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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  

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Micro-Level Studies

Contents

Despite the debate in research, several micro-level studies have reported a cost-savings related to privatized prisons (Segal and Moore, 2002; Thomas, 1997; Comparing Costs, 1997; Public-Private, 2000). Micro-level studies refer to studies that compare similar variables between two or more prisons, with at least one private and one public prison.

Following along the lines of the capitalist model of competition previously suggested as a benefit of private prisons, Segal and Moore (2002) show that the introduction of privatization urges managers (both from public and private facilities) to implement cost-effective strategies while maintaining quality of services to remain competitive. They examine 28 studies and report that 22 show a significant savings without impacting quality when compared to public prisons. These 28 studies extensively compared across multiple variables; furthermore, "many of them went to great lengths to compensate for the differences between compared facilities and to develop useful comparison figures" (Segal & Moore, 2002). The authors conclude, "it is remarkable that such a wide variety of approaches spanning over a decade and a half of research conducted in states across the nation repeatedly come to the same conclusion: that privatization saves money without reducing quality . . . . Thus the extreme one-sidedness of this literature-near-universal findings of cost savings from privatization-is on its own very persuasive" (Segal and Moore, 2002b). Some quality issues noted include better living environments and improved prisoner-guard relations.

prison bunks
Valerie Dunn, 41, of Riverside, reads on her bunk during an inmate count at The Leo Chesney Center, a private prison in Live Oak, California

Louisiana built three prisons, one public and two private, in effect creating a field laboratory experiment with which to compare and contrast public and private prisons. Archambeault (1998) examines secondary data to discern (1) If there was a significant cost-effectiveness difference between public and private prisons, and (2) if there was a difference between the two private prisons. After comparing more than 200 measurable variables, more than any other study, Archambeault (1998) concludes that the private prisons were less expensive to operate, while the public prison experienced twice as many critical incidents as the private prisons. This later finding precedes Segal and Moore in showing that private prisons can provide less expensive services without impacting quality. Indeed, Archambeault's finding suggests that private prisons actually provide better quality than public prisons. Further, the public prison "was found to have the statistically highest number of monthly inmate assaults on staff resulting in serious injury" (Archambeault, 1998). In addition, private prisons implement disciplinary strategies more effectively and justly, and lastly, "more inmates complete basic education, literacy, and vocational training courses" (Archambeault, 1998). In short, Archambeault's study highlights that private prisons cost less without sacrificing quality, and also addresses concerns about making appropriate comparisons across similar variables.

The last micro-level study involves New Mexico. To combat high taxes, New Mexico implemented an aggressive campaign, housing nearly 45% of its inmates in private prisons. Because of this, New Mexico is now known as the state on the forefront of the use of private prisons. In 2003, Mitchell conducted a comparative analysis of 46 states versus New Mexico's prison system and discovered several factors that decrease costs for privatized prisons. Unions were identified as a primary factor increasing costs in publicly operated prisons, creating legislation that penalizes prisons for hiring non-union workers and driving up benefits. Without unions' effect on labor laws, Mitchell noted a significant cost reduction: "All else being equal, the presence within a state of a right to work law (i.e. lack of unions in the prison setting) reduces annual per-prisoner cost by over $9,000. This is strong evidence of the costly nature of union power" (Mitchell, 2003).

Further, Mitchell noted a relation between percentage of inmates in privatized prisons and costs. A state that houses 5% of the prison population in private prisons will save an additional $423 per prisoner by increasing this total by 1%. Thus, a state that transitioned 500 public prisoners into a privately operated facility could potentially save over $200,000. Because most states contract out 1,000 to 3,000 inmates per contract established with a privately operated prison, actual savings increase significantly more than the example given. For New Mexico, an increase from its current percentage to 46% would save the state $55 per prisoner. Using the same formula above, this would equate to a $28,000 savings per year. Thus, as a state's private prison system reaches the 50% mark, savings appear to level out. In short, Mitchell notes a dramatic savings, claiming that states that house 45% of prisoners in private prisons can save 1/3 on their state budgets due to the fact that currently most states house 5% or fewer of their prisoners in private prisons. Based upon evidence that shows cost-savings for states if they move a percentage of their public prisoners to a private facility, Mitchell argues that competition in a free market economy reduces the cost of operating prisons. He states, "Because competition and its threat forces cost discipline, one would expect all prisons—private and public—in a competitive market to be more efficient than prisons in an all-public, monopolistic market."

The above section highlights that studies can be found that compare similar variables between publicly and privately operated prisons. Further, the preponderance of studies that show a cost-savings from operating private prisons and the additional research that addresses methodological issues highlights that private prisons do save the state money. The next two sections continue this comparative analysis by exploring recidivism rates and prison culture.

Go To Recidivism

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