Private Prisons

Hiding Behind a Veil of Democracy

Bianca Tylek

POPULAR CRIMINALISM PROFESSOR ANDREW CRESPO

MAY 7 2015

Contents Introduction 1

Part I The Emergence of For-Profit Prisons 4

Part II Threatening Growth Strategies 7

Maximizing Revenue 7

Minimizing Expenses 10

Part III Undermining Democracy 12

Legislative Lobbying 13

Campaign Financing 14

Conclusion 16

1

Introduction With the highest incarceration rate in the world

1 the United States is facing incarceration levels

that present substantial ethical and fiscal challenges Many Americans are losing their liberty with limited

benefit to public safety at a cost that constrained government budgets cannot sustain Consequently

democrats and republicans are now teaming up to tackle the issue of mass incarceration forming unlikely

partnerships such as the Coalition for Public Safety which brings together adversaries like the Koch

Brothers and the American Civil Liberties Union2 However there is one interest group enjoying a huge

windfall from the American incarceration crisis and sparing no expense to protect and expand it the

private prison industry

Individual features of prison operations have been privatized for quite some time A host of for-

profit companies provide services such as telecommunications and products such as commissary items

to correctional facilities However in the past few decades the comprehensive management of these

facilities has also emerged as a privatization target In fact given the capitalist underpinnings of

American culture the exponential growth of incarceration stemming from the War on Drugs announced

in 1971 and subsequent ldquotough on crimerdquo political regimes did everything short of draft an invitation to

for-profit prison owners and operators

Today more than 8 of the 16 million people serving time in federal or state prisons are held in

private facilities3 generating considerable income for half a dozen private prison companies In 2014 the

two leading private prison companies Corrections Corporation of America (CCA) and The GEO Group

(GEO) reported combined revenues of $28 billion4 These revenues translated to $22 million in

1 International Centre for Prison Studies Highest to Lowest - Prison Population Rate The US has the highest incarceration rate

for any country with a population over 100000 Seychelles is the only country with an incarceration rate higher than that of the

United States but its population is less than 90000 2 Carl Hulse ldquoUnlikely Cause Unites the Left and the Right Justice Reformrdquo The New York Times February 18 2015 3 US Department of Justice Officer of Justice Programs Bureau of Justice Statistics Prisoners in 2013 by E Ann Carson

(Washington DC Government Printing Office September 2014) 1 14 4 Corrections Corporation of America 2014 Annual Report Form 10-K F-4 The GEO Group Inc 2014 Annual Report Form

10-K 62 Includes only revenue from The GEO Grouprsquos US Corrections amp Detention business unit

Contents Introduction 1

Part I The Emergence of For-Profit Prisons 4

Part II Threatening Growth Strategies 7

Maximizing Revenue 7

Minimizing Expenses 10

Part III Undermining Democracy 12

Legislative Lobbying 13

Campaign Financing 14

Conclusion 16

1

Introduction With the highest incarceration rate in the world

1 the United States is facing incarceration levels

that present substantial ethical and fiscal challenges Many Americans are losing their liberty with limited

benefit to public safety at a cost that constrained government budgets cannot sustain Consequently

democrats and republicans are now teaming up to tackle the issue of mass incarceration forming unlikely

partnerships such as the Coalition for Public Safety which brings together adversaries like the Koch

Brothers and the American Civil Liberties Union2 However there is one interest group enjoying a huge

windfall from the American incarceration crisis and sparing no expense to protect and expand it the

private prison industry

Individual features of prison operations have been privatized for quite some time A host of for-

profit companies provide services such as telecommunications and products such as commissary items

to correctional facilities However in the past few decades the comprehensive management of these

facilities has also emerged as a privatization target In fact given the capitalist underpinnings of

American culture the exponential growth of incarceration stemming from the War on Drugs announced

in 1971 and subsequent ldquotough on crimerdquo political regimes did everything short of draft an invitation to

for-profit prison owners and operators

Today more than 8 of the 16 million people serving time in federal or state prisons are held in

private facilities3 generating considerable income for half a dozen private prison companies In 2014 the

two leading private prison companies Corrections Corporation of America (CCA) and The GEO Group

(GEO) reported combined revenues of $28 billion4 These revenues translated to $22 million in

1 International Centre for Prison Studies Highest to Lowest - Prison Population Rate The US has the highest incarceration rate

for any country with a population over 100000 Seychelles is the only country with an incarceration rate higher than that of the

United States but its population is less than 90000 2 Carl Hulse ldquoUnlikely Cause Unites the Left and the Right Justice Reformrdquo The New York Times February 18 2015 3 US Department of Justice Officer of Justice Programs Bureau of Justice Statistics Prisoners in 2013 by E Ann Carson

(Washington DC Government Printing Office September 2014) 1 14 4 Corrections Corporation of America 2014 Annual Report Form 10-K F-4 The GEO Group Inc 2014 Annual Report Form

10-K 62 Includes only revenue from The GEO Grouprsquos US Corrections amp Detention business unit

1

Introduction With the highest incarceration rate in the world

1 the United States is facing incarceration levels

that present substantial ethical and fiscal challenges Many Americans are losing their liberty with limited

benefit to public safety at a cost that constrained government budgets cannot sustain Consequently

democrats and republicans are now teaming up to tackle the issue of mass incarceration forming unlikely

partnerships such as the Coalition for Public Safety which brings together adversaries like the Koch

Brothers and the American Civil Liberties Union2 However there is one interest group enjoying a huge

windfall from the American incarceration crisis and sparing no expense to protect and expand it the

private prison industry

Individual features of prison operations have been privatized for quite some time A host of for-

profit companies provide services such as telecommunications and products such as commissary items

to correctional facilities However in the past few decades the comprehensive management of these

facilities has also emerged as a privatization target In fact given the capitalist underpinnings of

American culture the exponential growth of incarceration stemming from the War on Drugs announced

in 1971 and subsequent ldquotough on crimerdquo political regimes did everything short of draft an invitation to

for-profit prison owners and operators

Today more than 8 of the 16 million people serving time in federal or state prisons are held in

private facilities3 generating considerable income for half a dozen private prison companies In 2014 the

two leading private prison companies Corrections Corporation of America (CCA) and The GEO Group

(GEO) reported combined revenues of $28 billion4 These revenues translated to $22 million in

1 International Centre for Prison Studies Highest to Lowest - Prison Population Rate The US has the highest incarceration rate

for any country with a population over 100000 Seychelles is the only country with an incarceration rate higher than that of the

United States but its population is less than 90000 2 Carl Hulse ldquoUnlikely Cause Unites the Left and the Right Justice Reformrdquo The New York Times February 18 2015 3 US Department of Justice Officer of Justice Programs Bureau of Justice Statistics Prisoners in 2013 by E Ann Carson

(Washington DC Government Printing Office September 2014) 1 14 4 Corrections Corporation of America 2014 Annual Report Form 10-K F-4 The GEO Group Inc 2014 Annual Report Form

10-K 62 Includes only revenue from The GEO Grouprsquos US Corrections amp Detention business unit

2

executive compensation representing an 18 increase from the previous year5 But insiders are not the

only beneficiaries For these publicly held companies these revenues have also produced millions in

shareholder dividends6 Yet many of these shareholders may not even know they have an ownership

stake in a private prison company7 Vanguard and Fidelity are the nationrsquos top 401(k) providers and also

the combined owners of 19 of CCA and 11 of GEO8 One index fund managed by Vanguard alone

owns nearly 8 of both CCA and GEO shares9

Private prison companies present such an attractive financial investment because they enjoy profit

margins higher than most private industries In 2014 CCA had a net profit margin nearly double that of

the average private company in the United States10

Even more impressively both CCA and GEO

reported operating margins north of 30 for the facilities they owned and managed11

margins higher than

that reported by Apple in 201412

And indeed the investments panned out the way investors would have

liked with CCArsquos stock price growing 74 and GEOrsquos growing 82 over the past five years13

Together CCA and GEO account for approximately 75 of the $74 billion private prison

market14

Other private prison companies include Management amp Training Corporation LaSalle

Southwest Corrections Community Education Centers and Emerald Companies Figure 1 provides more

detail on the scale clientele and geographic presence of private prison companies in America

5 Morningstar Corrections Corporation of America Chart Morningstar The GEO Group Chart 6 Corrections Corporation of America 2014 Annual Report Form 10-K F-5 The GEO Group Inc 2014 Annual Report Form

10-K 94 7 Ray Downs ldquoWhorsquos Getting Rich off the Prison-Industrial Complexrdquo Vice May 17 2013 8 Morningstar Corrections Corporation of America Ownership Major Owners Morningstar The GEO Group Ownership

Major Owners 9 Id 10 Corrections Corporation of America 2014 Annual Report Form 10-K F-4 Sageworks The Private Company Report

(Raleigh NC Sageworks March 30 2015) 1 11 Corrections Corporation of America 2014 Annual Report Form 10-K 59 Refers only to the operating margin of The GEO

Grouprsquos US Corrections amp Detention business unit 12 Apple Inc 2014 Annual Report Form 10-K 45 13 Morningstar Corrections Corporation of America Insiders Executive Compensation Morningstar The GEO Group Insiders

Executive Compensation 14 Theirry Godard ldquoThe Economics of the American Prison Systemrdquo SmartAsset January 23 2015

3

Figure 1 Leading Private Prison Owners and Operators

Source Correctional Corporation of America Locations The GEO Group Inc 2014 Annual Report Form 10-K 13-16 The

GEO Group Inc Locations MTC Management amp Training Corporation Corrections Locations LaSalle Corrections Our

Locations Community Education Centers Facilities CEC Corrections Emerald Companies Company Locations

This paper will discuss the relationship between private prison companies and criminal law and

policy Part I will offer a brief overview of the modern history of for-profit prisons Part II will provide

more detail on the profit model of private prison companies and their accompanying growth strategies

Part III will then discuss the ways in which these strategies undermine democratic processes within the

criminal justice sphere Throughout the paper we will also address the leading alternative explanation for

the correlation between high incarceration rates and the presence of for-profit prisonsmdashthat private

prisons offer a less expensive solution to incarceration for budget constrained states

15 Refers only to The GEO Grouprsquos US Corrections amp Detention business unit and includes facilities recently acquired from

LSC Corrections Services 16 Includes LaSalle Corrections Community Education Centers and Emerald Companies 17 Does not include leased out or non-correctional facilities

Corrections

Corporation

of America

The GEO

Group15

Management

amp Training

Corporation

Other Owners

Operators16

Facilities17

() 59 61 22 29

LeasedOwned amp Managed 47 37 -- --

Managed Only 12 24 -- --

Beds () 85297 69697 26425 19129

Contract Agency

Immigration 12 12 2 7

Federal 17 18 3 12

StateLocal 34 34 17 21

Region

Northeast 2 2 0 1

Midwest 5 3 1 1

West 9 18 3 1

Southeast 19 16 5 11

Southwest 24 22 13 15

4

Part I The Emergence of For-Profit Prisons The modern age of prison privatization began in 1983 after the prison population grew more than

10 in consecutive years18

with the incorporation of CCA19

The company received its first federal

contract in Texas later that year and its first state contract in Tennessee the following year20

In 1984

CCA also opened the very first privately owned prison the Houston Processing Center in Texas21

In the

same year Wackenhut Corrections Corporation (WCC) was formed under the parent company of The

Wackenhut Corporation22

Just two years later in 1986 CCA leaped into an initial public offering on the

NASDAQ (WCC would follow suit in 1994)23

The following year WCC was awarded its first contract

over the Aurora Processing Center in Colorado24

Over the next five years these private prison conglomerates continued to expand operations while

a number of smaller private prison companies also emerged presenting an early opportunity for industry

consolidation In just 1995 CCA acquired TransCor America Concept and Corrections Partners25

In

1998 CCA acquired the third largest private prison company at the time US Corrections Corporation

for $10 million26

Years later in 2005 WCC would change its name to The GEO Group and embark on a

similar acquisition strategy27

Between 2005 and 2010 GEO acquired Correctional Services Corporation

CentraCore Properties Trust and Cornell Companies28

In 2014 GEO also acquired LSC Corrections

Services29

18 US Department of Justice Officer of Justice Programs Bureau of Justice Statistics Prisoners in 1986 (Washington DC

Government Printing Office May 1987) 1 19 Correctional Corporation of America About Us Who We Are Our History 20 Correctional Corporation of America About Us Who We Are Our History The Sentencing Project Prison Privatization and

the Use of Incarceration (Washington DC The Sentencing Project 2004) 1 21 Correctional Corporation of America About Us Who We Are Our History 22 The GEO Group Inc About Us History 23 Correctional Corporation of America About Us Who We Are Our History The GEO Group Inc About Us History 24 The GEO Group Inc About Us History 25 Correctional Corporation of America About Us Who We Are Our History 26 Corrections Corporation of America Corrections Corporation of America and CCA Prison Realty Trust to Merge In $4 Billion

Transaction Companies Acquire US Corrections Corporation [Press Release] April 20 1998 27 The GEO Group Inc About Us History 28 Id 29 The GEO Group The GEO Group Announces Acquisition of Eight Correctional and Detention Facilities Totaling More Than

6500 Beds [Press Release] January 26 2015

5

Throughout the maturation of the private prison industry the number of people incarcerated grew

260 from 437248 in 1983 to 1574741 in 201330

Still the number of prisoners held in for-profit

prisons grew at a rate that significantly outpaced the already dramatic growth rate of incarceration more

generally31

By 2013 there were 133044 prisoners or 8 of the total prison population housed in for-

profit prisons32

Though the majority of these prisoners are state prisoners for-profit prisons account for a

larger segment of the federal prison population than the state prison population33

In fact federal agencies

make up more than 40 of CCArsquos client base34

The US Marshals Service (USMS) accounts for 17

and the Federal Bureau of Prisons (BOP) and Immigration and Customs Enforcement (ICE) each account

for another 1335

ICE is also GEOrsquos largest client36

Thus not surprisingly

there is a cluster of for-profit

prisons in the states along the

Mexican-American border Texas

New Mexico Arizona and

California However with more

than 40 of for-profit prisons

located in the southwest and

another 30 in the southeast37

the prevalence of immigration detention cannot be the only factor driving private prison companies to

concentrate their operations in the south Southern states also offer the highest incarceration rates in the

30 US Department of Justice Officer of Justice Programs Bureau of Justice Statistics Prisoners in 1986 (Washington DC

Government Printing Office May 1987) 1 US Department of Justice Officer of Justice Programs Bureau of Justice Statistics

Prisoners in 2013 by E Ann Carson (Washington DC Government Printing Office September 2014) 2 31 American Civil Liberties Union Banking on Bondage Private Prisons and Mass Incarceration (New York NY American

Civil Liberties Union November 2011) 5 32 US Department of Justice Officer of Justice Programs Bureau of Justice Statistics Prisoners in 2013 by E Ann Carson

(Washington DC Government Printing Office September 2014) 14 33 Id 34 Corrections Corporation of America 2014 Annual Report Form 10-K 9 35 Id 36 Aviva Shen ldquoPrivate Prisons Spend $45 Million On Lobbying Rake In $51 Billion For Immigrant Detention Alonerdquo

ThinkProgress August 3 2012 37 See Figure 1

Figure 2 Regional State Prison Incarceration Rates

Source Peter Wagner ldquoTracking State Prison Growth in 50 Statesrdquo Prison

Policy Initiative May 28 2014

6

nation and a conservative political climate that has endorsed the ldquotough on crimerdquo policies that have

allowed them to persist over the years (see Figure 2) Furthermore their overwhelming republican

governments favor private sector expansion thus encouraging private prison companies to directly exploit

these ballooned incarceration rates Figure 3 provides more detail on the geographic concentration of four

of the leading private prison companies

Figure 3 Geographic Landscape of Private Prison Beds

Source US Department of Justice Officer of Justice Programs Bureau of Justice Statistics Prisoners in 2013 by E Ann

Carson (Washington DC Government Printing Office September 2014) 7 Community Education Centers Facilities CEC

Corrections Correctional Corporation of America Locations MTC Management amp Training Corporation Corrections

Locations The GEO Group Inc 2014 Annual Report Form 10-K 13-16

While it is no coincidence that the geographic expansion of for-profit prisons has directly

correlated with regional incarceration rates it is difficult to determine whether private prison companies

are simply capitalizing on favorable conditions or driving them Surely private prison companies cannot

7

be blamed for creating the current incarceration crisis that began in the 1970s prior to their emergence or

even the conservative ideologies that contributed to their later success in certain regions However these

private prison companies have taken proactive steps to reinforce the conditions favorable to their success

and thus have fashioned a vicious feedback loop that encourages incarceration

Part II Threatening Growth Strategies The revenue model of private prison owners and operators depends on a per diem per prisoner

pay structure With per diem rates limited by existing operational costs at public facilities the profitability

of for-profit prisons relies on increasing man-days38

to maximize revenue and lowering operational costs

to minimize expenses The former approach promotes incarceration with no upward boundary while the

latter threatens prison conditions with at least some downward limit In this section we will discuss the

benefits and limits of these growth strategies and their implications on incarceration rates

Maximizing Revenue With a per diem revenue model increasing compensated man-days is critically important to the

profit growth of private prison companies These companies can increase their man-days in number of

ways First they can increase their companyrsquos market share of the existing private prison market through

mergers and acquisitions Second they can increase the private prison market share of the broader prison

market by increasing the number of privately contracted beds andor their occupancy rates Third they

can increase the overall utilization of prisons by increasing incarceration more generally In this section

we will touch on each of these strategies in more detail

Corporate Expansion Private prison companies can increase their share of the existing private

prison market by acquiring existing private prisons from competitors GEO took this approach when they

recently bought out LSC Corrections Services for approximately $312 million39

The acquisition added

38 Man-days are calculated by multiplying the number of prisoners by the number of days each serves 39 The GEO Group The GEO Group Announces Acquisition of Eight Correctional and Detention Facilities Totaling More Than

6500 Beds [Press Release] January 26 2015

8

eight facilities or 6500 beds to the companyrsquos portfolio40

Though both CCA and GEO have expanded

their market shares in this way in the past there are two rather substantial limitations to this growth

strategy current levels of privatization and the small number of players in the market In fact by 2007

there were only six players left41

Thus this is unlikely to be the dominant growth strategy for these

private prison companies going forward

Prison Privatization Private prison companies can increase their man-days by increasing the

market share of for-profit prisons in corrections more broadly This approach is dependent on the

industryrsquos ability to gain government and public support for the privatization of corrections While private

prison companies have noted the opposition of certain groups such as labor unions and criminal justice

reform organizations42

they have nevertheless seen an expansion in their populations In fact the number

of prisoners held in for-profit prisons increased more than 1600 between 1990 and 200943

While contracting for additional beds private prison companies also make an effort to include

occupancy guarantees in their management contracts Sixty-five percent of management contracts have

such guarantee clauses44

These clauses typically promise occupancy rates between 80 and 100 and

offer to pay for unused prison beds below the delineated guarantee45

For example in 2012 CCA secured

a management contract from the Arizona Department of Corrections to incarcerate 1000 prisoners at the

Red Rock Correctional Center46

The contract included an occupancy guarantee of 90 for the contracted

beds47

As a result of such contracts in 2014 CCA and GEO enjoyed occupancy rates as high as 84 and

96 respectively48

This growth strategy holds a lot of promise since more than 90 of prisoners are still

40 Id 41 Simon Hakim and Erwin A Blackstone Prison Break A New Approach to Public Cost and Safety (Oakland CA The

Independent Institute June 2014) 16 42 Corrections Corporation of America 2014 Annual Report Form 10-K 26 43 American Civil Liberties Union Banking on Bondage Private Prisons and Mass Incarceration (New York NY American

Civil Liberties Union November 2011) 5 44 In the Public Interest Criminal How Lockup Quotas and ldquoLow-Crime Taxesrdquo Guarantee Profits for Private Prison

Corporations (Washington DC In the Public Interest September 2013) 6 45 Id at 3-6 46 Corrections Corporation of America 2014 Annual Report Form 10-K F-20 47 Id 48 Corrections Corporation of America 2014 Annual Report Form 10-K 6 The GEO Group Inc 2014 Annual Report Form

10-K 54 For Corrections Corporation of American data includes idle facilities but excludes facilities marked for

discontinuation For The GEO Group data excludes idle facilities

9

held in public prisons49

However there is still an absolute ceiling set by the number of people

incarcerated and a lower practical ceiling set by correctional systems and their policies about what types

of populations can be housed in for-profit prisons

Prison Utilization Private prisons are relied upon to relieve strains on government budgets and

concerns of overcrowding50

Accordingly private prison companies fair best when incarceration is high

enough to create such burdens Thus these companies can grow their man-days by increasing the overall

number of people incarcerated This approach undoubtedly raises the greatest number of ethical issues

but it also the only uncapped growth strategy And not only is the strategy recognized by private prison

companies but efforts made to reduce incarceration are viewed as threats to profitability In fact both

CCA and GEO cite leniency in conviction and sentencing decriminalization of drug and immigration

offenses and even reductions in crime as business risks In its 2014 Annual Report CCA states

growth depends on a number of factors we cannot control including crime rates and

sentencing patterns in various jurisdictions The demand for our facilities and services could

be adversely affected by the relaxation of enforcement efforts leniency in conviction or parole

standards and sentencing practices or through the decriminalization of certain activities that are

currently proscribed by criminal laws For instance any changes with respect to drugs and

controlled substances or illegal immigration could affect the number of persons arrested

convicted and sentenced thereby potentially reducing demand for correctional facilities to house

them Legislation has also been proposed in numerous jurisdictions that could lower minimum

sentences for some non-violent crimes and 25 make more inmates eligible for early release based

on good behavior Also sentencing alternatives under consideration could put some offenders on

probation with electronic monitoring who would otherwise be incarcerated Similarly reductions

in crime rates or resources dedicated to prevent and enforce crime could lead to reductions in

arrests convictions and sentences requiring incarceration at correctional facilities51

Similarly in its 2014 Annual Report GEO states

The demand for our correctional and detention facilities and services could be adversely

affected by changes in existing criminal or immigration laws crime rates in jurisdictions in which

we operate the relaxation of criminal or immigration enforcement efforts leniency in conviction

sentencing or deportation practices and the decriminalization of certain activities that are

currently proscribed by criminal laws or the loosening of immigration laws For example any

changes with respect to the decriminalization of drugs and controlled substances could affect the

number of persons arrested convicted sentenced and incarcerated thereby potentially reducing

49 US Department of Justice Officer of Justice Programs Bureau of Justice Statistics Prisoners in 2013 by E Ann Carson

(Washington DC Government Printing Office September 2014) 14 50 Simon Hakim and Erwin A Blackstone Prison Break A New Approach to Public Cost and Safety (Oakland CA The

Independent Institute June 2014) 3 51 Corrections Corporation of America 2014 Annual Report Form 10-K 27-28

10

demand for correctional facilities to house them Similarly reductions in crime rates could lead to

reductions in arrests convictions and sentences requiring incarceration at correctional facilities52

In summary the profitability of private prison companies comes at the expense of public safety and

personal liberty It may not be surprising then that the recidivism rates of privately held prisons are higher

than those of publicly run prisons53

After all it is within the best interest of private prison companies to

have a revolving door at their facilities

Minimizing Expenses Another way private prison companies seek to increase profitability is by reducing their

operational expensesmdashthe less they spend the more they pocket With approximately 65-70 of prison

expenditures going to staff54

private prison companies save the most in operational costs by avoiding

unionized labor and the associated personnel services55

Consequently the correctional staff at for-profit

prisons tend to be inadequately trained and poorly paid56

Not surprisingly private prisons have been

condemned for higher rates of violence and abuse57

Private prisons also cut costs related to food

healthcare and programs58

While lowering these expenses may not directly influence incarceration rates

it may have an indirect impact by worsening prison conditions and thus putting prisoners in poorer mental

and physical health for release Indeed as already noted studies have showed that recidivism rates are

higher for private prisons than public prisons59

Interestingly financial efficiency is also the primary alternative explanation for the expansion of

for-profit prisons in highly incarcerative states If true the interests of the public and private sectors

would in some way be aligned With lower operational costs private prison companies can still promise

savings for federal and state systems while charging profit premiums There is indeed some truth to these

52 The GEO Group Inc 2014 Annual Report Form 10-K 36 53 Theirry Godard ldquoThe Economics of the American Prison Systemrdquo SmartAsset January 23 2015 54 US Department of Justice Office of Justice Programs Bureau of Justice Assistance Emerging Issues on Privatized Prisons

by James Austin and Garry Coventry (Washington DC Government Printing Office February 2001) 16 55 Simon Hakim and Erwin A Blackstone Prison Break A New Approach to Public Cost and Safety (Oakland CA The

Independent Institute June 2014) 23-24 56 Brendan Fischer ldquoViolence Abuse and Death at For-Profit Prisons A GEO Group Rap Sheetrdquo The Center for Media and

Democracyrsquos PR Watch September 26 2013 57 US Department of Justice Office of Justice Programs Bureau of Justice Assistance Emerging Issues on Privatized Prisons

by James Austin and Garry Coventry (Washington DC Government Printing Office February 2001) 36-37 48 58 Theirry Godard ldquoThe Economics of the American Prison Systemrdquo SmartAsset January 23 2015 59 Id

11

claims with short-run savings averaging about 19 and long-run savings averaging about 2960

Some

states even require private prison companies to offer a specified discount to public per-diem costs For

example Texas Kentucky and Mississippi have contract stipulations that require a 10 savings61

Moreover a recent study found that the cost savings of for-profit prisons is often underestimated because

they fail to account for savings on personnel services such as pensions and healthcare for retirees which

may not be attributed directly to state correctional departments62

Finally with operating margins as high

as 30 and per diem costs still lower than those in public prisons63

some might consider for-profit

prisons much more financially efficient However comparing private and public operational costs is not

as straight forward as private prison companies might like the public to believe There are in fact hidden

costs that private prison companies either unfairly avoid or perhaps even create for public prisons

First for-profit prisons can cherry-pick the most desirable or profitable prisoners from the

general prison population Generally this means that for-profit prisons house healthy minimum security

prisoners who are cheaper to incarcerate States are left to run maximum security prisons that require

ldquomore intensive security systems and proceduresrdquo64

Public prisons also typically house specialized

populations such as sex offenders that are more expensive due to higher treatment and administrative

needs65

Finally public prisons also tend to be responsible for prisoners with moderate to high mental or

physical healthcare needs These population differences allow private prison companies to demonstrate

artificial savings for states

60 Id Short-run costs are those associated with the day-to-day operation of prison facilities Long-run costs include short-run

costs plus the capital expenditures associated with maintaining and building prisons 61 Id 62 Simon Hakim and Erwin A Blackstone Prison Break A New Approach to Public Cost and Safety (Oakland CA The

Independent Institute June 2014) 3 63 Association of State Correctional Administrators Inmate Cost Per Day Follow Up Survey (September 2011) 64 Harris Kenny and Leonard Gilroy The Challenge of Comparing Public and Private Correctional Costs (Reason Foundation

December 2013) 4-5 65 Id

12

Second as already mentioned studies have shown that for-profit prisons have marginally higher

rates of recidivism than their public counterparts66

Ethical concerns aside higher recidivism rates burden

states with additional incarceration expenses in the future Though a differential of 3-4 may seem

negligible a difference of even one

percentage point can amount to

considerable costs particularly in states

with high incarceration costs For

example in New York where the

annual cost of incarcerating one person

is more than $60000 recidivism comes

at a very high price Figure 4 provides

further detail on the annual costs of

incarceration by state

In their efforts to maximize revenues and minimize expenses private prison companies rely

heavily on growth strategies that promote incarceration Given the obvious ethical implications private

prison companies are less than public about their expansion intentions Consequently they employ

growth tactics that manipulate political elections and criminal lawmaking weakening the influence of

popular democracy on criminal law and policy

Part III Undermining Democracy With most private prison contracts executed by federal state and local policymakers the for-

profit prison industry relies heavily on political relationships Accordingly the industry has a dual-

pronged political strategy that undermines democratic legitimacy in its dependence on legislative

lobbying and campaign financing

66 Spivak Andrew L and Susan F Sharp ldquoInmate Recidivism As a Measure of Private Prison Performancerdquo Crime amp

Delinquency Vol 54 (Washington DC SAGE Publications July 2008) 482-508

Figure 4 Annual Cost of Incarceration per Prisoner

Source Theirry Godard ldquoThe Economics of the American Prison Systemrdquo

SmartAsset January 23 2015

13

Legislative Lobbying Despite denying lobbying involvement in the past ten years the three leading private prison

operators have spent over $45 million on lobbying67

According to the companyrsquos own literature CCA

has an explicit policy prohibiting it from ldquoengaging in lobbying or advocacy efforts that would influence

enforcement efforts parole standards criminal laws and sentencing policiesrdquo68

Yet over the past decade

CCA like its competitors has spent more than $900000 annually on lobbying69

In fact not only do

private prison operators utilize the services of lobbying firms they also employ their own in-house

lobbyists

Since 2002 alone CCA has employed nearly 400 lobbyists across 30 states70

In 2014 the

company had 36 active lobbyists in 10 states focusing heavily on Florida Vermont Tennessee

California Pennsylvania Kentucky and Minnesota71

Over the same time frame GEO has employed

more than 200 lobbyists across 11 states focusing heavily on Florida California Texas Pennsylvania

and Virginia72

In 2014 the company had 15 active lobbyists across 5 states73

Attention to these specific states has been a successful strategy play for private prison operators

Aside from being the home to the headquarters of GEO Florida also has the second largest private prison

population and the market share of these for-profit prisons is only increasing74

Between 2012 and 2013

the private prison population in Florida grew 1 while the private prison population across all states

decreased 575

Lobbying centered on California has also produced strong results With the second

largest prison population in the country and a judicial order to remedy overcrowding76

California has

67 Aviva Shen ldquoPrivate Prisons Spend $45 Million On Lobbying Rake In $51 Billion For Immigrant Detention Alonerdquo

ThinkProgress August 3 2012 68 Corrections Corporation of America 2014 Annual Report Form 10-K 28 69 Justice Policy Institute Gaming the System How the Political Strategies of Private Prison Companies Promote Ineffective

Incarceration Policies (Washington DC Justice Policy Institute June 2011) 22 70 National Institute on Money in State Politics Corrections Corporation of America April 29 2015 71 Id 72 National Institute on Money in State Politics GEO Group April 29 2015 73 Id 74 US Department of Justice Officer of Justice Programs Bureau of Justice Statistics Prisoners in 2013 by E Ann Carson

(Washington DC Government Printing Office September 2014) 14 75 Id 76 Id at 5

14

largely embraced private prisons Accordingly between 2012 and 2013 the private prison population in

California grew 23377

Both CCA and GEO are private sector members of American Legislative Exchange Council

(ALEC) a nonpartisan organization aimed at advancing ldquolimited government free markets and

federalism at the state levelrdquo78

The organization utilizes a public-private partnership structure to bring

together state legislators members of the private sector and the general public to draft and introduce

model legislation ALEC has played a role in the passing of mandatory minimum three strikes and truth-

in-sentencing laws all of which have contributed to the rapid growth of incarceration since the 1970s79

Unfortunately further detail about the

lobbying efforts of private prison

operators is lacking since lobbyists are

not required to report the direction in

which they lobbied on any particular

piece of legislation80

Campaign Financing Since 1990 the private prison

operators have made nearly $15 million in

political contributions at the state and

local level81

These contributions have

seen a dramatic uptick in recent years

77 Id at 14 78 American Legislative Exchange Council About Us 79 Justice Policy Institute Gaming the System How the Political Strategies of Private Prison Companies Promote Ineffective

Incarceration Policies (Washington DC Justice Policy Institute June 2011) 29 80 Id at 21 81 National Institute on Money in State Politics Correctional facilities construction amp managementfor-profit contributions to

candidates and committees April 29 2015

$2650346

$-

$500000

$1000000

$1500000

$2000000

$2500000

$3000000

Figure 5 State and Local Political Contributions of

Private Prison Companies by Year

Source National Institute on Money in State Politics Correctional

facilities construction amp managementfor-profit contributions to

candidates and committees April 29 2015

15

with 2014 representing the highest amount yet at $27 million82

CCA and GEO along with their

acquisitions have accounted for 72 of these political contributions over the years83

The two companies

also made combined political contributions of nearly $1 million at the federal level since just 201084

Moreover these company-specific figures under estimate their political influence because they fail to

capture the individual political contributions of the companiesrsquo executive leadership and board of

directors In fact the Chief Executive Officer of GEO George Zoley and one of the founding partners of

CCA Doctor Crants have each made approximately $90000 in political contributions85

Approximately half of all state and local political contributions are made to party committees the

largest beneficiary of which is the Florida Republican Party which has received more than $4 million86

Another substantial proportion of

these contributions are made

directly to state and local

candidates87

Finally the remaining

3 of these contributions are made

to ballot measure committees88

Similar to lobbying

spending these contributions have

been relatively clustered in a few

states Florida California Texas

Tennessee and Virginia have all

82 Id 83 Id 84 Id 85 Id 86 Id 87 Id 88 Id

Figure 6 State and Local Political Contributions of

Private Prison Companies by State

Source National Institute on Money in State Politics Correctional facilities

construction amp managementfor-profit contributions to candidates and

committees April 29 2015

16

scene contributions in excess of $50000089

GEO is by far the largest correctional contributor in Florida

at $34 million and CCA has an equally substantial lead as the largest correctional contributor in

California at $15 million90

Though republican candidates tend to be the recipients of campaign contributions from private

prison operators nearly a third of contributions are made to democratic candidates91

Researchers have

taken this to suggest that private prison operators are less concerned with supporting particular political

beliefs than general access to political power92

In fact nearly 80 of campaign contributions support

winning candidates93

Even the timing of these contributions is strategically nuanced Private prison

operators tend to give in the early and late stages of political campaigns in order to establish a strong

rapport early and then reinforce a positive relationship with the candidate expected to win94

Conclusion Though private prison companies tend to tout financial efficiency as their great contribution to

corrections their incentives are in many ways diametrically opposed to those of a safe and free society

Their financial success depends on increasing crime law enforcement and liberty infractions

Accordingly they succumb to undercutting popular democracy to feed their bottom lines They rely on

the questionable practices of private sector lobbying and campaign financing to secure political support

for their business ventures They do so with as much secrecy as possible to stay out of the direct attack of

ethically minded opposition

Thus it seems only fitting that the fastest growing client for private prison companies is one that

intends to fly under the radar and enjoys the fewest protections illegal immigrants targeted by

Immigration and Customs Enforcement Both CCA and GEO highlighted the importance of the recent

89 Id 90 Id 91 Justice Policy Institute Gaming the System How the Political Strategies of Private Prison Companies Promote Ineffective

Incarceration Policies (Washington DC Justice Policy Institute June 2011) 19 92 Id at 18 93 National Institute on Money in State Politics Correctional facilities construction amp managementfor-profit contributions to

candidates and committees April 29 2015 94 Justice Policy Institute Gaming the System How the Political Strategies of Private Prison Companies Promote Ineffective

Incarceration Policies (Washington DC Justice Policy Institute June 2011) 18

17

focus on immigration laws at the federal state and local level in their annual reports But they are not idle

players in the space they are well-prepared to protect and expand their enterprises For example 30 of the

36 legislators who co-sponsored Arizonarsquos immigration bill that would undoubtedly place more

immigrants in detention received campaign contributions from private prison companies95

If we are not

careful and perhaps even if we are federal state and local immigration policies will be dictated by a few

parties interested in further immigrant detention

Unfortunately business interests run high in politics and consistently undermine the legitimacy of

popular democracy To rein in the legislative lobbying and campaign financing of private prison

companies additional limitation would have to be made on such practices Alternatively the privatization

of prisons could be outlawed or at least more closely regulated For example legislation could be passed

that forbids private prison companies from relying on a revenue model that encourages incarceration or

prohibits states from paying owners and operators on a per diem per person basis Private prison

companies could instead offer the public sector better recidivism rates in exchange for higher payouts

similar to the social impact bond model It may not be entirely prudent to dismiss privatization within

corrections or any other public sector However as it currently stands the privatization of prisons

threatens all efforts to reduce mass incarceration

95 Andre N Sanchez ldquoPrivate Prisons Spend Millions On Lobbying To Put More People In Jailrdquo Think Progress June 23 2011