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Are private prisons worth the cost?

By Suzy Khimm

Well before passing Arizona's controversial immigration law, Arizona lawmakers were treating the state as a laboratory of sorts for the criminal justice system. Last year, state legislators passed a bill that would have privatized almost all of Arizona's correctional system for $100 million upfront -- an unprecedented move by a state government. The main argument was economic, as private operators claimed they could run more cost-efficient facilities, which supporters said would help close a billion-dollar budget gap in Phoenix.

The bill wasn't ultimately signed into law, but Arizona has still put a growing number of inmates into private prisons each year, who now account for 20 percent of the state's prison population. Nationally, there's been a similar surge in private prison construction as the inmate population has tripled between 1987 and 2007: Inmates in private prisons now account for 9 percent of the total U.S. prison population, up from 6 percent in 2000.

Although private prisons have been sold on economic grounds, a study this year by Arizona's own Corrections Department questions whether such facilities can even deliver in terms of cost savings, reports the Arizona Republic. The state's cost study showed that it's often more expensive to incarcerate inmates in private prisons than in state-run facilities, despite the savings that private operators typically promise. "The cost of housing a medium-security inmate is $3 to $8 more per day in a private prison, depending on what assumptions are made about overhead costs to the state," according to the story. How did this happen? According to some observers, it's because private operators often low-ball their operating costs when presenting their case to the state. The Republic lays it out:

According to the National Institute of Justice, private prisons tend to make much lower estimates of their overhead costs to the state for oversight, inmate health care and staff background checks.

Officials at public prisons often argue that the state winds up paying a higher cost for those services than is advertised, mitigating savings that private prisons are built to deliver. …

To maintain profit margins, [Arizona State University professor] Pratt said, companies often cut back on staff training, wages and inmate services. "Cost savings like that don't come without consequences," Pratt said. "And that can present a security risk that's elevated."

In fact, the reason that Arizona is taking a second look at its private prisons right now is because of a high-profile fugitive case: Three inmates escaped from a private facility last month and are believed to be responsible for two murders during their flight, having only been captured last Thursday. This is just the latest episode in a long history of scandals that have plagued private prison operators, including charges of prisoner abuse in adult and juvenile facilities.

I don't think there's anything inherently wrong with privately run prisons, but if they can't even save taxpayers money -- and create greater security risks in an effort to deliver as promised -- then lawmakers should think again before resorting to them. Having poured millions into lobbying lawmakers, the private prison industry has also sold itself to local communities by promising to create jobs in the places where new facilities are built. The thing is, if the same funds were put toward constructing new publicly run facilities, the money could have a similarly stimulative effect on local economies -- and could end up delivering more on the dollar than their private counterparts.

Suzy Khimm is a political reporter in the Washington bureau of Mother Jones.

By Suzy Khimm  |  August 23, 2010; 1:15 PM ET
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It is really simple. Private companies have to make a profit for their shareholders (or a bundle for top management, depending on how they are run). Therefore, they have to operate at a profit. They can do this by lowering costs below what a public agency could do or giving poorer quality. Often they do both--they hire less skilled and experienced workers to save money and they cut back on quality to make their bottom line. Plus the profit motive takes over in place of serving the public interest.

There are a very few instances where a for-profit company can operate a good service, but these are often monopolies, like the USPS used to be. When there is competition, the private company, who doesn't have to serve all comers, skims the cream, the high-margin trade, and the public or quasi-public agency is left trying to fulfill the original mission. We see this in education most prominently. There is just an inherent conflict between running something for profit and running it as a public service. Some things shouldn't be run for profit because the profit motive provides the wrong incentives. (health care, anyone?)

Private prisons are no different. they hire less skilled people, pay them less and aren't necesssarily required to observe the basic civil liberties that publicly operated prisons have to. They can't be a good deal for both the shareholders (or top management in some cases) and for the public. It really is that simple.

It's no accident that the prison break recently in the news happened in one of Arizona's privately run prisons.

Posted by: Mimikatz | August 23, 2010 2:09 PM | Report abuse

Assuming prisons should be more than just people warehouses, (a big assumption - I know), there are other metrics besides cost and escapes. Do privately run corrections facilities show any better recidivism rates than do publicly run systems?

Posted by: jeirvine | August 23, 2010 3:27 PM | Report abuse

Question: In cases where operators low-ball their estimates in order to win contracts, what happens when the private operators report costs have risen more then expected: do the operators eat the losses or does the government bail them out?

Posted by: ctown_woody | August 23, 2010 3:32 PM | Report abuse

Private contractors low-ball estimates of costs in order to win contracts? Isn't that what always happens with privatization?

Posted by: rick_desper | August 23, 2010 4:14 PM | Report abuse

Seems to me the fiscal concern may not be about day to day cost advantages (which are apparently small or non-existant) but avoiding the burden of long term pension obligations.

From Matt Miller's 8/11 piece: "In California, more money is spent each year on compensation and pensions for 70,000 prison employees than on the state's entire higher education system!"

Posted by: gregallen1 | August 23, 2010 4:15 PM | Report abuse

Is incarcerating non-violent offenders worth the cost? That's another questions. As much as we may resent them, why are white collar criminals and drug users in jail? How much of the prison population is non-violent, and how much of them were first imprisoned for non-violent crimes, before getting released and going on to use their prison experience to commit a violent crime?

Private prisons--meh, probably not a great idea. Contracting out bracelets to private companies for keeping an eye on non-violent offenders? That might not be so bad. Or some variation that lowers overall costs by getting non-violent offenders off the state dole.

Posted by: Kevin_Willis | August 23, 2010 4:24 PM | Report abuse

@jeirvine: "Do privately run corrections facilities show any better recidivism"

Even if they did (I don't know either way), it'll be because of specific tactics, not simply because they are private. What should be look at is rational attempts to reform, rather than punishment for punishment's sake.

It's been a while, but I'll never forget the story about child molesters (who, frankly, I don't think should get out, but the moral of the story remains relevant) who were allowed to participate in a special program, in which they would be eligible for early parole if they completed it. The central component of the program was psychological, and much of it hinged on forcing the molesters to role-play as their victims--essentially, forcing them to empathize. Most of them (as I recall) ended up opting out of the program, preferring to forego early parole, just to avoid having to emotionally experience what they did to their victims.

Such a thing is hardly a one-size-fits-all approach, but, frankly, people are fairly malleable. There are ways out there, positive, pro-active ways, to radically diminish recidivism. But I don't think we're much more likely to try them in private prisons than in public ones.

Posted by: Kevin_Willis | August 23, 2010 4:29 PM | Report abuse

You said you don't see anything wrong with private prisons other than the failure to deliver on cost. This is pretty astounding; say corporate prison to your self a few time and think about how that sounds. Really.

The idiocy of assuming that adding a profit motive can make things cheaper is only the surface of the issue.

The idea of adding a profit motive to sentencing (something that has happened with some if these juv. centers) is morally reprehensible.

Posted by: chrynoble | August 23, 2010 6:06 PM | Report abuse

Eh, I think they're inherently a problem because they create highly perverse lobbying incentives. I'm not particularly soft on crime but I do think prison tends to be a) expensive and b) not always the most appropriate form of, well, correction. But if you've got someone who's looking at losing $100,000,000 contracts, or gaining new ones, based on prison-reform initiatives they're going to have some serious incentives to muddy the waters. No less than, for instance, the boogey-man public employee unions private prisons were supposed to help replace.

On the other hand I'd privatize parole services in a heartbeat -- I'm pretty sure a nice arrangement similar to the private bail bond industry (or maybe even an extension of it) would be pretty efficient at keeping tabs on parolees and making sure they met whatever metrics and/or conditions were required to keep them out of prison. To tip my hat in a Tyler Cowen-esque direction I think it might be really, really efficient to let private parole operators bid on cases they'd like to manage. Cases nobody wanted to bid on would probably be... pretty good proxies of people who shouldn't be paroled in the first place.

And hmm... and as far as socially-positive lobbying incentives go it would be interesting to see what a private parole industry would do to get their hands on the umpty-thousand extremely-unlikely-to-reoffend prisoners incarcerated for minor drug offenses. Yes, they'd be low-hanging fruit in the extreme but almost any amount states paid for parole services would be less than incarcerating them so... from a cost-avoidance perspective it would still be a good deal.

Contrast that scenario with the private prison industry who almost by definition would far, far rather have *only* the kind of low-risk prisoners the private parole industry would most prefer to see released.

(Hmm... hadn't really thought about that last angle before.)


Posted by: figleaf | August 23, 2010 6:32 PM | Report abuse

They're criminals, why waste even a dollar on them.
I saw a news story about a student who had to change her college option because she couldn't afford the college she wanted. She had to go to a lesser school but was still going to owe over $30,000 in loans. I thought to myself, that's about what it costs to keep a piece of crap criminal alive.
I would much rather use that $30,000 to educate a worthwhile person than keep a piece of crap alive.

Posted by: steves5 | August 24, 2010 9:42 AM | Report abuse

Enforcement of the penal laws is a government obligation... in fact, beyond defending the nation against attack from abroad, it is the FUNDAMENTAL task of government. Custody and care of people undergoing sentences of incarceration is part and parcel of law enforcement.

This function involves the use of force: imprisoning someone IS an act of force, in the same way as policemen conducting an armed raid to enforce the law are engaged in the use of force. These roles should no more be farmed out to private individuals or corporations than should the adjudicative functions of the Courts themselves, or the lawmaking functions of the Legislature.

Abuse in private prisons is certain. Liability will follow such abuse. Escapes are inevitable, as we see, and liability will follow that, too: public liability. For example, the survivors of the people murdered by escapees discussed in the article will sue both the corporation that ran the prison, and the State, which is ultimately responsible for putting and keeping prisoners in prison.

Posted by: Iconoblaster | August 24, 2010 11:56 AM | Report abuse

Assuming prisons should be more than just people warehouses, (a big assumption - I know), there are other metrics besides cost and escapes. Do privately run corrections facilities show any better recidivism rates than do publicly run systems?

Posted by: jeirvine

Actually recidivism tends to be higher for prisoners coming out of private facilities because they offer less educational, vocational, and other forms of programming (significantly less; only 60% of private prisons compared to >90% of state-run ones). So prisoners are less prepared to re-enter society and be productive citizens. Unfortunately, this works perfectly with what private prisons hope to achieve; greater rates of incarceration. Private prisons literally have an incentive to make sure people recidivate, and to grow the prison population. They lobby extensively, contribute to the campaigns of tough-on-crime politicians, and work through the American Legislative Exchange Council (A conservative, corporate legislation front group) to promote stricter sentencs. The industry is perverse and operated inhumanely. There are practically no redeeming qualities to the industry. And I, like a lot of other commenters on here, take offense at your inability to "see anything wrong with private prisons." That's repulsive. It is morally reprehensible to try to garner profit from the incarceration of human beings.

For way more on how terrible the private prison industry is, and how it doesn't actually even save any money, check out

Posted by: mt6112a | August 24, 2010 1:31 PM | Report abuse

But Suzy, my religion requires me to believe that private is always better and cheaper than public.

By arguing that the facts prove otherwise, you are violating my First Amendment rights to free exercise of my religion! :)

Posted by: NancyIrving | August 24, 2010 10:35 PM | Report abuse

P.S. In case you are wondering, I belong to the Church of Ayn Rand.

Posted by: NancyIrving | August 24, 2010 10:38 PM | Report abuse

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