Discovery Guides Areas


The Drain of Public Prison Systems and the Role of Privatization:
A Case Study of State Correctional Systems

(Released February 2010)

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  by David W. Miller  


Key Citations



Introduction: Economic Recession


The most recent economic downturn has hurt employment opportunities, the housing market, and the value of the dollar (Baker, 2009, 2009b, 2009c; and Kotz, 2009). Prisons are one sector that had been addressing economic issues long before our current downturn. Prisons started to see the impact of decreased budgets in the mid 1990s, but now, due to increased fees for medical and psychiatric care, issues pertaining to overcrowding as a result of more punitive criminal justice policy, and high wages due to overtime, prisons are becoming an increased drain on state budgets. One way states have addressed rising costs is to approve the building of private prisons. Indeed, since the 1980s, privatized prisons can be called the new "hot commodity," with several private companies, notably Wackenhut Corrections and Corrections Corporation of America (CCA), going public in the stock market (Shichor, 1995). A handful of private organizations contract with state entities to provide services, with Wackenhut and CCA representing the highest tier of these agencies, and Cornell Companies, which had been just under CCA until it began to focus on community rehabilitative services, representing the next level down. In short, Wackenhut and CCA control more than half of all private prisons in the United States, with some estimates going as high as 75%.

Visitors entrance to the Utah State Prison in Draper, Utah, United States
Private prisons can be defined in one of the following manners: a transfer of public facilities to a private organization; a contract to design and operate new prisons; and a contract to provide other services to public prisons such as transportation, medical care, food, and maintenance. A misconception about private prisons is that they are not tied to the government. However, private prisons typically enter into a contract with a government agency to house inmates; in return, the government plays a major role in regulating private prisons. Thus, it is important to note that there is less of a difference than commonly believed between public and prisons-for-profit correctional systems (Dolovich, 2005). Indeed, the primary distinction of a private prison is that an organization rather than the government oversees its operation. Often the relationship is blurred, with the government outsourcing thousands of prisoners to private prisons per year, but also, through contracts, extending its power by placing limitations and regulations on these organizations (Mulone, 2008).

In the late 1990s, the privatization movement of prisons continued to grow due to the Federal Government contracting with private correctional companies. Prior to this, only state public correctional systems had contracted with private organizations to house inmates. Cheung (2002) writes, "Traditionally, the federal government has been more cautious in experimenting with privatization." However, in 1997 the Federal Bureau of Prisons (FBOP) contracted with Wackenhut to transfer its facility in Taft, California to a private prison. Since this first contract was established with the private prison industry, "federal interest in the privatization of prisons has boomed, due in part to mandatory minimums and harsh drug sentencing laws, and consequent overcrowding in prisons. By mid-2001, federal prisons were operating at 33% over capacity" (Cheung).

The 1996 Immigration Reform Act has specifically impacted the Federal Government's decision to contract with private firms. This legislation changed sentencing laws for undocumented immigrants, allowing prosecutors to plead former and current misdemeanor charges against undocumented immigrants as aggravated felony cases. Cheung (2002) notes this policy more than doubled the number of noncitizens serving time in Federal prisons in two years after its implementation. In short, overcrowding, a direct effect of harsher criminal justice policy (as will be detailed in a later section), has ensured the continued existence of the privatization movement in correctional prisons. "As the federal prison population swells, so has the momentum for private prisons and additional bed space," Cheung explains (2002).Thus, state level prisons and federal level prisons are facing similar factors that suggest the continued growth of the privatization movement as a result of a more punitive criminal justice policy, which in turn creates overcrowding.

One additional factor in the increased privatization is the argument that private prisons save money, leading to public and political support for their continued growth. Research, although mixed, has backed this claim. For instance, Wackenhut and CCA appear to provide significant cost-savings. Even in Texas, a state that has the lowest cost per inmate, these two private organizations seem to provide less expensive services than public prisons. On average, Wackenhut and CCA provide a 5-15% cost savings when measures focus on cost per inmate rates (Smith, 1993). However, in 2001, the Bureau of Justice Assistance stated that "rather than the projected 20-percent savings, the average saving from privatization was only 1 percent" (Austin & Coventry, 2001).

chart of increasing imprisonment
U.S. Department of Justice, Bureau of Justice Statistics, National Crime Victimization Survey

Private organizations also argue that they provide better quality services, as evidenced by accreditation, than public prisons. To become accredited, prisons must provide a number of quality services (e.g. food, education, health care) and rehabilitative programs. Further, to meet accreditation standards, prisons must have a low percentage of aggressive episodes between staff and prisoners, a low percentage of inmate disturbances, a comfortable and safe living environment for both inmates and staff, and clear policies and procedures to maintain order, safety, security and the implementation of prison justice (Urban Institute, 1989; Logan, 1991; Archambeault, 1996; Thomas, 1997; Culp, 1998; Lanza-Kaduce & Parker, 1998).

In 2005, 10% of public prisons had met quality standards to become accredited while 44% of private prisons had met accreditation standards (Segal, 2005). New policies require all private prisons, unlike public prisons, to be accredited or be in the process of meeting accreditation standards. As such, the percentage of accredited private prisons is expected to increase. In short, these standards establish accountability measures. Although a majority of Wackenhut and CCA operated prisons are accredited or moving toward accreditation and appear to provide services equal to or better than public prisons, Smith (1993) notes that other companies are not as well financed as these two top private organizations, and thus, are more likely to eventually fail and provide poorer services. Smith includes Cornell Companies in his analysis, which in 1993 had a significant role in the privatized market, but today has fallen down the tier. Smith (1993) writes:

The boom has created a shadier realm of speculators ready to turn a quick profit from the traffic in convicts. Compared to the big three (Wackenhut, CCA, and Cornell Companies), these smaller companies are undercapitalized, inexperienced, understaffed, and are more likely to fail eventually. Run by hucksters, fast-talking developers, and snake-oil salesmen, they sell for-profit prisons—disguised as economic development—to depressed rural communities desperate to bolster their budgets and local economies. (Smith, 1993)
Thus, privatized prisons represent a new growth industry (Pratt & Maahs, 1999), mainly due to the effect of more punitive criminal justice policy, and private prisons' potential to save money without jeopardizing quality of services in this new age of overcrowded prisons. This especially holds true for Wackenhut and CCA.

A history of the privatization movement highlights early examples of the system implemented in the 19th Century before courts, pressured by big businesses who argued that unpaid prison labor destroyed the free market and competition system, ruled in the early 20th Century that prison systems for profit were unconstitutional. The situation was reversed by the late 1980s, when punitive criminal justice policies (e.g. mandatory sentencing and a "three strikes" policy) had created a prison population boom that quickly led to overburdened and understaffed public prisons. The Prison Industry Enhancement Certification program (PIE-Program), established by Congress in 1979, is cited as leading to the re-emergence of privately operated prisons (Herriaz, 2004). As a result, private prisons quickly became an alternative means of housing offenders to ease prison populations and state budgets. After summarizing the historical chronology of privatized prisons in part I, this Discovery Guide conducts a comparative analysis between public and private prisons in part II. This comparative analysis highlights differences in cost-savings, recidivism rates, and prison culture in relation to level and degree of violence in public versus private prisons. Concluding remarks will suggest what role the private correctional system can play in the future to assist states in decreasing costs.

Go To The Convict Lease System

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