co-owner of Pinchback Press.

This entry was posted in Personal Finance and tagged , , , , , , , . Bookmark the permalink.