Filling a Niche
With more than 1.8 million Americans behind bars, privately operated prisons are expanding at a rate of 20 percent annually.

The number of adults in the correctional population has been increasing in the United States, according to the U.S. Department of Justice. Due to a drive for stricter sentencing guidelines at local, state and federal levels, the prison population throughout the country has been rising steadily for more than a decade.

At the end of 1997, federal prisons were at 119 percent capacity and state-run prisons at 115 percent capacity. More than 1.8 million Americans were behind bars at the end of 1998.

According to the U.S. Department of Justice, state and federal prison authorities had 1,210,034 in custody and local jails held 664,847 persons awaiting trial or serving a sentence in 1998 with only 72,000 of these serving their sentence in the community. That leads to the question -- where will all these prisoners be housed? Increasingly, for many public prison systems, the answer is private prisons. There are private prisons located in 31 states and the District of Columbia. Texas has the most with 43 facilities and California follows with 24. Florida contains 10, Oklahoma eight and Colorado nine. Many other states allow only one or two private facilities to operate within their borders. Kentucky has three.

By the end of 1994, there were 88 privately operated correctional facilities in the United States. Today the private sector is housing four percent of the entire inmate population with 119,000 private beds rented by the government through 145 privately managed secure correctional facilities in the U.S.

A growth industry

Private prisons are not a new concept. In the mid-1800s, states awarded contracts to private entrepreneurs to operate several facilities including New York’s Auburn and Sing Sing penitentiaries.

However, it has been over the last 15 years or so that the private prison industry has come into its own with private corrections expanding at 20 percent per year while overall prison bed growth is only about four-five percent. Analysts predict an average annual growth in private prisons of 25 percent over the next five years.

Bill Cull of Frankfort, whose company Concept Inc. was the third largest private prison company in the country before it merged with Corrections Corporation of America, believes the private prison industry will to grow at that pace -- or faster.

"They will continue to penetrate the market faster than the total beds will grow," he said. "The private prison industry answers a need. There were states that didn’t have a place to put the people who commit violent crimes. Private prisons supplied that place and provided the service at a lower cost. With time the states came to recognize there is no operating superiority to the government over the private sector and the private sector often does things better than the government," he added.

"The industry assists the government and allows it to better perform its job-providing security to the people," Cull said. "When there is substantial growth in the prison population it is difficult for the government to respond quickly, but the private sector can."

"Private prisons do have their place," said Dr. James Wells of the Center for Criminal Justice Education and Research. "They serve a purpose, a very important purpose, to reduce the population in our public facilities."

Kentucky leading the way

It was precisely the need to house the overflowing state prison population that led Kentucky to contract with the private sector in 1985 and become the first state correctional system to contract with a private vendor.

"We broke ground in this area," said Commissioner Doug Sapp of the Department of Corrections. "The evolution of privatization was just beginning to gain momentum with some local and federal contracts, but we became the first state system. Since then many others have followed suit. It was a part of our overall strategy to deal with a very rapidly growing inmate population."

Sapp stresses it was only one part of the plan that also included expanding state prison facilities and other programs such as halfway houses. Kentucky’s first state prisoners to be housed in a private facility were located at the Marion Adjustment Center. Today state prisoners are still housed in Marion, but also at the Lee Adjustment Center and the Otter Creek Correctional Center in Floyd County. All three private institutions are minimum security.

"It’s not feasible for all populations, only certain levels of security," Sapp said. "We felt more comfortable holding our own maximum security prisoners than contracting them out."

Currently, Kentucky can only contract out 1,700 prisoners and averages about 1,570 prisoners out of a total state prison system population of 14,800.

"I don’t anticipate an increase in the future in either percentage or number," Sapp said.

Kentucky’s private prison contracts are with Nashville-based Corrections Corp. of America (CCA), the company that bought Cull’s Kentucky-based private corrections firm. CCA is an international corporation with 14,000 employees, 65,000 prison beds in 78 facilities under contract and a presence in 26 states, Puerto Rico, the District of Columbia and two foreign countries.

A mutually beneficial relationship

Although Kentucky may have led the way, they have not remained the only state to privately contract prison facilities. Thirteen years after the first inmate walked into the Marion facility, Sapp believes the decision was sound then and remains sound today.

"I’ve been satisfied with our arrangement here in Kentucky," Sapp, who attributes that in part to the way Kentucky has shaped its contract with private prison operators.

"We laid out the terms and conditions of our contract to mirror our system," he said. "The private facilities have the same policies and procedures and our staff monitors daily operations. We’ve been extremely pleased with the performance."

Sapp points out the public and private prisons in Kentucky work so closely together that the private prison wardens even attend the state wardens’ meetings.

"Their daily operations closely mirror our own, because we very specifically laid out what those daily correctional operations are," he said.

Easing the burden

Kentucky’s state prisons are not the only facilities to feel the burden of rising convict populations. The Commonwealth’s regional jails have also suffered growing pains. This trend is repeated throughout the country. Prisons are reserved for more serious offenders serving more than one year. Jails are usually operated by local governments and hold persons awaiting trial or transfer to prison and offenders of less severe sentences. However, with state prisons over capacity, many regional jails have found themselves housing state prisoners long-term.

According to the National Conference of State Legislatures Criminal Justice Program, some 20,000 state prisoners are held on any given day in local jails, usually awaiting transfer to a state facility when space becomes available.

That’s why Montgomery County Jailer DeWayne Myers finds private prison companies to be one solution to the problem.

"It’s been a substantial help," Myers said. "It gets the high-risk prisoners out of the local jails."

"I consider them partners," continued Myers, whose current jail population hovers at 140 while capacity is 119. Of those, 62 are state prisoners. "We’ve been either full or running way over head count for as long as I can remember."

Myers has operated the Montgomery County Regional Jail for the past six years but he’s literally spent almost his entire life working for the jail. He was six years old when his father took over the jail and as an adult he worked for his father for seven years.

"Everybody I talk to at jails in other areas are full too," he said. "The crime rate is up and we need some place to put them all. Private institutions are a place to put them. It’s that simple. We house for so many different counties and then you add in the state prisoners. I just don’t have enough room for them all."

The bottom line

While rapidly increasing prison populations may have forced governments into contracting with the private sector there is often another pressing reason that keeps those contracts alive.

According to the Center for Policy Analysis, the basic appeal is cost savings. Estimates point to savings of 20 percent on construction and between five and 15 percent on operations. The state of Texas estimates it saves $9.50 a day per inmate when it turns prisoners over to private operators. In the past decade, at least 14 separate independent studies have compared the costs of operating private and public institutions. Twelve of those studies proved that the cost of privately managed prisons is from two to 28 percent less than that of government-managed facilities.

Many states have passed measures to ensure cost savings from prison privatization. For example, Texas and Mississippi both require contracts with private prisons to cost at least 10 percent less than using the state system. Florida requires seven percent savings and Tennessee requires payments to private firms to be less than government facility costs. In Kentucky, state regulations require that any private prison contract must cost 10 percent less than comparable state housing would, according to Dave Johnson, the administrator of Kentucky’s Private Prisons Program.

The private sector saves money by doing a number of things differently from government. Since their success hinges on delivering the same product as the government, but at lower cost, or a better product at a cost-effective price, they turn to new management approaches, new monitoring techniques and administrative efficiencies.

Private companies contend they can cut between 10 and 40 percent off construction costs. In one example, two nearly identical 1,600 bed facilities were under construction in Delaware County, Pa. The state facility totalled $89 million while the private facility only $48 million. The difference was in the length of the construction process, with the private facility taking two years less than the state project. The time difference is blamed on government accounting and accountability processes. Private prisons also operate more efficiently with innovative design techniques to cut personnel while still maintaining security. These include not using communal cafeterias for inmates -- instead delivering food to each inmate’s cell and video teleconferencing for pretrial hearings. Private operating firms also tend to have fewer administrative personnel. Public prisons spend about 29 percent of their operating budgets on administrative costs while the average private company spends between six and eight percent.

The most recent estimate of operating expenses per state inmate was $15,586 in 1990, a figure that includes salaries, supplies, utilities and contractual services but not construction and debt costs.

A number of studies have found savings of 20 percent for private construction costs and five to 15 percent for private management of prison units. Private prison industry officials point out that competition forces private operators to deliver. If they don’t, the client government can easily get a competing firm to come in and take over.

"Conceivably, private systems can cut corners that could lead to problems, but a reputable company won’t take that risk," Cull said. "Private systems have a great incentive to do the job right, because they will lose business if they don’t. And if they lose business then they will go broke."

Cull also points out that private systems often have people with just as much experience running their facilities as public prison systems. In fact, there are more accredited facilities operated by the private sector than by government.

"When I opened the first private federal prison in Arizona, I hired a warden who had served in three different federal prisons for the government," Cull said. "I wanted the best person available for the job, and he was happy to come work for us."

Still more benefits

Private prisons also seem to get better results. Industry analysts say that private prisons maintain less-crowded and better conditions than many government prisons, meaning fewer inmate fights, happier correctional officers and less employee turnover. According to a recent University of Florida study and report to the Florida State Legislature, state inmates released from privately operated prisons are 27 percent less likely to become repeat offenders than those who leave publicly operated facilities. According to the report, in the 12 months following their release, 10 percent of the former private prison inmates were arrested versus 19 percent of the former public prison inmates. According to the American Correctional Association, private prisons on average have experienced lower escape rates and rates of inmate violence than their public sector counterparts.

"Our business is as fascinating and challenging as it ever was. It is one of the few where increasing quality actually decreases costs and it is one that allows government to have its cake and eat it, too, when it comes to funding its multiple priorities," said Doctor R. Crants, chairman and CEO of CCA. "Our government has just issued new statistics on prison and jail populations and incarceration rates. The numbers are astounding and lead us to believe our work, our contributions and our success are just beginning."

Deanna Mascle is a staff writer for The Lane Report.

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