Budget expenditures for prisons have been rising in many states at a rate even greater than the growth of the prison rolls. State corrections costs, between 1976 and 1990 soared from 19 cents per $100 of personal income to 40 cents per $100—a growth rate twice as fast as the economy.[22]

Growth in privatizing corrections has been dramatic in recent years. (see Table 3) There are now 52 privately run adult jails in the United States, England, and Australia, an 18 percent increase since November 1991.[23] Half of all U.S. private corrections facilities were designed for medium- or maximum-security prisoners and one-third have received full accreditation by the American Correctional Association, compared to under 10 percent for public facilities.[24]

Table 3

CORRECTIONS ACTIVITIES PRIVATIZED

THROUGH CONTRACTING

Activity

Profile of Respondents

% of Agencies Responsible That Privatize

Community Corrections

84%

76%

Halfway Houses

64%

94%

Prison Operations

92%

74%

Pardon and Parole

72%

6%

Other

48%

n/a

Source: State Government Privatization 1992, Apogee Research, Inc., p. 22.

Ten states have engaged the private sector to either operate or build corrections facilities. Others contract with the private sector to provide inmate services ranging from health care to religious programs.

Most prevalent in the South, contracting out the full management and operation of corrections facilities can lead to cost savings due to increased management efficiency. (see Table 4) According to the Government of Texas's Sunset Advisory Committee, four private prisons in Texas operate at 14 percent lower costs than state-prison operation. Kentucky saved 21 percent by contracting with U.S. Corrections to operate a minimum-security prison.[25] Such savings, if applied to all state prisons, can add up. According to a 1990 Reason Foundation study, California could save at least $212 million by contracting out prison operations and management to private firm.[26]

Table 4

PRINCIPAL REASONS FOR CORRECTIONS PRIVATIZATION

Activity

Principal Reasons

 

Capital Cost Savings

Operating Cost Savings

Insufficient Facilities

Lack Expertise

Better Service

Community Corrections

X

X

X

 

 

Halfway Houses

X

X

X

 

 

Prison Operations

 

X

 

X

 

Pardon and Parole

 

X

 

 

X

Source: State Government Privatization 1992, Apogee Research, Inc., p. 22.

FINANCIAL TECHNIQUES

The private sector is also engaged to construct and operate new prisons through the use of lease-financing techniques. For instance, in a lease-back arrangement, the state rents the corrections facility from the private builder, thereby avoiding up-front expenditures on new corrections facilities.[27]

Prisons can also be constructed through the use of straight leases and lease/ purchase arrangements.[28] Example: Southeast Missouri Correctional Facility Inc., a private firm, financed a prison by issuing in 1986 $55 million in tax-exempt bonds. The privately built, operated, and financed prison was then leased to the state for payments of $4.5 million a year for 30 years. After 30 years, the state of Missouri acquires ownership of the prison.[29]

There are other privatization possibilities for corrections. Inmate services such as food, medical, mental health, rehabilitation, transportation, and education have all been successfully contracted out to the private sector. (see Table 5)

Table 5

PRISON OPERATIONS PRIVATIZED

Operations

% Responsible that Privatize

Administration

--

Custodians

4%

Data Processing

9%

Education

44%

Food Service

48%

Health Care

74%

House Keeping

4%

Maintenance

13%

Rehabilitation

52%

Security

9%

Transportation

35%

Other

9%

Source: State Government Privatization 1992, Apogee Research, Inc., p. 22.

The Weld Administration in Massachusetts estimates that it is saving $8 million annually by contracting with Emergency Medical Systems Associates of Florida to provide medical and mental-health services for 9,600 inmates in Massachusetts. Another $600,000 of estimated savings will result from contracting out prison food services at four institutions.

Contracting out educational instruction in prisons can result not only in cost savings but also higher-quality service. States can be more flexible in modifying vocational course subject matter and materials to parallel the changing job market. The state of Washington contracts out all its educational services in prisons to nonprofit institutions.[30]