States across the country have been grappling with how to operate their prison systems as efficiently and effectively as possible. One option growing in popularity is outsourcing prison management. In Texas, Tennessee and also here in Michigan, private firms lowered the cost of running corrections systems. The idea should be further explored in the Great Lakes State, since taxpayers, state officials, and prisoners themselves could derive tremendous benefits.

The Michigan Department of Corrections (MDOC) is responsible for administering criminal penalties to 117,700 individuals who have been convicted of some crime under Michigan law. It operates 42 prisons and 11 camps and monitors parolees at “half-way” houses through electronic tethering, for which prisoners wear an ankle bracelet fitted with a transmitter whose signal is monitored by officials from a distance. The MDOC also contracts with counties to house certain inmates. In fact, in fiscal year 2001, the state of Michigan paid more than $17 million to house some 4,700 prisoners in county jails rather than house them in the state’s own prisons. Operating the department is not inexpensive. The MDOC requires nearly 19,000 employees — half of whom are guards — and $1.7 billion to operate annually.

Although state of Michigan has not engaged in privatization on a large enough scale to produce the kinds of savings potentially available, it has experimented with the idea with good results. In 1999, the state contracted with a private firm, Wackenhut Corrections Corporation, to build and operate a correctional facility in Baldwin. Opened in 1999, the Michigan Youth Correctional Facility has space for 450 men under the age of 20. The MDOC estimates that the facility saves between $6,975 and $19,125 per day based on comparisons with similar state-run prisons. This comes to between $2.5 million and $6.9 million annually — and that’s just for one facility.

Such savings are not uncommon. An analysis of 28 studies of prison privatization found that virtually all private prisons save money, with costs typically running between 5 and 15 percent less than the cost of government prisons. In addition, the May 2002 Harvard Law Review references three recent studies that found cost savings from 3.75 percent to 14 percent with no decrease in the quality of services. One of those studies found that private prison construction costs in Florida were 24 percent lower than they would have been had the state built its own facilities instead.

Cost savings aren’t the only reason government uses privatization for building and/or operating correctional facilities. Other reasons include:

  • Relieves overcrowding.
    Governments can obtain increased inmate housing capacity quicker by contracting with the private sector. Private firms in Pennsylvania, for example, built a prison in two years less than it took the state to build a similar prison nearby - and for $38 million less - while saving the county in which it was built $1.5 million in annual debt costs. In Houston, a new Immigration and Naturalization Service detention facility was expected to cost $26,000 per bed and take 30 months through normal government construction procedures. A private firm did the job for $14,000 per bed in less than six months.

  • Improves quality.
    States need not sacrifice quality when they use contractors. A review of 18 prison quality studies by the Reason Foundation in 2002 found that 16 of the privately run prisons performed at least as well as government-run prisons. By some measures the private prisons do better. The American Corrections Association (ACA) is a private, nonprofit group that is also, in part, a private regulatory body. In order to earn ACAs accreditation, which is the corrections equivalent of the “Good Housekeeping Seal of Approval,” a prison must meet guidelines that include staff training, fiscal controls, food service, sanitation, and safety and emergency procedures. The Association maintains 19 unique manuals of standards, each of which applies to a different type of correctional facility. While only 10 percent of America’s 48,000 government prison facilities are accredited by the ACA, an impressive 44 percent of privately run facilities are so accredited.

  • If this weren’t sufficiently compelling, Harvard Law Review also looked at studies of public and private prisons to determine whether the quality of prison services suffered when they were delivered privately. According to the authors, “... [N]one of the more rigorous studies finds quality at private prisons lower than quality at public prisons on average, and most find private prisons outscoring public prisons on most quality indicators.”

  • Fosters innovation.
    Private firms can offer states more flexibility in planning and designing prisons and prison operations. Because they are “outsiders” conditioned by the profit motive to come up with innovative ideas as a matter of survival, they are better able to think “outside the box.” For instance, a private prison administrator discovered that the Virginia Department of Corrections maintained expensive warehouses for food out of fear that deliveries would not reach prisons. This was a long-standing custom begun when food was delivered to prisons by pack mules. The system simply had no motive to change until a private firm was hired to save the state money. In Florida, privately run prisons have introduced more advanced locking systems, a greater use of camera surveillance, and a host of other innovations.

While Michigan has only experimented with prison privatization, other states have done much more and with great success. In New Mexico, for example, 44 percent of state and federal inmates are housed in facilities under private management. In Oregon the number is 43 percent. By comparison, only 0.9 percent of all Michigan inmates are incarcerated under a private management system.

No state in the union has privatized the management of its entire correctional system. In fact, one state, Tennessee, came close to being the first but was thwarted by political pressure to retreat from outsourcing in 1998. Tennessee expected to save more than 22 percent annually — or $100 million — by contracting with Corrections Corporation of America, a private, for-profit prison management business. If Michigan were to contract with and shave just 15 percent from its corrections budget, the state would see annual savings of $240 million.

Michigan faces a $1.8 billion budget deficit in its next fiscal year, due in large part to tough economic times. But tough times call for tough decisions. Will legislators choose to cut state spending or will they increase the tax burden on Michigan citizens? If they choose the former, outsourcing management of at least part of the state’s enormous criminal justice system could save taxpayers millions of dollars while simultaneously improving services.

Lawrence Reed is president of the Mackinac Center for Public Policy. John La Plante has authored fiscal policy research articles for the Thomas Jefferson Institute in Virginia and the Oklahoma Council of Public Affairs. He is a graduate of Kalamazoo College in Kalamazoo.