What factors contributed to the emergence of a market for private prisons in the U.S.? Discuss the relationship between politics, ideology, and

Bureau of Justice Assistance

Monograph

U.S. Department of Justice

Office of Justice Programs

Bureau of Justice Assistance

EMERGING ISSUES PRIVATIZED PRISONS

ON

This document was prepared by the National Council on Crime and Delinquency, under grant number 97–DD–BX–0014, awarded by the Bureau of Justice Assistance, Office of Jus- tice Programs, U.S. Department of Justice. The opinions, findings, and conclusions or recom- mendations expressed in this document are those of the authors and do not necessarily represent the official position or policies of the U.S.␣ Department of Justice.

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Bureau of Justice Assistance

Emerging Issues on Privatized Prisons

MonographFebruary 2001 NCJ 181249

James Austin, Ph.D. Garry Coventry, Ph.D.

National Council on Crime and Delinquency

Cover photo used with permission from The American Correctional Association.

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Emerging Issues on Privatized Prisons

Foreword

One of the most daunting challenges confronting our criminal justice sys- tem today is the overcrowding of our nation’s prisons. The past decade has witnessed a doubling of the number of adult offenders brought before our courts. According to one estimate, as we begin the new millennium, the nation’s inmate population approaches the 2 million mark. Securing and humanely housing such a large population has placed an enormous burden on prison administrators as well as the federal, state, and local jurisdictions that must finance the institutional confinement of so many inmates.

In the 1980s, the public’s frustration over a perceived failure of the penal system to rehabilitate offenders and a reluctance to provide more funding for correctional institutions, coupled with the increasing demand for more jail space, precipitated a crisis. One proposed solution that emerged was the privatizing of prisons and jails by contracting out, in part or in whole, their operations. In 1987, the number of inmates incarcerated in privately operated correctional facilities worldwide was 3,100; by 1998 the number had risen to 132,000. In the United States today there is a total of 158 pri- vate correctional facilities. Proponents of privatization have suggested that allowing the facilities to be operated by the private sector could result in cost reductions of 20 percent.

To explore the issues pertaining to the privatization of prisons, the Bureau of Justice Assistance funded a nationwide study that has resulted in this monograph, Emerging Issues on Privatized Prisons. The monograph exam- ines the historical factors that gave rise to the higher incarceration rates, fueling the privatization movement, and the role played by the private sec- tor in the prison system. It outlines the arguments, both in support of and opposition to, privatized prisons, reviews current literature on the subject, and examines issues that will have an impact on future privatizations. An appendix provides practical guidelines for policymakers who are consid- ering privatizing a facility.

The study resulted in some interesting conclusions. For example, it was discovered that, rather than the projected 20-percent savings, the average saving from privatization was only about 1 percent, and most of that was achieved through lower labor costs. Nevertheless, there were indications that the mere prospect of privatization had a positive effect on prison ad- ministration, making it more responsive to reform. It is hoped that this monograph will prove enlightening to those involved with the issue of privatized prisons and promote a greater discussion about it.

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Emerging Issues on Privatized Prisons

Executive Summary ………………………………………………………………………….. ix

Current Trends in Privatization ……………………………………… ix

Prior Research Findings on Privatization ………………………… x

National Survey Results ………………………………………………….. x

Future Trends …………………………………………………………………. xi

Chapter 1 Introduction ……………………………………………………………………. 1

Chapter 2 The History of and Key Debates Over Privatization ……. 9

Privatization of Corrections: A Historical Overview ……….. 9

The Debate …………………………………………………………………….. 13

Chapter 3 Recent Research Regarding Privatization ……………………. 21

Background ……………………………………………………………………. 21

Costs ………………………………………………………………………………. 22

Inmate Services, Quality of Confinement, and Public Safety …………………………………………………………… 29

Health Care ……………………………………………………………………. 33

Additional Literature …………………………………………………….. 35

Summary ……………………………………………………………………….. 37

Chapter 4 The National Survey of State Prison Privatization ……… 39

Background ……………………………………………………………………. 39

Survey of Public and Private State Facilities ………………….. 39

Reanalysis of Survey Data Controlling for Facility Security Level ……………………………………………………. 52

Chapter 5 Summary ………………………………………………………………………. 59

The Diminishing Returns on Privatization …………………….. 59

The Future of Privatization ……………………………………………. 60

Notes ………………………………………………………………………………………………… 61

References ………………………………………………………………………………………… 65

Appendix Guidelines for Contracting for a Private Prison ………….. 69

Sources for Further Information ……………………………………………………… 83

Contents

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Emerging Issues on Privatized Prisons

Tables

Table 1 Number of Persons Held in State or Federal Prisons or Local Jails, 1985, 1990–1997 ……………………………. 2

Table 2 Prison Operating Costs, Fiscal Years 1980–1994 ……………… 3

Table 3 Private Adult Correctional Firms, December 31, 1998 …….. 4

Table 4 Geographic Distribution of Privately Operated Correctional Facilities, December 31, 1998 ………………………. 5

Table 5 Geographic Distribution of Privately Operated Correctional Facilities Outside the United States, December 31, 1998 …………………………………………………………… 6

Table 6 Public Strategies for Private Prisons ……………………………… 14

Table 7 Financial Data for Corrections Corporation of America, 1987 and 1997 ………………………………………………………………… 29

Table 8 Inmate Characteristics at Public Facilities at Midyear 1995 and Private Facilities as of December 31, 1997 ………. 41

Table 9 Characteristics of Private Facilities by Level of Security as of December 31, 1997 ………………………………………………… 42

Table 10 Types and Rates of Participation in Institutional Programs at Public Facilities at Midyear 1995 and at Private Facilities as of December 31, 1997 ……………………… 44

Table 11 Persons Employed in Public State Facilities at Midyear 1995 and at Private State Facilities as of December 31, 1997 …………………………………………………………. 46

Table 12 Characteristics of Employment in Private Facilities, January 1–December 31, 1997 ………………………………………… 47

Table 13 Major Incidents in Public Facilities (July 1, 1994– June 30, 1995) and in Private Facilities (January 1– December 31, 1997) ………………………………………………………… 48

Table 14 Disciplinary Resources at Private Facilities, January 1–December 31, 1997 ………………………………………… 50

Table 15 State Facilities Under Court Order or Consent Decree: Public Facilities at Midyear 1995 and Private Facilities on December 31, 1997 ……………………………………………………. 51

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Bureau of Justice Assistance

Table 16 Characteristics of Inmates at Public Medium- and Minimum-Security Facilities at Midyear 1995 and Private Medium- and Minimum-Security Facilities on December 31, 1997 …………………………………………………………. 53

Table 17 Characteristics of Public Medium- and Minimum- Security Facilities at Midyear 1995 and Private Medium- and Minimum-Security Facilities on December 31, 1997 …………………………………………………………. 54

Table 18 Types and Rates of Participation in Institutional Programs at Public and Private Medium- and Minimum-Security Facilities …………………………………………. 55

Table 19 Characteristics of Persons Employed in Public Medium- and Minimum-Security Facilities at Midyear 1995 and Private Medium- and Minimum-Security Facilities on December 31, 1997 …………………………………………………………. 56

Table 20 Major Incidents in Public Medium- and Minimum- Security Facilities (July 1, 1994–June 30, 1995) and Private Medium- and Minimum-Security Facilities (January 1, 1997–December 31, 1997) …………………………….. 57

Tables (continued)

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Emerging Issues on Privatized Prisons

Executive Summary

The state of corrections has come under attack by many during the past decade. Many contend that the current state of affairs will not work in the 21st century. Some argue that the public sector is incapable of handling the complex and changing dynamics associated with corrections, and there- fore more prisons need to be handed over to the private sector; others argue that private industry should not be a part of the public matter of penalizing offenders of crime. Although the private sector has had a long history of involvement in corrections, private prisons make up less than 5 percent of the current market. This study offers a review of the history of privatization, presents a review of relevant research on the issues in- volved, and compares some of the major findings from the National Survey of State Prison Privatization, 1997, conducted by the National Council on Crime and Delinquency (1998) and the Census of State and Federal Correc- tional Facilities, 1995, conducted by the Bureau of Justice Statistics (1997a), on the benefits and costs associated with private- and public-managed prison facilities.

Although private prisons tend to house mostly minimum-security inmates, the findings from this report suggest that private prisons operate much the same as public facilities. Private prisons offer only modest cost savings, which are basically a result of moderate reductions in staffing patterns, fringe benefits, and other labor-related costs. No evidence was found to show that the existence of private prisons will have a dramatic effect on how nonprivate prisons operate.

Current Trends in Privatization ❑ It is estimated that worldwide there are 184 privately operated

correctional facilities, which hold 132,346 inmates.

❑ Within the United States, a total of 158 private correctional facilities are operating in 30 states, Puerto Rico, and the District of Columbia. Texas has the most facilities (43), followed by California (24), Florida (10), and Colorado (9). Most private correctional facilities tend to be concentrated in the Southern and Western United States.

❑ Another 26 private facilities operate in 3 other countries, with Australia (12) and the United Kingdom (10) topping the list.

❑ Total revenues allocated to private prisons and jails are estimated at $1␣ billion.

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Bureau of Justice Assistance

❑ Despite rapid growth in the number of private correctional facilities, they represent only a small share of the entire correctional facilities market. With jail and prison populations totaling approximately 1.7 million in the United States, the estimated 116,626-bed capacity of private correctional facilities makes up less than 7 percent of the U.S. market. Less than 5 percent (52,370 inmates) of the total 1.2 million U.S.␣ prison population is housed in private facilities.

Prior Research Findings on Privatization ❑ Few studies have been completed regarding the impact that privatizing

prisons has on costs, protection from harm, recidivism, and conditions of confinement.

❑ A major conclusion reached from the few studies completed is that privately operated prisons function as well as publicly operated prisons.

❑ With respect to operating costs, privately operated prisons can reduce expenditures in those markets in which public employee benefit rates are relatively high in comparison to national rates.

❑ Management problems that have occurred with privatized prisons can␣ usually be linked to poorly drafted contracts, lack of oversight by contracting agencies, and transferring inmates with classification level requirements to private prisons that do not have the resources and capabilities to handle these inmates.

❑ Evidence shows that the presence of private prisons has encouraged public facilities to adopt similar cost-saving strategies in staff deploy- ment and procurement policies.

❑ Evidence also shows that private entities can construct new facilities faster and cheaper than can be done by firms in the public sector.

National Survey Results ❑ Most privately operated prisons (not including jails or detention

centers) are relatively new, with bed capacities of 800 or less, and designed for medium- and minimum-security custody inmates.

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Emerging Issues on Privatized Prisons

❑ Results from previous studies show that privately operated prisons function similarly to publicly operated prisons with respect to program and work participation by inmates and the distribution of staff by key functional areas. Three exceptions to these findings are in the areas of staffing levels, management information system (MIS) support, and critical incidents. Privately operated facilities have a significantly lower staffing level than publicly operated prisons and lack MIS support. They also report a significantly higher rate of assaults on staff and inmates.

❑ The differences mentioned above may be related to factors such as reporting standards or the fact that most correctional facilities exper- ience management difficulties when newly opened. However, insuffi- cient training and lack of qualified staff in key positions may also be valid reasons for these differences. Nonetheless, the assumption that privately operated prisons are safer or better managed than publicly operated facilities is not supported by the results presented in this report.

Future Trends ❑ The number of privatized prisons is likely to increase, but not at the

pace exhibited during the past decade.

❑ The number of companies operating privatized prisons is likely to decrease as competition and the costs of doing business increase, thus forcing a consolidation of firms within the industry.

❑ It is unlikely that privatized prisons will develop a strong market in the high-security inmate population market due to the recent flurry of well- publicized disturbances. However, important inroads can be expected for the private sector within low-security medical, mental health, and geriatric inmate populations.

❑ Speculative prisons will face the greatest scrutiny and resistance by state and federal correctional agencies. These facilities are the most difficult to monitor and regulate.

❑ Unless there is a sharp reduction in major incidents at private prisons, litigation directed at facilities that are immune from the Prison Litigation Reform Act will likely increase.

1

Emerging Issues on Privatized PrisonsChapter 1

Introduction

Prison overcrowding is one of the most burdensome problems plaguing our criminal justice system and a major catalyst for privatizing correctional facilities. Over the past decade the number of adult offenders under the ju- risdiction and control of the United States justice system has doubled. Be- tween 1980 and 1995, the probation, parole, and jail populations grew almost as rapidly as the prison population. In 1995, more than 5.4 million adults—approximately 1 out of every 46—were under some form of cor- rectional supervision (Bureau of Justice Statistics, 1997a). The public has witnessed an increase in the nation’s prison and jail populations from nearly 750,000 in 1985 to more than 1.7 million in 1997 (table 1). This rise in prison and jail populations and the corresponding need for additional bed space have been accompanied by similar increases in alternative forms of correctional supervision.

As the number of inmates in prisons and jails and on probation and parole increased, a corresponding surge in prison spending has occurred. Accord- ing to a report issued by the U.S. General Accounting Office (1996a), prison operating costs grew steadily between fiscal years 1980 and 1994, due in part to the continuous growth in the inmate population. Total U.S. prison operating costs (federal and state) grew from about $3.1 billion in fiscal year 1980 to more than $17 billion in fiscal year 1994. This is an increase of nearly 550 percent based on constant or inflation-adjusted dollars (table 2).

The National Council on Crime and Delinquency (NCCD) has estimated that up to $15 billion will be needed to construct additional prisons to ac- commodate the anticipated growth in the inmate population by the year 2000, with an additional $21.9 billion needed to operate these prisons. This combined $37 billion does not include the additional billions of dollars re- quired to service the debt associated with the loans necessary to pay for additional prison construction (Clark, 1998). Based on current trends, NCCD estimates that prison and jail populations will reach 2 million by the end of 2000.

Compounding the problems created by the growing demand for prison space and funding is the lack of public confidence in the quality of correc- tional services provided by federal, state, and municipal governments. Pe- nal programs designed to rehabilitate offenders have not demonstrated a significant reduction in crime or recidivism and have thus lost credibility with the public and policymakers. In short, the belief that government is not equipped to meet the challenges of contemporary institutional confine- ment is spreading.

In the 1980s, private prisons and jails were seen as part of the solution to meet the increasing pressure for prison bed space at a time when taxpayers

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Bureau of Justice Assistance

Total Incarceration Year Inmates Federal State Jail Rate †

1985 744,208 35,781 451,812 256,615 313

1990 1,148,702 58,838 684,544 405,320 458

1991 1,219,014 63,930 728,605 426,479 481

1992 1,295,150 72,071 778,495 444,584 505

1993 1,369,185 80,815 828,566 459,804 528

1994 1,476,621 85,500 904,647 486,474 564

1995 1,585,586 89,538 989,004 507,044 600

1996 1,646,020 95,088 1,032,440 518,492 618

1997 1,725,842 99,175 1,059,588 567,079 645

1990–1997 percentage increase 6.5 8.4 7.0 4.9 5.8

Table 1 Number of Persons Held in State or Federal Prisons or Local Jails, 1985, 1990–1997*

* Jail counts are for midyear (June 30). State and federal prisoner counts for 1990–1995 are for December 31. Counts for 1994–1997 exclude persons who were supervised outside a jail facility. † Persons in custody per 100,000 residents on July 1 of each year. Source: Bureau of Justice Statistics (1998).

were reluctant to pay for correctional services and were not supportive of divestiture of resources from other areas of state responsibilities and ser- vices (Travis et al., 1985). To confront escalating prison populations and costs, an increasing number of policymakers are now turning to the private sector for assistance.

Privatization is commonly defined as a contract process that shifts public functions, responsibilities, and capital assets, in whole or in part, from the public sector to the private sector. Privatization in correctional services can assume a number of institutional characteristics. For instance, the most common form of privatization in corrections is the contracting out (or outsourcing) of specific services that entails a competition among pri- vate bidders to perform governmental activities. Over the past two de- cades, the practice of state and local correctional agencies contracting with private entities for medical, mental health, educational, food services, maintenance, and administrative office security functions has risen sharply. Under these circumstances, the correctional agency remains the financier and continues to manage and maintain policy control over the type and quality of services provided.

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Emerging Issues on Privatized Prisons

Fiscal Year Federal State Total

1980 $ 319,274,000 $ 2,787,369,000 $ 3,106,643,000

1981 346,517,000 3,229,234,000 3,575,751,000

1982 368,000,000 3,794,178,000 4,161,178,000

1983 435,000,000 4,346,273,000 4,781,273,000

1984 529,245,000 5,066,666,000 5,595,911,000

1985 500,941,000 5,934,160,000 6,435,101,000

1986 555,097,000 6,619,534,000 7,174,631,000

1987 580,097,000 7,601,594,000 8,181,691,000

1988 878,502,000 8,586,498,000 9,465,000,000

1989 900,334,000 9,611,020,000 10,511,354,000

1990 1,148,678,000 11,194,236,000 12,342,914,000

1991 1,318,741,000 12,514,171,000 13,832,912,000

1992 1,585,498,000 13,290,202,000 14,875,700,000

1993 1,767,019,000 14,239,710,000 16,006,729,000

1994 1,918,067,000 15,776,174,000 17,694,241,000

Table 2 Prison Operating Costs, Fiscal Years 1980–1994

Source: U.S. General Accounting Office (1996a).

A more radical approach is to have government transfer ownership of assets, commercial enterprises, and management responsibilities to the private sector. This approach, called an “asset sale,” leaves the government with a limited or nonexistent role in the financial support, management, or␣ oversight of the sold asset (U.S. General Accounting Office, 1997). This form of privatization was not adopted by governments in operating correc- tional facilities until the 1980s.

A dramatic increase in the use of private correctional facilities has occurred—initially in the United States and more recently in the United Kingdom, Australia, and South Africa.1

In 1987, the total number of inmates in privately operated prisons and jails␣ worldwide was approximately 3,100. By December 31, 1998, that number had increased to more than 132,000 (table 3). Although 14 private correctional facility firms existed at that time, 2 companies (Corrections Corporation of America and Wackenhut Corrections Corporation) accounted

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Bureau of Justice Assistance

for more than three-fourths of the entire worldwide market (Thomas, 1998).

In the United States, a total of 158 private correctional facilities are operat- ing in 30 states, Puerto Rico, and the District of Columbia (table 4). Texas has the most facilities (43), followed by California (24), Florida (10), and Colorado (9). Most private correctional facilities tend to be concentrated in the Southern and Western United States. Another 26 private facilities operate in 3 other countries, with Australia and the United Kingdom topping

Table 3 Private Adult Correctional Firms, December 31, 1998

Outside Total Management Firm U.S. Capacity U.S. Capacity Capacity Percentage*

Alternative Programs, Inc. 340 0 340 0.3%

Avalon Correctional Services, Inc. 350 0 350 0.3

Bobby Ross Group 464 0 464 0.4

CiviGenics Inc. 3,563 0 3,563 2.7

Cornell Corrections, Inc. 5,794 0 5,794 4.4

Correctional Services Corporation 6,727 0 6,727 5.1

Correctional Systems, Inc. 272 0 272 0.2

Corrections Corporation of America 65,748 2,244 67,992 51.4

Group 4 Prison Services Ltd. 0 4,510 4,510 3.4

GRW Corporation 362 0 362 0.3

Management and Training Corporation 7,465 0 7,465 5.6

Maranatha Production Company 500 0 500 0.4

Securicor 0 800 800 0.6

Wackenhut Corrections Corporation 25,041 8,166 33,207 25.1

Total 116,626 15,720 132,346 100.0

* Discrepancy in total is due to rounding. Source: Thomas (1998).

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Emerging Issues on Privatized Prisons

Jurisdiction Number of Facilities Percentage of Facilities*

Texas 43 23.4 %

California 24 13.0

Florida 10 5.4

Colorado 9 4.9

Oklahoma 8 4.3

New Mexico 7 3.8

Tennessee 6 3.3

Mississippi 6 3.3

Arizona 6 3.3

Georgia 5 2.7

Kentucky 4 2.2

Puerto Rico 4 2.2

Arkansas 2 1.1

North Carolina 2 1.1

Louisiana 2 1.1

Missouri 2 1.1

Ohio 2 1.1

Kansas 2 1.1

13 other states and D.C. 14 7.6

U.S. total 158 85.9

Non-U.S. total 26 14.1

Total 184 100.0

* Discrepancy in total is due to rounding. Source: Thomas (1998).

the list (table 5). There are another 530 nonsecure, privately operated facili- ties, such as halfway houses, residential drug treatment, and other juvenile correctional facilities in the United States. Total revenues allocated to private prisons and jails in 1998 are estimated at $1 billion (McDonald et al., 1998).

Table 4 Geographic Distribution of Privately Operated Correctional Facilities, December 31, 1998

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Bureau of Justice Assistance

Table 5 Geographic Distribution of Privately Operated Correctional Facilities Outside the United States, December 31, 1998

Despite the rapid growth in the number of private correctional facilities, they represent only a small share of the entire correctional facilities mar- ket, at least within the United States. With jail and prison populations totaling approximately 1.7 million in the United States, the estimated 116,626-bed capacity of private correctional facilities makes up less than 7␣ percent of the U.S. market. The recently completed Abt Associates Inc. report (McDonald et al., 1998) found that less than 5 percent (or 52,370 inmates) of the total 1.2 million United States prisoner population was housed in private prisons.

In terms of prison facilities, the Abt study identified no more than 65 facili- ties that could house state prisoners, which is a small percentage of the more than 1,500 prisons in the United States. Furthermore, indications show that growth in privatization may be slowing. For example, Lanza- Kaduce and colleagues (1998) report that private facility bed capacity has not increased since January 1, 1998. Additionally, stock prices for most of the major firms have dropped substantially in the past year. There have also been a number of highly publicized management problems with several privately operated facilities.

This report gives attention to issues surrounding the current debate on privatization. The privatization of correctional operations and services has resurfaced as a controversial topic, yet its antecedents developed early in this country’s history. Chapter 2 examines the factors, particularly demo- graphic shifts, sentencing law changes, and the political backdrop that gave rise to increased incarceration rates since the early 1980s, leading to the recent privatization movement for incarceration. Another section of chapter 2 investigates the historical role of private-sector involvement in the provision of correctional services in the United States. This chapter also briefly outlines the various arguments in favor of and against privately op- erated prisons.

Country Facilities Capacity by Country Percentage

South Africa 2 3,000 19.1%

U.K. 12 8,061 51.3

Australia 12 4,659 29.6

Total 26 15,720 100.0

Source: Thomas (1998).

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Emerging Issues on Privatized Prisons

Chapter 3 reviews the current research literature on prison privatization, with particular attention given to recent federal, state, and local experi- ences with privatization. Chapter 4 outlines the methodology used by the NCCD to conduct a national survey of private prison facilities in late 1997 and reports the findings of this survey. Chapter 5 summarizes the major findings of the study and examines the most critical issues that will likely have an impact on privatization of the nation’s prison systems.

Finally, the appendix contains practical guidelines for state and local policymakers to consider should they decide to privatize a facility. These guidelines were developed by the Oklahoma Department of Corrections, which has been very active in the privatization movement.

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Emerging Issues on Privatized Prisons

Privatization of Corrections: A Historical Overview Private enterprise in the United States has an extensive history of involve- ment in the provision of correctional services. According to Feeler (1991), the involvement of the private sector in corrections stems, in part, from an Anglo-American political culture that is somewhat skeptical of govern- mental authority yet promotes private initiative. Feeler traces the private- sector involvement back to shortly after the first English colonists arrived in Virginia in

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