Bringing Down Costs Through Privatization

• With 28,678 adult prisoners in private correctional facilities on December 31, 1994, the market share of private prisons has risen to 2 percent of the prison and jail population.32
• Between 1993 and 1994, private facilities under contract also rose from 71 to 88, a one-year increase of 14.5 percent.
• The Federal Bureau of Prisons has awarded its first contract to design, construct and manage a 1,000-bed medium security prison (to be located in Eloy, Ariz.) to Concept, Inc., of Louisville, Ky.
• Texas leads the nation in privatization, with 33 private adult correctional units in operation or under construction.

Major companies in the industry include CCA, with a rated capacity of 17,061 inmates in facilities under construction and planned expansions, Wackenhut Corrections with 13,732 and Concept, Inc. with 4,800. Profits, however, remain elusive.33 For example, CCA reports that it makes a small profit, but Pricor, Inc., of Murfreesboro, Tenn., an early leader in the industry, quit adult corrections after suffering a series of losses.

Economic theory implies that if there were a formal market to buy, sell and rent prison cells, the problems of funding and efficiently allocating prison space would decrease. And there are numerous "unexploited " opportunities to reduce the net costs of prisons by creating factories behind bars, having prisoners earn their keep and compensating victims.

The most promising ways to control taxpayers’ costs include privatizing prison construction and operation. Short of full privatization, government-operated correctional facilities could be corporatized and operated like private businesses.

Prison Operation.

• CCA charges Harris County, Texas, and the Immigration and Naturalization Service only $35.25 per inmate per day to operate a 350-bed minimum security facility in Houston, a charge that includes recovery of the cost of building the facility.36
• Operating costs for government-run prisons can be twice that amount, even without taking construction and land costs into account.37

Employing Prisoners.

"Prisons originally were intended to be self-supporting." Increasing productive work for prisoners requires the repeal of some federal and state statutes and clearing away bureaucratic obstacles. The federal Hawes-Cooper Act of 1929 authorized states to prohibit the entry of prison-made goods produced in other states. The Walsh-Healy Act of 1936 prohibited convict labor on government contracts exceeding $10,000. The Sumners-Ashurst Act of 1940 made it a federal offense to transport prison-made goods across state borders, regardless of state laws.39

Throughout the nation, a score of exceptions to the federal restrictions on prison labor have been authorized, provided the inmates were paid a prevailing wage, labor union officials were consulted, other workers were not adversely affected and the jobs were in an industry without local unemployment.40

A survey commissioned by the National Institute of Justice identified more than 70 companies that employ inmates in 16 states in manufacturing, service and light assembly operations.41 Prisoners sew leisure wear, manufacture water-bed mattresses and assemble electronic components. PRIDE, a state-sponsored private corporation that runs Florida’s 46 prison industries - from furniture making to optical glass grinding, made a $4 million profit in 1987.42

Such work benefits everyone. It enables prisoners to earn wages and acquire marketable skills while learning individual responsibility and the value of productive labor. It also ensures that they are able to contribute to victim compensation and to their own and their families’ support while they are in prison. A 1991 study by the U.S. Bureau of Prisons found that only 6.6 percent of federal inmates who had been employed in prison industries violated their parole or were rearrested within a year of their release vs. 20 percent for nonemployed prisoners43

By the end of 1994, the Private Sector Prison Industry Enhancement program had 74 private firms employing 1,663 prison inmates to manufacture goods ranging from circuit boards to bird feeders to graduation gowns.44 Airline reservations, telemarketing, data processing and map digitizing services employed others. At the current annual rate, $11 million in gross wages is being paid ($6,600 per prison year), for a cumulative total of $46 million since 1979. Prisoners have retained 56 percent of their wages and paid out the rest in room and board (19 percent), taxes (12 percent), victim restitution (6.6 percent) and family support (6.4 percent).

South Carolina and Nevada have become leaders in private sector use of prison labor, yet nationally only 5,000 prisoners (far less than 1 percent) work for private companies because of the additional costs of doing business in prisons.45

"South Carolina and Nevada have become leaders in private sector use of prison labor."

Fred Braun Jr., president of Workman Fund in Leavenworth, Kan., has been a key promoter of Private Sector Prison Industries (PSPI). Organized as a nonprofit foundation, Workman lends venture capital to private enterprises interested in training and employing prisoners on-site in "real world" work. Workman reported promising results from an enterprise in which convicts worked alongside nonconvict labor. Braun also is president of Creative Enterprises, the umbrella company for two plants, Zephyr Products, Inc. (sheet metal products) and Heatron, Inc. (electric heating elements), which train and employ minimum-custody inmates at the Lansing East Unit in Leavenworth.46 Braun’s original vision was of an industrial park of three or four firms employing 200. Thirteen years after opening Zephyr, he had added no more businesses, but his two original plants were employing about 150 prisoners.47

Bureaucratic inertia slows the transition to private work for prisoners. For example, the state corrections system in Texas has long been a leader in state-run prison industries, which probably has hindered the introduction of private sector opportunities for prison employment and production there.