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Private Prison Contracts Include Quotas

One of the great dangers of privatizing jails and prisons is that you give a huge profit motive to keep those facilities filled to the brim with inmates. A new report from In the Public Interest finds that many of the contracts between private corrections firms require that the government either keep them full or pay for the empty beds.

In 2012, Corrections Corporation of America (CCA), the largest for-profit private prison company in the
country, sent a letter to 48 state governors offering to buy their public prisons. CCA offered to buy and operate a state’s prison in exchange for a 20-year contract, which would include a 90 percent occupancy rate guarantee for the entire term. Essentially, the state would have to guarantee that its prison would be 90 percent filled for the next 20 years (a quota), or pay the company for unused prison beds if the number of inmates dipped below 90 percent capacity at any point during the contract term (a “low-crime tax” that essentially penalizes taxpayers when prison incarceration rates fall). Fortunately, no state took CCA up on its outrageous offer. But many private prison companies have been successful at inserting occupancy guarantee provisions into prison privatization contracts, requiring states to maintain high occupancy levels in their private prisons.

For example, three privately-run prisons in Arizona are governed by contracts that contain 100 percent inmate quotas.2
The state of Arizona is contractually obligated to keep these prisons filled to 100 percent capacity, or pay the private company for any unused beds…

Bed guarantee provisions are also costly for state and local governments. As examples in the report show, these clauses can force corrections departments to pay thousands, sometimes millions, for unused beds — a “low-crime tax” that penalizes taxpayers when they achieve what should be a desired goal of lower incarceration rates. The private prison industry often claims that prison privatization saves states money. Numerous studies and audits have shown these claims of cost savings to be illusory4, and bed occupancy requirements are one way that private prison companies lock in inflated costs after the contract is signed.

Such contracts should be illegal everywhere. But Congress completely ignores the inequities in our criminal justice system.

Comments

  1. says

    I can see the annual meeting for “Penal Colonies R Us”…

    “If you’ll look at page 7 of the handout you will see that our month-to-month and year-over-year recidivism rates are still trending up, despite the decidedly inimical regulatory climate that no longer requires all of those lovely mandatory sentences.

    Our managers and stakeholders (formerly, “screws” and “gunbulls”) have optimized opportunity and by overcrowding and de-humanizing the livestock, er, I mean, felon-o-perps, have guaranteed shorter re-cycle times and more lasting secondary and tertiary stays at our facilities.

    I think our friends in the GOP deserve a big vote of thanks!”

  2. Matrim says

    Well free market, the invisible hand, and all that! If we don’t like how our private prisons are run, we can just chose to be incarcerated by one of their competitors! That’s how this works, right?

  3. dogmeat says

    Much like their economic policies, the privatization argument the GOP embraces has been shown to be equally false. But much like “Cut taxes = JOBS!” has become the almost gospel permanent mantra of the right, “Privatization = save money!” has become a religious mantra to them as well.

    Who would have thought that a major political party could not just adopt but utterly embrace policy platforms based upon consistently flawed understanding of pretty basic economics?

  4. unbound says

    Wow. I work with government contracts, and there is no way I could get a deal that is even remotely this good. Our company needs better contacts or to find black-mail material…

  5. says

    These might actually be illegal already. Contracts against public policy are already illegal and there’s a huge conflict of interest here. Unfortunately, I don’t think anyone but the government has standing to sue.

  6. Baktru says

    That’s like having a phone contract that stipulates you will be charged for 3 hours of long distance calling monthly regardless. Or.. No that is just screwed up. The very fact there are private companies whose very profit is dependent on high crime rates is just wrong. And I thought I was in a business sector that at times gets a bit unethical. Compared to that though..

  7. dogmeat says

    It isn’t just laws related to crime, it also plays a role in the punishment wing of the anti-immigration lobby. SB1070 here in AZ was partially written by the advocacy group working for private prisons. Had it been allowed to go into effect, illegal immigrants, rather than being turned over to INS, would go into AZ prisons, run by… guess who?

    Some nasty consequences to this trend:

    –Treating drug addiction as a criminal rather than medical problem
    –Mandatory minimum sentencing
    –“Tough on crime” legislation
    –Privatizing immigration issues

    Basically a profit driven police state. And here I thought “V” was set in a Fascist England… silly me.

  8. naturalcynic says

    … and, folks, that’s why we can’t legalize marijuana. It will cost the state too much to lose far too much money if all of those potential and current widgets aren’t in place.

  9. equisetum says

    Unfortunately, I don’t think anyone but the government has standing to sue.

    And no one in the government will sue, because they’re looking forward to jobs with the contractors.

  10. says

    Look, if they didn’t want to be in jail, those guys from Al Quota shouldn’t have attacked us.

    Baktru “I do wonder though, do those companies ever have Customer Satisfaction Surveys?”
    That’s what Yelp is for.

  11. exdrone says

    I have helped draft government contracts at the federal level. Performance measures are supposed to be imposed on the service provider, not the government. I would never have been allowed to accept a performance liability in the way that this one has been described. Performance penalties are intended to motivate the service provider to better service. If the government’s way of doing business is not amenable to a potential contractor, then they do not have to bid on the contract. There will always be other bidders out there who will happily do business even when faced with fluctuating demand on an ongoing basis.

  12. magistramarla says

    Privatization of any government function is evil.
    The private company called Pinnacle has taken over our military housing and has ruined it.
    MWR, which used to be run by and for the military members is now a for-profit entity and has made the MWR facilities so expensive that spouses’ groups and most of the military members can’t afford to use them.
    All of these evil private companies ought to be lumped together with Haliburton and these prison companies, sued by the government and have their executives thrown into those prisons.

  13. Pen says

    magistramarla has the right idea, I think. Maybe we could fill these quotas with white-collar criminals?

  14. D. C. Sessions says

    Do bear in mind that the contract negotiations in Arizona were conducted between the Corporation and Jan Brewer, who is not exactly a disinterested party.

  15. aluchko says

    Private prisons are a horrible idea, but if they’re going to insist on them at least get the incentives right:

    1) Reward the prison when an inmate is granted parole.

    2) Penalize the prison when a former inmate re-offends.

    3) Restrict their ability to cherry pick good prisoners and dump bad ones.

  16. francesc says

    Uh, there is probably something that I don’t understand of your prison system, so if anyone could expain it…
    Do the convicts pay for their own stay in prison? If that’s not the case I think that the contractors may be interested in having a low occupacy rate, they don’t pay as much as sustenance and they get the same money from the state. That, of course, could help some people to get back on the street faster. I see that as a good secondary effect.
    On another hand, it would be better if it were a judge who decided that and not a private company

  17. equisetum says

    Do the convicts pay for their own stay in prison?

    I don’t think this is true for state or federal prisons yet. Some cities and counties have implemented this, which is how a homeless working mother ended up in jail for failing (to be able) to pay for her son’s room and board in jail (from Barabra Ehrenreich on Alternative Radio).

    I do think the prison contractors are paid per inmate (hence the minimum occupancy guarantee). And don’t forget, judges can also get kickbacks for convictions.
    Which when you think about it is just another way of taking public money and putting it in private hands.

    This case in particular (the original post) points out just how bad the private prison system is. It’s grounded on false economic principles. We are supposed to believe running a prison with a profit motive is going to be cheaper (you know, market ‘efficiencies’) that running a prison at cost. The whole idea is predicated on a lie.

  18. freehand says

    equisetum: This case in particular (the original post) points out just how bad the private prison system is. It’s grounded on false economic principles. We are supposed to believe running a prison with a profit motive is going to be cheaper (you know, market ‘efficiencies’) that running a prison at cost. The whole idea is predicated on a lie.

    They are more efficient, but they are more efficient in putting money into the hands of top management. Why people think this is a good idea for government baffles me. I have seen privatization in several former government processes, and they always lead to higher costs for the taxpayer and corruption:
    1. Privatized prisons, as this thread is discussing.
    2. Support for the military during wartime: Kellog, Brown, and Root and Blackwater handling various tasks which were done more cheaply by military personnel before. Plus, they are less transparent. Plus also, they are not constrained by the US Military Code of Justice. Plus they harm morale and weaken security, e.g. military guards being told to allow people in uniform but without name or rank into the prison to “interrogate” prisoners (How secure is that? How can they check on who is allowed in, who has committed crimes, etc.?)
    3. Private corporations are taking over national security. Boze Allen, for example, is tasked with background checks for security clearances. They have been caught simply faking reports on about half of the second-level clearances. They “might not” get their contract renewed. But their former employee Snowden is facing a lifetime of jail or exile for telling us the truth.

    We have become a police state for profit, with nameless corporate CEOs calling the shots.

  19. equisetum says

    They are more efficient, but they are more efficient in putting money into the hands of top management.

    That’s why I put ‘efficiencies’ in quotes after I mentioned the lie that privatizing a prison makes it cheaper. It’s zeroeth year economics that it doesn’t work that way, but that’s the argument that’s often used to get the masses riled up. “Government wastes money. Private Businesses don’t.” It’s a lie, but it works because there is such a visceral distrust of government in the U.S. that the Corporations can get people to ignore the fact that it’s the same damn money paying for the prison (or the water), which means the taxpayers are paying to run the service PLUS profit. This can only be done if a) it’s more expensive, or b) the service is bad.

    I could go on, but I’m tired, and I don’t really want to research the privatization of the Mexican telephone company right now.

  20. francesc says

    @19 thank you for your answer. Unbelievable the kids for cash reference.
    “We are supposed to believe running a prison with a profit motive is going to be cheaper (you know, market ‘efficiencies’) that running a prison at cost. The whole idea is predicated on a lie.”
    Yeah, I know. It’s a pretty common lie in my country. We have good -improvable, but pretty decent- hospitals here that we are selling to private companies because paying the staff and getting profit must be cheaper than just paying the staff.

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