The Weekend Economists' Panglossian Pandemic January 20-22, 2012

[Demeter]

26. Private Prisons Don’t Save Money in Arizona

http://my.firedoglake.com/mt6112a/2012/01/19/private-prisons-dont-save-money-in-arizona/

Arizona sure loves it some privatization. Facing extreme budget shortfalls, the state attempted to sell off and then re-lease its state house in 2009 to earn some extra money, along with privatizing its entire prison system. But while that plan failed, the state’s thirst for privatization never waned. Though it already had multiple private prisons holding prisoners from other states and the federal government, a prominent republican in the state legislature introduced and helped pass SB1070, the now-infamous “Breathing While Brown” law. This law, as pointed out in an investigative report by NPR, was written by ALEC, a conservative legislation front group that has longed worked with the major players in the private prison industry and promoted privatization across the board. They’re also the ones behind attacks on global warming, voting rights, and unions, but that’s a different story.

So, the state basically gave a handout to private prison operators, who would undoubtedly benefit from stronger enforcement of federal immigration laws and increased detention. This came after the industry donated heavily in the 2010 election cycle, to candidates, political parties, and ballot initiatives favored by republicans. Then, even after 3 prisoners escaped from a private prison found to have numerous security deficiencies and went on a murderous rampage, state officials still pushed for more private prisons. They re-initiated a request for proposals from private companies to construct 5,000 prison beds. Thankfully, people began to take notice. An advocacy organization filed a lawsuit trying to block the RFP, which was dismissed on a technicality. But the substantive issue in the lawsuit wasn’t resolved; namely, that the state, by law, is required to conduct performance audits of its existing private facilities every two years, including cost-comparisons with public institutions. So the state began its audit late last year to compare public and private prisons, and the request for proposals was put on hold until the state could evaluate whether or not it would save money by turning to for-profit incarceration.

Now, common sense would tell you that there’s no way to improve services in a not-for-profit venture without raising the budget for that given venture. Private prison companies don’t make money by generating more revenue; they make it by cutting costs, in things like maintenance, security, and medical care provided to prisoners. So private prisons simply don’t offer better or even equivalent services and conditions compared to state-run facilities. But the findings of the audit may surprise those who aren’t familiar with this blog or the industry: the state wouldn’t actually save any money by privatizing its prisons. That’s right; even though they pay less, offer less benefits, cherry-pick the cheapest prisoners, and cut corners in every area of operations, private prisons cost just about as much to operate in Arizona as state-run facilities.

As a result, Arizona has cancelled its request for proposals for new beds, and the plan to further privatize the system is on hold for now. This is a smart move for many reasons, including the fact that the state’s rate of prison population growth slowed dramatically over the past few years. And when one looks at the numbers a little deeper, the myth of cost-savings offered by private prison operators becomes even more apparent. For medium-security prisoners, it cost the state of Arizona $5 less per prisoner, per day to house than a private prison would. If say half of the state’s 6,400 privately-housed prisoners are medium security, that means the state paid private prison companies $5,840,000 more than it would have cost them to just house those prisoners itself. In just 2010. For minimum-security prisoners, private companies offered a whopping $0.03 in savings per prisoner per day. And that’s for the cheapest possible population! Delving even further into the numbers, the audit seemed to show that private prison facilities’ value depreciates at an exorbitantly higher rate than public facilities (probably because they don’t perform regular maintenance, as a way to increase the bottom line). For example; state-run facilities depreciated at a rate of about $1.40 per prisoner, per day. Private facilities in the state depreciate at a rate of $12 per prisoner, per day. That’s around eight times as fast as government-run facilities.