Are Private Prisons Good Investments for States?

A new report confirms that private prisons not only rely on faulty math to get states to agree to binding contracts, but they also fail to save states money even when their contract legally requires it.

April 15, 2014
Private Prison

The wave of criticism against private prison companies has grown amidst revelations of poor security, lack of oversight, and perverse financial incentives to lock up more people. Now, a new report from In the Public Interest confirms that private prisons not only rely on faulty math to get states to agree to binding contracts, but also fail to save states money even when their contract legally requires it.

The report examined over 40 studies of private prisons and outcomes in five individual states, and found added costs with private companies when compared to state run facilities. It concluded that companies use questionable methodology in calculating the costs of public and private prisons, inflating public prison costs to make private prisons seem more affordable. These companies can cherry-pick the least expensive prisoners available (often choosing not to house elderly, sickly, or higher-security prisoners), while filling their contracts with expensive terms, occupancy minimums, and automatic increases that create added hidden costs to the state. The study found that Ohio, New Mexico, Florida, Georgia, and Arizona all failed to see savings that were promised – or even legally required in the cases of Ohio (5 percent savings) and Florida (7 percent) – with private prisons.

If private prison companies are not saving taxpayer’s money, why do states continue to send funding where it doesn’t work? Unfortunately, states cannot afford their corrections systems and are scrambling to find any solutions to mitigate the increasing costs, without the time or wherewithal to evaluate the best options.

Instead, states should allocate funding according to a "Success-Oriented Funding" (SOF) model. This simple, effective approach ties funding directly to achievement of clear goals to ensure taxpayers’ dollars are not wasted. Several states have embraced this simple concept: fund what works to better the criminal justice system, using public dollars to incentivize policies that produce results like reducing mass incarceration while reducing crime.

The data will show what works, and what doesn’t. With SOF, states are informed consumers, and can allocate funds according to what works. SOF can be implemented into private or public funding streams- whether federal, state or local or whether grants, budgets, contracts or other awards. Dollars should be tightly tied to clear, measurable metrics that drive toward the twin goals of reducing crime and reducing mass incarceration. Implementing SOF into private prison contracts would entail conditioning contracts on whether private prisons met clear goals to improve outcomes for inmates and states. For example, one effective metric should be reducing the recidivism rate of private companies' prisoners upon release. This would help shift private prisons' incentives away from staying in business for themselves towards reducing mass incarceration and saving taxpayer dollars. To truly deal with expanding corrections costs, states must stop digging deeper into taxpayers’ pockets to fund initiatives that don’t produce results.

(Photo: Flickr/Pepino1976)