NCPA - National Center for Policy Analysis

Private Prisons Can Lock Down Big Savings for States

April 29, 2003

Private prisons have proven to be an effective strategy for helping states keep their public corrections budgets under control, according to a new study by researchers from Vanderbilt University. In fact, introducing private prisons into states that do not currently use them could reduce public prison operating costs in a single state by an average of $20 million annually.

Analyzing state prison and budget data for the period 1999-2001, the study found:

  • States that used private prisons experienced lower growth in the cost of housing their public prisoners compared to states with no corrections privatization.
  • For those states, the growth in daily costs of housing prisoners in the public corrections system was reduced by 8.9 percent or about 4.45 percent per year.
  • In 2001, states without private prisons spent an average of $445 million in corrections expenditures.
  • Additional savings would be generated from lower operational costs in the private prisons themselves: according to numerous independent studies, the operating costs of private prisons are, on average, 5 to 20 percent lower than at public corrections facilities.

The study also found that even small levels of private prison use can have a large impact on correctional expenditures.

  • States with less than 5 percent of their prison population under private management experienced a 12.5 percent growth in public corrections expenditures compared to an 18.9 percent increase in states with no private prisons.
  • States with even larger percentages (20 percent and above) of prisons under private management generated even greater savings, with per capita increases for public prison costs of only 5.9 percent.

Source: James F. Blumstein and Mark A. Cohen, "The Interrelationship Between Public and Private Prisons: Does the Existence of Prisoners Under Private Management Affect the Rate of Growth in Expenditures on Prisoners Under Public Management?" April 23, 2003, Corrections Corporation of America (CCA) and the Association for Private Correctional and Treatment Organizations (APCTO).

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