Private vs. Government Prisons: Cost-Effectiveness and Accountability

Introduction and Background

Private prisons are becoming an increasingly popular alternative to government-operated prisons, but a critical question remains: Are these private corporations doing a better job? To formulate an answer, this paper provides a review of the relevant literature to determine how many prisons are privately run, how many are operated by the government, and which approach—public or private—produces a more financially sound prison system. An analysis of the respective advantages and disadvantages of privately operated prisons compared to government-run prisons is used to identify points of convergence and significant differences in service provision. A discussion of the views of the U.S. Bureau of Justice concerning privately operated prisons is followed by an overall assessment of private versus government-operated prisons, including the costs to American taxpayers for building new prisons and the profits typically generated by private operators, to identify which approach provides optimal results. A summary of the research and important findings are provided in the conclusion.

Over the past two decades, the costs to American taxpayers associated with crime control have increased at twice the rate of defense spending, and spending on corrections at the state level has increased faster than any other spending category (McCormick, 2000). The skyrocketing costs for corrections is due in large part to the fact that the United States incarcerates far more of its citizens than almost any other country in the world, industrialized or not. More than two million Americans are currently behind bars in federal and state institutions across the country, with California and Texas experiencing the most increase in recent years (Irwin, Schiraldi & Ziedenberg, 2000).

Incarceration Costs and Prison Construction

In fact, for every 147 people in the United States, one is behind bars in a state or federal prison. This equates to a national incarceration rate of 682 per 100,000—an alarming rate that is between five to eight times comparable rates in other industrialized democracies and only slightly less than Russia's rate of 685 per 100,000, which is the highest in the world (McCormick, 2000). As a result, the United States not only imprisons more people than most other countries; it also holds approximately 25 percent of all the prisoners in the world (McCormick, 2000). Consequently, identifying the most cost-effective approach to the provision of corrections services has become the focus of a growing amount of research and attention from policymakers and law enforcement authorities alike.

This need has become even more important during periods of dwindling state and federal budgets for corrections, even as the costs required to administer these facilities continue to increase. Making do with less may be acceptable in some commercial sectors, but there is little room for cost savings at the expense of other factors such as long-term recidivism rates, ensuring that prisoners retain their fundamental rights, and conducting all operations in ways that are subject to public scrutiny and official oversight.

Over the past 20 years, state expenditures on prisons and jails have increased faster than any other segment (Irwin, Schiraldi & Ziedenberg, 2000). The states and the federal government fund their prison systems differently, but these funds are inevitably derived from the American taxpayer (McCormick, 2000). More troubling still, states are actually spending more to build new prisons than they are to build new educational institutions—a reversal of priorities that raises fundamental questions about resource allocation (Irwin et al., 2000).

The costs of building enough new prisons to house the growing inmate population are substantial. For example, the South Carolina Department of Corrections estimates construction costs by facility type in 2011 dollars as follows:

Given the enormity of the resources required for building and administering this corrections system, it is important to determine whether the job private prisons are doing is really better, as proponents claim. Advocates for private prisons maintain that privatization of this industry is consistent with the privatization of other sectors and represents good business practice rather than a moral decision. For instance, privately operated prisons claim to provide the same correctional services as their government-operated counterparts at reduced costs to governments while providing better and more cost-effective services to prisoners, as well as increased security for communities (Campbell, Andrew & Coyle, 2003).

Cost Comparisons and Claimed Savings

However, other analysts point out that private prisons face the same challenges and constraints to operating efficient correctional facilities as government-run prisons. According to Coyle, Campbell, and Neufield (2003), "Even the private prisons have been overcrowded" (p. 170).

Current incarceration rates in private prisons suggest the private sector is growing significantly. Fathi (2010) reports that approximately eight percent of all U.S. prisoners, and fifteen percent of federal prisoners, are housed in privately operated correctional institutions, making these facilities a significant and growing part of the correctional landscape (p. 1454). Given this trend toward privatization of the prison and corrections function that has traditionally been a government responsibility, it is important to determine whether there have been any unexpected consequences that might diminish the appeal of private prisons.

In fact, a number of disadvantages are only recently coming to light, due in part to the lack of transparency in the private-prison industry. Fathi emphasizes that "Private facilities present a special oversight problem. While the profit motive may increase the temptation to cut corners on staffing, medical care, and other essential services, private prisons are subject to even less scrutiny than their public counterparts" (p. 1454). In sharp contrast to government-operated prisons, private prisons enjoy virtual autonomy in their operations. Fathi further notes that "As private corporations, they are typically not subject to open meeting and freedom of information laws that apply to state and local departments of corrections" (2010, p. 1455).

Some indication of actual cost savings that private prisons supposedly achieve compared to government-operated facilities can be discerned from a recent analysis conducted by the Arizona Bureau of Planning, Budget and Research. The Bureau reported that the total adjusted per diem (per prisoner, per day) costs for state-operated medium security facilities was $48.42, whereas the per diem for medium security prisoners held by private contractors was $53.02 (Hodai, 2012)—suggesting that private prisons actually cost more.

According to Hodai, the report also noted "a whopping savings of three cents per head among the relatively low-maintenance minimum security crowd held in private pens—at $46.56 per them for a private bed, versus $46.59 at state-run institutions." However, the report quickly deflates the significance of that $0.03 margin, stating: "[There are several] inmate management functions that are provided and paid for by the state but are not provided by the private contractors. This inequity increases the state per capita cost which, in comparison, artificially lowers the private bed cost" (emphasis added) (2012, p. 10).

Moreover, government-operated prisons, as part of the larger justice system, administer these facilities in ways that conform to a wide array of mandated requirements that do not always apply to their privately operated counterparts. For instance, the U.S. Office of Justice Programs Web site makes it clear that the supervision of prisoners does not end with their incarceration but rather extends to the provision of other services in the community following release. From the government's perspective, these extended measures serve to reduce recidivism rates and reduce costs to American taxpayers. From the private prison industry's perspective, though, these initiatives just reduce their customer base and are contrary to their profit motive.

Oversight, Transparency, and Prisoner Rights

In this regard, the Office of Justice Programs states that "approximately 7.1 million men and women were under adult correctional supervision in the nation's prisons or jails or on probation or parole at yearend 2010. About 70 percent (4.9 million) of the adults under correctional supervision at yearend 2010 were supervised in the community (either probation or parole) while 30 percent (2.2 million) were incarcerated in the nation's prisons or jails" (Corrections, 2012, para. 2). In sum, by the end of 2010, approximately one out of every 33 adult U.S. residents was subject to the oversight of the American judicial system through supervised community programs or was actually incarcerated in a prison, representing 962 inmates per 100,000 adult U.S. residents being incarcerated in state or federal prison or in local jails (Corrections, 2012).

At first glance, the lack of transparency in private prisons may not appear overly important. However, civil libertarians and opponents of private prisons argue that prisoners are essentially stripped of some of their rights in private facilities compared to government-operated prisons. For example, Fathi points out that "Moreover, private prisons are shielded from judicial oversight in significant ways. Federal prisoners may not sue private prison corporations for damages under Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, two circuits have held that they may similarly not maintain a Bivens action against individual private prison employees, at least if state tort law remedies exist" (p. 1455).

Furthermore, prisoners with disabilities are also adversely affected by being incarcerated in private prisons. In this regard, Fathi notes that "The Eleventh Circuit has recently held that private prison operators are not 'public entities' under the Americans with Disabilities Act, and therefore, unlike publicly operated prisons, cannot be sued under Title II of that statute" (2010, p. 1456). Certainly, other remedies exist under the law for prisoners whose fundamental rights are being violated. However, the fact that private prisons enjoy this competitive advantage at the expense of prisoners' rights reflects the fundamentally different environment in which government- and private-run prison facilities operate today.

Because the private prison industry enjoys this competitive advantage, the implications for prisoners are only recently becoming known. According to Fathi (2010):

Prisoners are overwhelmingly poor and lacking in formal education; many are functionally illiterate. In all but two states, they are deprived of even that most basic instrument of political self-defense—the vote. Their unpopularity makes it unlikely that others will come to their aid. Prisoners are the ultimate discrete and insular minority; no other group in American society is so completely disabled from defending its rights and interests. (p. 1453)

From the perspective of many victims of violent crime, these diminished rights might not seem important. However, the fact remains that prisoners are entitled to certain rights in government-operated facilities that are not matched in privately operated prisons. For example, Fathi points out that "The Standards on the Treatment of Prisoners (Standards) is that prisoners must have access to the courts on an equal footing with all other persons" (p. 1454).

In addition, the Standards discourage the use of private prisons, at least for secure confinement: "[c]ontracts with private corporations or other private entities for the operation of a secure correctional facility should be disfavored" (Fathi, 2010, p. 1454). Furthermore, the model standards for treatment also stipulate that in those circumstances where private prisons must be used, there should be sufficient oversight included in the contract to ensure that prisoners' rights are not adversely affected. In this regard, Fathi adds that the Standards stipulate that "When private facilities are used, the Standards require multiple means of oversight, including applicability of freedom of information laws; contract provisions for oversight; and on-site monitoring by the contracting agency" (2010, p. 1455).

Conclusion

The answer to the question concerning whether private-run prisons are "better" than government-operated correctional facilities clearly depends on who is doing the asking and who is doing the answering. From the perspective of the average American taxpayer, private prisons may appear to be better simply because they claim to cost less than their government-operated counterparts. From the perspective of the victims of the people who are incarcerated, private prisons may appear to be "worse" because the perpetrators are not sufficiently punished but rather allowed to live in relative comfort and security.