In early 1998, Virginia opened its first and only private, for-profit prison, in Lawrenceville. The facility was financed by a $42 million bond issue underwritten by the Industrial Development Corporation of Brunswick County. Rated as a medium-security prison, Lawrenceville was composed of 250 cell-housing units with capacity for 1,500 beds. At the time, 26 states had already engaged in for-profit incarceration as a promised means to save taxpayer funds and provide profits to investors.
The Commonwealth had contracted with the Corrections Corporation of America (CCA, now called CoreCivic). The fundamental economic formula to sustain a significant cash flow to CCA in order to operate the facility was based upon an estimate at the time of $12,500 per inmate to be paid by the state. This compared with $16,360 per inmate estimated by Virginia for its government-owned prisons. One substantial factor in the per-inmate difference was that corrections officers under CCA would not receive state-funded pensions but could participate in stock options for retirement. At some point, the per-inmate formula was buttressed by an agreement with the Commonwealth that it would guarantee CCA a 95% occupancy rate. Thus, the state is liable to pay for unused beds.
Despite some early criticisms of for-profit prisons as “dollars for dungeons” and enterprises that were invested in sustaining high levels of imprisonment and sentencing, Virginia nonetheless swallowed the bait and proceeded. Over the intervening years, other shortcomings appeared, including failure of the for-profits to participate in programs to reduce recidivism. But for-profit corporations are resilient and creative if nothing else in making money. Once under the control of the for-profit, inmates are coerced to work for pennies an hour, providing cheap labor for some of the most profitable enterprises in the world, including the U.S. military. According to one report, the federal prison industry produces 100 percent of all military helmets, ammunition belts, bullet-proof vests, ID tags, shirts, pants, tents, bags, and canteens. This model is also standard in state facilities.
Some acolytes continue to whisper prayers to Saint Ronald Reagan and place pennies in an alms box for votive candles to be lit for him. One of the more popular sacred scriptures intones: Government is not the solution to our problems. Government is the problem. Saint Ronald’s pronouncement may have been uttered by his economic adviser, Milton Friedman: The government solution to a problem is usually as bad as the problem. One may begin to believe that the similar clever pronouncements of modern-day conservatives found their theocratic origin in Reaganomics.
Simplistic solutions to knotty public issues cannot all be solved by private sector, for-profit management, a/k/a privatization, often viewed as a corollary of Reaganomics.
As we pointed out in last week’s issue (Reaganomics Succumbs to Reality, 12/02/2019, https://wp.me/p9wDCF-QR), simplistic solutions to knotty public issues cannot all be solved by private sector, for-profit management, a/k/a privatization, often viewed as a corollary of Reaganomics. While privatization is generally conceived as a binary approach to the delivery of public services, in the current economic climate, given the size, scale, scope, and costs involved, such proposals are often characterized as public/private partnerships.
As private prisons make profit from criminal conduct, it goes against business sense to reduce criminality, especially recidivism. In 2011, a Pennsylvania Juvenile Court judge was convicted in a “cash for kids jail scheme,” in which private prisons had paid him to dole out harsh sentences in order to maintain their prison population.
As private prisons make profit from criminal conduct, it goes against business sense to reduce criminality, especially recidivism. In 2011, a Pennsylvania Juvenile Court judge was convicted in a “cash for kids jail scheme,” in which private prisons had paid him to dole out harsh sentences in order to maintain their prison population. Private prisons are, in theory, a practical solution to a thorny problem. The state has too many prisoners and not enough prisons. The public sector is unable or unwilling to build more. Private companies step in and earn revenue per prisoner to maintain and run the facilities.
President Reagan’s War on Drugs policies in the 1980s began to flood the nation’s prison system with inmates for longer sentences, creating overcrowding. Private prisons became the solution. Their entrepreneurs claimed the facilities could operate larger prisons with fewer staff than the public sector requires, instead opting to rely on electronic surveillance cameras. Private prisons were sold to officials and the public with the promise to run at a lower cost than public prisons, a savings to taxpayers.
With the rising numbers of people being arrested and given longer sentences, especially for drug offenses, the number of private prisons rose dramatically, increasing from a total of five in 1998 to 100 in 2008. Today, private prisons are located in 33 states, with a $70-billion price tag.
As the ability of governments to finance public services through tax levies and other revenues is squeezed, officials are inclined to seek to off-load responsibilities to private entities, which may more easily reduce costs by lowering wages, reducing service levels, and surreptitiously raise revenues without public scrutiny. This is particularly true for those services that are generally unpopular with voters, such as the management and operation of prisons. According to critics, there were more than 1.6 million prisoners in federal and state prisons at the end of 2010, of which 128,195 were housed in for-profit facilities. The proportion of inmates in commercial facilities continues to grow, even though evidence suggests the following:
- Cost savings have not materialized as expected
- Private prisons actually cost more than public prisons
- Private facilities often refuse prisoners who cost more to house, such as violent offenders
- Private prisons have lower staff levels and provide less training to employees, leading to more assaults on guards and inmates than in public facilities
State prison costs continue to rise for a variety of reasons. In the 1950s and 1960s, in- patient mental health facilities were de-institutionalized and patients were returned to the community. As a result, state prison populations became warehouses for the mentally ill, with one estimate at 21% for 2005.
Virginia lawmakers have considered legislation to repeal the authority of the Department of Corrections to undertake any agreement to construct private prisons or contract with for-profit prison corporations.
Virginia lawmakers have considered legislation to repeal the authority of the Department of Corrections to undertake any agreement to construct private prisons or contract with for-profit prison corporations. At the same time, Corrections boasts that the Commonwealth has the lowest recidivism rate in the nation. In addition, like many states, Virginia is engaged in diversion programs for offenders; veterans and mental health courts; and modification of felony criteria to reduce the number of offenses prosecuted.
Together, it is the hope that these efforts restore the state’s responsibility for its inmate population; afford the capacity to reallocate public funds for more effective utilization; and terminate the self-serving, harmful dynamic of the relationship of for-profit prisons in managing a public function.