Private Prisons: Financial Salvation for State Budgets? Maybe Not. Bob Donley Reports

LBN’s Bob Donley reports that the privatization of prisons in America is increasing. The reason for the growth of private prisons is the profit involved. Private prisons are not a new development, of course. During the American Revolution, England began using private ships moored offshore as a place to store criminals. After the Civil War, a number of landowners, especially in the South, contracted to use prisoners as cheap labor.

The modern era in private prisons began in the 1980s when Corrections Corporation of America was formed. It began managing its first facility in January, 1984. CCA is still the biggest operator in the private prison industry, now a $5 billion trade. Since 2000, CCA’s share value has risen from $1 per share to about $33. “So somebody, somewhere, is making a buck in this business.”

All told, there are about 133,000 inmates in private prisons—about 8.4% of the entire prison population. Proponents of private prison companies say that businesses can provide incarceration services more economically than governments. However, the Bureau of Justice Statistics finds no significant savings.

Critics of private jails point out that these institutions usually house less violent criminals, so it should be less expensive. About two years ago, there was a small push back from the private prison bandwagon: Kentucky and Idaho, among others, began to cut back or eliminate their usually of privately-operated prisons.

In spite of a few setbacks, the private prison business is still booming. Recently, Virginia, Louisiana, and Oklahoma have entered into contracts that guarantee a 95% occupancy rate for companies that operate prisons in those states. Arizona, Donley notes, upped the ante with a guarantee of a 100% occupancy rate. What that means, Donley points out, is that the state will pay for prison beds whether there are inmates there or not. “These firms are now, in essence, guaranteed to make a profit.”

The private prison industry is profitable and growing.

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