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Private Prisons a Smart Strategy for Arizona

leonard.gilroy@reason.org (Leonard Gilroy) — Tue, 17 Nov 2009 12:22:00 EST

Letter to the Editor at the Arizona Daily Star

Susan Maurer's fears of prison privatization ("Privatizing prisons: A shortsighted fix, a long-term nightmare," Nov. 10, 2009) are based on myths, not facts.

Private prisons are helping federal, state and local governments deliver quality correctional services and programming amid tightening budgets. A 2008 Vanderbilt University study showed significant cost savings through prison privatization, and a recent Harvard Law Review article found that private prisons outperform public prisons on most quality indicators.

Moreover, private prisons are subject to strong government oversight and are held accountable to the standards set by the public sector and independent accreditation agencies. Private prisons also have strong track records on safety, security and the development of innovative inmate education and treatment programs.

Taxpayers should not be misled. With prison capacity needs growing and budgets shrinking, a greater reliance on private prisons is a sensible strategy for Arizona.

Leonard C. Gilroy
Director of Government Reform, Reason Foundation

Privatization News Roundup, Nov. 13, 2009

leonard.gilroy@reason.org (Leonard Gilroy) — Fri, 13 Nov 2009 08:12:00 EST

Some privatization news highlights from the last week that haven't been covered elsewhere on the blog:

FEDERAL

"White House push to reduce contractors is at odds with expanding role of agencies," Government Executive
"Former Defense acquisition chief warns against 'global war on contractors'," Government Executive
"Federal procurement nominee outlines agenda," Washington Technology
"Balfour Beatty bases new division here," Nashville Post

STATE & LOCAL:

"State's risk agency looks at privatization," The Advocate
"Group divided on worker's comp privatization," The Associated Press
"Governor to submit plan to reduce prison crowding," Los Angeles Times
"Closing time for Virginia's ABC stores," Washington Post
"Conservative group calls for privatization of Iowa prisons," Iowa Independent
"Commission to submit fiscal-fix measures to Colorado Legislature," Denver Business Journal
"Public/private partnership deserves a second look," Belleville Times
"DOT: Atlanta Toll Lanes Top Priority for Privately Funded Program," Georgia Public Broadcasting
"Charlotte urban loop to be built with private funds," WRAL.com
"Team ends its bid to build, operate RTD line to airport," Denver Post
"Town officials tour prison, evaluate impact on town," Wickenburg Sun
"Possible State Prison Brings Hope to Jenkins County," Georgia Public Broadcasting
"ECU exploring partnerships for housing," Greenville Daily Reflector
"Bay City starts preliminary talks with company to take over water and sewer operations," Bay City Times
"County supervisors vote against privatization of Planning Department," Green Bay Press Gazette

INTERNATIONAL:

"The Coming Privatization Boom," MotleyFool.com
"Canadian pensions pounce on Aus toll road firm," Financial Standard
"Sweden Selects Bids From Local Groups in Pharmacy Privatization," Bloomberg.com
"Public-private partnership system in British Columbia keeps evolving," Journal of Commerce
"Saint John courthouse won't have private partner," CBCNews
"Lessons from India's port privatization," Livemint.com
"China Plans to Build, Manage Toll Road in Ugandan Capital," Bloomberg.com
"Parliament approves Privatisation of SLPA," Awoko
"Lebanese economic shake-up to focus on privatization," Daily Star
"Syria Pursuing partnership with private sector," Global Arab Network
"Peru port workers start strike over privatization," Reuters

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

Arizona Prison Privatization Proposal Doesn't Jive with Market

leonard.gilroy@reason.org (Leonard Gilroy) — Mon, 09 Nov 2009 12:55:00 EST

Though it generated a lot of headlines in places like The New York Times, Arizona's ballyhooed proposal to turn over some or most of its prisons to private operators is revealing itself to be all smoke but no fire. According to the Arizona Daily Star:

Arizona's plan to turn over its prisons to private companies in exchange for a $100 million upfront payment is having trouble getting off the drawing board, with the plan behind schedule and prison operators showing little interest.

The privatization effort is required under a law enacted last summer as lawmakers struggled to close a huge budget shortfall. It directs the state to award a contract to one or more private companies to run an unspecified number of prisons for $100 million.

It emerged as Republican lawmakers cast about for alternatives to Republican Gov. Jan Brewer's proposal to increase the sales tax to avoid deep cuts.

The prison-concession provision doesn't specify which or how many of the state's 10 prison complexes would be included, what would happen to current state employees or the length of a contract. State officials were supposed to provide an initial batch of information to potential bidders on Oct. 1, but missed the deadline.

Corrections Corp. of America, the nation's largest private prison company, "is not focused on that," said Louise Grant, a CCA vice president, adding "it's very questionable whether or not we would participate."

It's easy to see why it's not attracting interest—it was a hastily developed proposal that failed to jive with the reality of the market. Here's why.

After several iterations through the spring and summer, the FY2010 budget signed into law in September included provisions requiring the Arizona Department of Administration to issue a request for proposals for a concession agreement allowing private vendors to operate any Arizona state prison complex or combination thereof (aside from the state prison in Yuma). But on top of that, the state also wants to get a $100 million upfront payment, which is the source of the problem.

Despite using the term "concession"—which typically implies a transfer of most risks and responsibilities associated with facility ownership, except for the title itself—what policymakers crafted here is nothing of the sort. It's just a glorified operations contract without the facility ownership component that would be such a value driver, as it's on the facility end that private prison operators can really drive down costs that could potentially be capitalized in the form of a large upfront payment.

So Arizona policymakers dropped the ball by crafting a proposal that few, if any, companies are interested in bidding on. If I'm a private prison company and I can get contracts in a variety of states, why would I bother bidding on a less-than-attractive proposal to operate facilities I don't and won't own, all while making a $100 million loan to the state (taking a huge chunk of my capital reserves) on top of it!? I'll go out on a limb and say, "not gonna happen."

The kicker with all of this is that the language in House Bill 2010 authorizing the prison(s) concession is immediately preceeded by the also-reknowned statutory language authorizing the sale-leaseback of dozens of state buildings, including several Capitol complex buildings and...you guessed it...state prisons!

So apparently policymakers are OK with selling a prison facility to an investor for 20 years, but not "selling" them to private prison companies as part of a concession to generate upfront revenue and drive cost savings over time. As much as I hate to say it, I don't think any of this was purposeful, but rather sloppy drafting amid tremendous budget pressures.

Lest I leave the impression that Arizona policymakers have utterly mangled their attempts to rejuvenate prison privatization, I would like to point out that there are two other lesser known prison privatization components of the budget that I believe may have some legs. The first is a requirement that the Arizona Department of Corrections issue a request for proposals and contract for 5,000 new private prison beds at new or existing in-state private prisons. The state certainly needs new prison capacity, and a "greenfield" project like this should not generate significant opposition from the state correctional officers union since no existing jobs are at stake. The second initiative requires the ADOC to issue a request for information, followed by a request for proposals, for the privatization of all correctional health services (including medical and dental services) that are provided in a state owned prison (facility not specified).

Still though, it's unfortunate to see policymakers generally fumble the ball on prison privatization when the budget crisis demands quick action to cut costs. Privatization is a powerful way to do that, as I argued in a recent appearance on Arizona PBS's Horizon show.

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

Privatization News Roundup, Nov. 5, 2009

leonard.gilroy@reason.org (Leonard Gilroy) — Thu, 05 Nov 2009 16:45:00 EST

Some privatization news highlights from the last two weeks that haven't been covered elsewhere on the blog:

FEDERAL

"VA will turn to a contractor to reduce backlog of GI educational benefits," NextGov.com
"Senators express concern about administration's contracting guidance," Government Executive
"OMB's new procurement guidance inadequate, lawmakers say," Federal Times
"OMB pushes more fixed-price contracts," Federal Times

STATE & LOCAL:

"Panel offers cost cuts," The Advocate
"Public vs. private: Should NC give up booze control?," WRAL.com
"State-run setup's benefit doubted," The Patriot-News
"FSSA chief outlines plan to create 'hybrid' welfare system," The Herald-Times
"Plan to privatize prison deserves consideration," Denver Post
"Missouri Department of Corrections calls prison population boom no problem," Columbia Missourian
"Privatization fears persist for public Macclenny hospital," Florida Times-Union
"Eliminate, privatize some state services," Sioux City Journal
"Walker makes direct budget pitch," Milwaukee Journal Sentinel
"Novato Sanitary referendum gets green light," Contra Costa Times
"Brown County to look at privatizing planning," Green Bay Press Gazette
"Somerville Mayor Curtatone reconvenes Financial Advisory Committee," Somerville Journal
"Cape May County Youth Shelter employees, parents oppose privatization plan," Press of Atlantic City
"Central Dauphin moving forward with bus outsourcing plan," The Patriot-News
"Staffing drives airport's quest to privatize," Daily Inter Lake

INTERNATIONAL:

"Brazil In Talks On Rio's Galeao Airport Concession," Wall Street Journal
"State mulls disposals, partnerships to release value from property portfolio (South Africa)," Creamer Media's Engineering News
"KDB takes one step closer to privatization," Korea Herald
"KDB plans for mergers ahead of privatization," JoongAng Daily
"Poland's privatization plan shall help to close budget gap," Poland.com
"Czech Airlines Privatization Off For Now," Aviation Week
"Serbia to Privatize a Number of State Enterprises in 2010," PropertyXpress.com
"Syria launches its first electricity privatization tender," Daily Star
"AZN 75 million invested in Azerbaijani privatized enterprises for Jan-Sept," Azerbaijan Business Center
"MP offers to start using private prisons in Kyrgyzstan," 24 Press Club

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

California to Send 2,300 More Inmates to Out-of-State Private Prisons

leonard.gilroy@reason.org (Leonard Gilroy) — Tue, 03 Nov 2009 12:43:00 EST

Per Southern California Public Radio, California has amended its contract with private prison provider CCA to increase the total number of contracted out-of-state prison beds by an additional 2,300 as part of the state's strategy to get a grip on its prison capacity crisis:

Back in 2006, Governor Schwarzenegger declared a state emergency in California's prisons due to overcrowded conditions he said threatened inmates and prison guards. That proclamation authorized the Department of Corrections and Rehabilitation to temporarily transfer 7,900 inmates out of state over the last 3 years.

The departments' Gordon Hinkle says the transfers enabled California to get rid of thousands of makeshift cells erected in prison day rooms and gymnasiums. "One of the things we've been trying to do in California is to shut down any of the 'bad beds' or dorm-type living situations which creates a higher security risk not only for the inmates but for also for the correctional officers that are working to supervise them."

Under an amended contract with the Corrections Corporation of America, one of the largest private prison operators in the country, California will be able to transfer an additional 2,300 high-security inmates to the company's facilities in Arizona, Mississippi, and Oklahoma. The transfers are expected to begin early next year.

The inmates are likely to be housed at CCA's North Fork Correctional Center in Oklahoma and its Red Rock Correctional Center in Arizona. This is now the fourth time that the contract has been amended since originally signed in 2006, representing a ten-fold increase in three years (from 1,000 in 2006 to 10,468 under the latest amendment).

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Corrections Privatization Research and Commentary

Oklahoma Corrections Report Ignores Costs to Make Public Prisons Look Cheaper

leonard.gilroy@reason.org (Leonard Gilroy) — Mon, 26 Oct 2009 13:31:00 EDT

Following up on my post last week, here are two more reasons to question the Oklahoma Department of Corrections' new report suggesting lower per diem costs in public prison beds relative to private prisons.

First, I just received a copy of the so-called "report" (a three-pager with few details, pretty underwhelming) and it appears that my original suspicion was correct—ODOC is selectively leaving significant costs out of their analysis. And they admit it on the very first page of their report! They start by explaining their new "revised" per-diem calculation, which reveals these major red flags:

"[T]his model does not consider indirect or adminstrative funding in the facility operating cost calculation."
"Similar arguments can be made for indirect costs."
"The revised model no longer reflects costs paid by other agencies..."

Translation—running prisons actually costs more than what's in the ODOC budget alone, so it relies on overhead, administrative and other funds from elsewhere in the state budget. The ODOC claims that they are "revising" their per-diem calculations for the purpose of making their numbers more comparable to how a private prison would calculate per-diem rates, when in fact government works very, very differently with costs smeared across various budgets and agencies.

Here's the kicker—ODOC justifies its revised methodology on trying to get more accurate comparisons in a situation where "each private facility is given a budget and expected to operate within that budget with no 'outside' operating monies." Then ODOC goes on to create a methodology where it removes all of the "outside" operating monies from its own side of the ledger! That's a 180 degree bait-and-switch.

Policymakers should not be fooled. If this isn't a blatant attempt to game the numbers to make ODOC look unrealistically competitive, I don't know what is. The ODOC made this very obvious by including in their new report what the per-diems would have been under their old methodology, and the private sector had lower per-diem rates than public prisons for both minimum and maximum security facilities. Tweak the methodology a little bit, ignore some costs, and viola...under the new methodology the ODOC magically becomes "cheaper." Hmmmm. Classic government obfuscation.

Second, the state's Legislative Service Bureau issued a lengthy, detailed performance audit of the ODOC in late 2007 that clearly found lower costs in private prisons (full report here):

Private prison beds currently cost the state $47.14 per bed per day, a rate significantly below the $51.94 cost of the most directly comparable state-run medium-security institutions (Exhibit 1-6).

The relative cost efficiency of the private prisons appears attributable to the fact that DOC institutions tend to be antiquated, poorly designed facilities that require higher staffing levels to compensate for severe security deficiencies inherent in their physical plant. The private prisons, by contrast, are relatively new institutions designed to facilitate the efficient use of staff resources and to enhance security.

To conduct a fair comparison of the state’s cost for private prisons versus state-operated facilities, we compared the expected cost of private operation of the new maximum-security facilities at Davis to the estimated amount DOC would spend to operate comparable facilities. Our analysis shows a per diem cost of $62.34 for private operation of the facility ($58 contract rate + $4.34 in associated indirect costs) versus a $65.36 per diem for government operation, a difference of 4.8 percent.

Private operation, then, appears cheaper for the state up to a contract rate of $61.03 per bed. Above that price, department management is the cheaper option.

Cost however, is only one of the many factors that require evaluation in a thorough assessment of privatization. The ability of the private sector to develop and open new facilities quickly is a critical advantage. On the other hand, relying upon private correctional capacity involves an element of risk, as demonstrated by DOC’s recent loss of critical bedspace due to Cornell's termination of its contract with the state. Even so, our report recommends improved systems for contract control and management, and an approach to procurement that emphasizes competition and diversification, to address this concern.

At a minimum, state policymakers should be seriously scrutinizing ODOC's new numbers, given that they're reportedly being used to justify why the private prisons should be asked to bear the brunt of a 5 percent budget cuts, while sparing state-run facilities the same. When a change in methodology produces a flip-flop in outcome, it deserves to be taken with a grain of salt until further vetted.

It seems pretty clear to me that the ODOC has decided that the old methodology wasn't working out in their favor, so viola...they just changed the methodology and problem solved. Yet another micro-example of a long-standing phenomenon: when the rules of the game aren't working for the public sector, the public sector tends to just change them.

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

Privatization News Roundup, Oct. 23, 2009

leonard.gilroy@reason.org (Leonard Gilroy) — Fri, 23 Oct 2009 15:16:00 EDT

Some privatization news highlights from the last week that haven't been covered elsewhere on the blog:

FEDERAL

"GAO: Army shouldn't privatize West Point jobs," The Associated Press
"Panel Recommends Privatization of Fannie Mae And Freddie Mac," Talk Radio News Service
"Justice kicks off planning phase of $1.5B contract," Washington Technology

STATE & LOCAL:

"Puerto Rico to Use Private-Partnership Proceeds to Repay Bonds," Bloomberg
"Arresting Developments," Barron's
"Miami Tunnel Reaches Closure," The Bond Buyer
"Despite speed bumps, Port of Miami tunnels continued attracting lender interest," Miami Today
"Lawmakers eye using budget as a tool against Northrop Grumman in IT deal," Richmond Times Dispatch
"Montana Airport to Privatize Security Screening," Security Management
"Airport to privatize security," Daily Inter Lake
"Colorado prison cuts possible elsewhere," Denver Post
"Fire department should keep going to medical emergencies, committee says," Record-Searchlight
"Village gets bid by company to construct sewer system," The Reporter

INTERNATIONAL:

"Scottish Think-tank Propose PFI Replacement," PPPFocus.com
"Private firms model for projects," BBC News
"UK's Royal Mint Workers Protest Against Privatization Plans," Bloomberg
"Japan Post Goes in New Direction," Wall Street Journal
"Makeover of postal privatization," The Japan Times
"France: Voters Reject Postal Privatization," Toward Freedom blog
"Russia may privatize certain state corporations - Medvedev," RIA Novosti
"Poland Banks on Privatizations to Plug Budget," BusinessWeek
"Zambia Shortlists Eight In Privatization Of Zamtel," Wall Street Journal
"Public-private partnerships contribute to country's development," AngolaPress
"Zimbabwe: Privatization Opens Massive Infrastructure Opportunities," AllAfrica.com
"Government announces new wave of privatization," Daily Georgian Times
"More private finance initiatives to reduce budget deficit," Malaysia Star
"6 power plants to be privatized next year," Manila Bulletin

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

Oklahoma Corrections Study Merits Scrutiny

leonard.gilroy@reason.org (Leonard Gilroy) — Wed, 21 Oct 2009 03:02:00 EDT

Barbara Hoberock at the Tulsa World reports today that the Oklahoma Department of Corrections has done an internal study which they claim shows that the state has similar or lower costs per prison bed than private prisons. Unfortunately, having scanned the ODOC's website, they haven't made a copy of the report available so that we can review their methodology, so at this point I think it's best to take the study with a grain of salt, because the reported findings raise more questions than answers. First, some context from Hoberock's article:

The findings were released to the state Board of Corrections last week. [Department of Corrections Director Justin] Jones said the department is required to report rates to the board each year. "We are either less than the private per diems or extremely competitive," he said.

The cost to house an inmate in a public, medium-security bed is $44.35 a day, compared with $49 for a bed in a Corrections Corporation of America lockup and $44.83 for a bed in a GEO prison, Corrections Department figures show.

Jones said the public rates were calculated before the agency's most recent budget cuts, so they do not include recent cuts in contracts with private prisons.

The daily cost to house an inmate in a maximum-security state prison is $63.70, compared with $64.50 in a CCA prison, the department says.

Some red flags here:

These numbers don't jive with the ODOC's own data reported in its March 2009 Facts and Figures publication. There it clearly shows a medium security per-diem rate of $56.10, and a maximum security per-diem rate of $70.04. Both are clearly higher than either the public or private per-diems cited in the article. It may be that these are old figures, it may be that they're an average of all facilities (public & private), or it may be that the ODOC's new report ignores important costs—it's hard to tell without more information. Regardless, the discrepancies warrant further review of the new study's methodology.

It may even be that budget cuts and other system changes have actually reduced medium-security per diems by 20 percent in 6 months (from $56 to $44). I seriously doubt it, but for the sake of argument let's say it's accurate. In that case, I'd say that the outcome would then validate the findings of the Vanderbilt University study discussed in Reason Foundation's Annual Privatization Report 2009, which found that states can better keep their corrections budgets in check by partnering with the private sector to deliver correctional and detention services. In essence, the study demonstrated that the injection of competition with private prisons worked to drive cost efficiency in the public prisons. But again, this interpretation is dependent upon the idea that the state managed to bring costs down by 20 percent this year, which just doesn't happen very often in government.
Does the new study factor in the capital costs of the prisons (several hundred million for roughly 5,000 new beds) the state would need to build to house the thousands of inmates currently incarcerated in private prisons? A true apples-to-apples cost comparison would need to factor that in. It's easy to make the public sector look very cost competitive when you start ignoring significant costs like these. Throw in tens of millions in annual debt service for a public bond issue to build new prisons, and the public sector per-diem rates will starts to look a lot different. If the goal is to compare the value for money for public prisons vs. private—which should be the underlying question, right?—then you can't just wish away major costs, nor the societal trade-offs for pursuing public debt for prisons, as opposed to funding other priorities (or just not adding to the debt burden in the first place).
Similarly, did the ODOC factor in those costs borne by the state outside of the corrections budget? What about legal expenses? How about risk management and insurance coverage (states are usually self-insured for these sorts of things, which is probably not in the corrections budget? What about facility maintenance, HVAC systems and the like—are those costs captured in the corrections budget or handled by another agency? What about overhead and utility costs? The list goes on, which is why (a) it's tricky to do good public-private cost comparisons (especially when they're done by the contracting agency itself, who may have an incentive to game the numbers out of self-preservation), and (b) the reported findings of the ODOC report should be taken with a major grain of salt. As they stand today, the numbers are not transparent.

In fact, this is what makes this statement so ironic:

However, Jones said the evaluation is deceiving because the state system also supports an agricultural operation and has different inmate health care costs than private prisons do. The public system does not transfer inmates with severe health problems to the private prisons, he said. "We still have costs they don't have," he said.

And the private prisons have costs the state doesn't have, like taxes for one. Again, a key reason why a true value for money analysis would look at all of these factors, shared costs and unique costs alike, to try to get to an accurate public-private cost comparison.

I'm not the only one who's skeptical at this point:

Sen. Anthony Sykes, R-Moore, the chairman of the Senate Appropriations Subcommittee on Public Safety and Judiciary, said the analysis was based on assumptions and did not appear to take into account factors that cannot be ignored. He said the state has a long history of maintaining a balance between public and private prisons.

"It appears that DOC has used this analysis to justify having private prisons and halfway houses bear the entirety of the 5 percent cut ordered by the Office of State Finance and that no cuts are being imposed on public facilities," Sykes said. "At the very least, this action by DOC places the state in potential breach of contract."

I don't want to speculate on motivation, but knowing that the study is being released at the same time as the state is requiring the private prisons to bear the entire burden of agency budget cuts demands serious scrutiny of the ODOC analysis. The implication is that Oklahoma has achieved something no other state (or nation) has—maximum efficiency in their public prisons, to the point that they should be spared any cuts at the same time that many other state services are.

Let's get real—most states are in a fiscal crisis. No one should be off limits when it comes time to spread the cuts around state government. Whenever some agency claims that it should be given special treatment, it should generally be interpreted as a self-interested attempt to protect its budget. Ask most state agencies and they'll tell you they too have one thing or another that deserves protection from spending cuts. If policymakers listened to all of them, significant spending reductions in state government would be few and far between.

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

Privatization News Roundup, 10/16/2009

leonard.gilroy@reason.org (Leonard Gilroy) — Fri, 16 Oct 2009 16:00:00 EDT

Some privatization news highlights from the last week that haven't been covered elsewhere on the blog:

FEDERAL

"Administration wants tighter reins on contractor fees," Washington Technology
"Report says government should focus on quality of contracting competition," Government Executive
"North Georgia gets new immigration detention site," Chattanooga Times Free Press

STATE & LOCAL:

"US Airport Executives Eye Privatization Amid Traffic Slump," The Wall Street Journal
"Virginia audit blasts Northrop Grumman IT contract," The Virginian-Pilot
"Oklahoma DOC to cut some private prison contracts ," The Oklahoman
"Prison system to shop for new medical provider," The News Journal (Delaware)
"Proposal to privatize snow removal plowed under," Chicago Sun-Times
"Okaloosa schools' privatized health service a success, parents still concerned," Northwest Florida Daily News
"Cape May County looks to privatize youth shelter," Philadelphia Inquirer
"Fight at city hall after re-vote privatizes Baywalk sidewalk," The Daily Loaf (blog)
"Petition Backs Private Bid for Animal Shelter," Sag Harbor Express
"Grass cutting bids now being accepted by city," The Natchez Democrat

INTERNATIONAL:

"UK Considers Privatizations to Cut Its Debt," Wall Street Journal
"Firms eyes stake in Mombasa port," Business Daily Africa
"French companies eager to join public-private partnerships in concession of water and sewerage companies," Focus News Agency
"French Companies Interested in Privatization of Sofia Heating Utility," Sofia News Agency
"Yuschenko instructs cabinet to consider privatization of small hydro power plants," Interfax.com
"NAREDCO presents models for Public Private Partnership in housing," Webnewswire.com
"Govt roping in private players to construct old-age homes," Indopia
"Saudi Arabia committed to privatization," Middle East North Africa Financial Network
"Privatization of The Bahamas Telecommunications Company Enters Due Diligence Phase," Reuters

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

Privatization News Roundup, 10/11/2009

leonard.gilroy@reason.org (Leonard Gilroy) — Sun, 11 Oct 2009 13:07:00 EDT

Some privatization news highlights from the last week that haven't been covered elsewhere on the blog:

FEDERAL

"Feds ‘In-Sourcing’ Could Hurt N. Va. Economy," Burke Connection
"DHS announces immigration detention reforms," Government Executive
"Defense policy bill has major implications for contractors," Government Executive
Report: "Civilian Agencies' Development and Implementation of Insourcing Guidelines," GAO-10-58R, October 6, 2009, U.S. Government Accountability Office
Report: "Contract Management: Agencies Are Not Maximizing Opportunities for Competition or Savings under Blanket Purchase Agreements despite Significant Increase in Usage," GAO-09-792, U.S. Government Accountability Office

STATE & LOCAL:

"Private Capital Can Serve as Second Stimulus," EarthTimes.org
"New council exploring public-private alliance," NJBIZ
"Oklahoma urged to sell worker's comp agency," Forbes
"Activists Storm Leno's Office, Demand Schwarzenegger Veto Privatization Bill," Fog City Journal
"Supervisor questions savings from 'reverse privatization'," Fairfax County Times
"Protesters pan privatization plan," New Haven Register
"Bidwell Marina deal sealed Friday," Oroville Mercury-Register
"Future of BayWalk sidewalk up in the air again," Tampa Tribune
"Library faces privatization or drastic cuts, report says," The Union
"Piscataquis County decides against dispatch contract," Bangor Daily News
"Southampton Councilwoman mulls bids to privatize town animal shelter," 27east.com
"Newton firefighters seek chance to bring ambulance service in-house," Gatehouse News Service

INTERNATIONAL:

"Russia to go ahead with privatization in 2010 - deputy PM," RIA Novosti
"Brazil to privatize Rio airport to prepare for 2016 Olympics," RIA Novosti
"Private group seeks slice of $3b rail budget," Brisbane Times
"Turkey achieves privatization successes," Hurriyet Daily News
"Iran's Telecom Privatization May Prompt Reform," Forbes
"Iran to privatize its ports, management," Tehran Times
"Belarus plans to sell stake in Beltelecom by end-2009," ISI Emerging Markets
"Mumbai Port opens RFQs for privatization of 3 berths," SteelGuru

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

Privatization News Roundup, 10/2/2009

leonard.gilroy@reason.org (Leonard Gilroy) — Fri, 02 Oct 2009 06:57:00 EDT

It's been a few weeks since I've done a privatization news roundup, so today I'll play catch-up. The articles below are some privatization news highlights from the last several weeks that haven't been covered elsewhere on the blog:

FEDERAL

"NASA plans new schedule for $4B procurement," Washington Technology
"IG: VA has widespread problems with management of IT projects," NextGov.com
"House panelists decry space privatization," Salt Lake Tribune
"Immigration agency to outsource disaster-recovery plans," Washington Technology

STATE & LOCAL:

"Schwarzenegger's prison plan sets stage for court battle," Sacramento Bee
"Port of Miami tunnel deadline extended," South Florida Business Journal
"State prison contract changes hands," Alaska Dispatch
"Editorial: Privatizing roads may boost infrastructure," The Detroit News
"Let's get back on the privatization train," Vancouver Sun
"Indianapolis Extends IT Services Deal With Northrop Grumman," Government Technology
"Indianapolis considers electronic parking meters," WTHR
"Daley administration floats privatization of plowing side streets," Chicago Tribune
"Mental health workers sue DC to stop privatization," Washington Business Journal
"DC Council Member Fights Privatization Of City Child Care," WAMU
"County May Privatize Ambulances," The Monticello News (GA)
"Concessionaire signs contract for Bidwell Marina," Contra Costa Times

INTERNATIONAL:

"Russia to relaunch privatization drive," AFP
"Polish Privatization Will Narrow Budget Gap," Wall Street Journal
"Iran to privatize oil terminals," Tehran Times
"BBC considers part-privatization of commercial arm," Boston Globe
"British Conservatives consider bank privatizations," The Associated Press
"Ukraine hopes for $1.2 bln in privatisation in 2010," Forbes
"Gaming giants vie for lottery," Melbourne Herald Sun
"NSW Lotteries Privatised by Rees Government," Razors Edge
"Gov't to sell 15% of holdings in Ashdod, Haifa ports," Jerusalem Post
"Privatizations to gain pace," Turkish Daily News
"£184m housing repairs contract out to tender in Kingston," Surrey Comet
"2009-2010 Revenues of Bulgaria’s Privatization Agency can reach 440 million euros," Radio Bulgaria
"Oman to privatize, invest in power projects," Tehran Times

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

Privatization News Roundup, 8/28/2009

leonard.gilroy@reason.org (Leonard Gilroy) — Fri, 28 Aug 2009 14:04:00 EDT

The articles below are some privatization news highlights from the last week that haven't been covered elsewhere on the blog:

FEDERAL

"House Panel Begins Broader Review of Procurement System," Washington Post
"Eye Opener: Kennedy's Impact on Federal Workers," Washington Post
"Locking Up Profits in Private Prisons," Motley Fool

STATE & LOCAL:

"Three suitors compete to run the Port of Virginia," Virginia Business Magazine
"HGEA wants Hawaii state layoffs blocked until union is 'consulted'," Honolulu Advertiser
"Colorado: Lawmakers to examine state WC insurer, consider privatization," Risk & Insurance
"RTD to hold hearing on FasTracks partnership," Denver Business Journal
"Mass Pike service plazas, air rights concessions flop," TollRoadsNews.com
"Denver parking-meter change suggested," Denver Post
"South Fulton politicos making a bad situation worse," Atlanta Journal-Constitution
"Monroe County may privatize public safety, security systems," Rochester Democrat and Chronicle

INTERNATIONAL:

"Norway Opposition Plans $12 Billion Privatization Move-Report," CNNMoney.com
"Vinci to secure Slovak motorway financing," Reuters
"Oman plans privatization of power plants," Middle East North Africa Financial Network
"Rwanda, Burundi demand TRL privatization deal be scrapped," ThisDay
"Mounting CEE budget gaps may speed up government selloffs," Reuters
"Real properties top state assets for sale in 2010," BusinessWorld Online
"Authorities extend tender for port operator Marina Bar," ISI
"Serbia may seek at least 200 mln eur for drugmaker-report," Reuters
"Government to spend EUR 240mn from privatization on investments," ISI
"How Privatizing Hydro-Québec Can Make Quebecers Richer," Nickle's Energy Group
"Obstacle removed to Leumi privatization via stock exchange," Globes

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

Privatization Offers Solution for Michigan Prison Quandry

leonard.gilroy@reason.org (Leonard Gilroy) — Mon, 24 Aug 2009 18:33:00 EDT

Despite California's rejection of an offer to house some of its inmates in Michigan's empty Standish Maximum Correctional Facility, Michigan policymakers are still shopping around for offers from other states or the federal government.

I seriously doubt that Michigan will have much luck in this pursuit, however, and for a very simple reason—why would a state contract with another state to hire more costly public-sector employees when they can get the same service for less money by contracting for space in private prisons?

California offers an interesting example. As an emergency effort to relieve severe overcrowding in its prisons, California began contracting out for roughly 8,000 beds in out-of-state private prisons in the recent past. They took that experience—a sense of what's out there on the market— with them to Michigan, where Chris Christoff and Kathleen Gray at the Detroit Free Press report that:

[...] California prison officials told [Michigan State Corrections Director Patricia] Carsuso on Monday the Standish prison would be too expensive and lacked the needed medical facilities.

Translation: California knows it can get better facilities at a better rate elsewhere, because it's already doing so.

Here's a thought: maybe Michigan would get a better deal for taxpayers by just selling the Standish prison to a private prison company. That would not only allow the prison to stay open, but it would also allow the state to unlock economic value that's currently trapped in the asset (real estate value, tax revenues shifting from public to private operation, etc.) because, well, it's a tax-exempt government asset.

If Michigan doesn't need this prison, then just be done with it and sell it already. Policymakers shouldn't be grasping at straws trying to keep a dying prison—one that policymakers already decided to shutter once this year—on life-support.

Indeed, wouldn't many Michigan taxpayers find it odd that they were being asked to subsidize more corrections employees than the state really needed (and their long-term retiree pension and health care costs) in order to provide beds for prisoners in other states? Many would rightfully see this as unreasonable mission creep.

Seems to me that my proposal makes more sense. Sell the prison, keep many of the jobs there, unlock the trapped asset value, generate tax revenue from a private operator. Win-win all around. The state's current efforts only (and predictably) focus on the "preserving jobs" part, without the other massive benefits you'd get with privatization. At a time when fiscal responsibility should be paramount, it doesn't make sense for the state to try to enter a new enterprise to avoid making necessary cuts. Michigan taxpayers would be better served if there were more options on the table.

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Prisons and Corrections Research and Commentary

Privatization News Roundup, 8/21/2009

leonard.gilroy@reason.org (Leonard Gilroy) — Fri, 21 Aug 2009 15:53:00 EDT

The articles below are some privatization news highlights from the last week that haven't been covered elsewhere on the blog:

FEDERAL

"Dear USPS: Consider privatizing," CNNMoney.com
"Two Army hotels in Hawaii in privatization program," TMCnet
"Lend Lease sets sights on public private projects," Architecture and Design

STATE & LOCAL:

"Would Privatization Help Public Universities Excel?," U.S. News & World Report
"Education Security Provider Wren Helps Texas Schools Streamline Procurement Process Through TCPN Partnership," PR Newswire
"Oklahoma Public Employees Association seeks court action against privatizing Griffin Memorial Hospital," The Oklahoman
"Privatization of group homes protested," Connecticut Post
"Chicago's parking-meter lease draws lawsuit," Chicago Tribune
"100 Addiction Workers Face Layoff, Union Says," Washington Post
"County Commissioners Seek Proposals To Privatize Ascarate Golf Course," KFOXtv.com
"Town May Privatize Animal Shelter," The Sag Harbor Express

INTERNATIONAL:

"Bulgaria State Goes after Telecom for Unpaid Privatization Dues," Novinite.com
"Air France Withdraws From Czech Airlines Bidding," Wall Street Journal
"East Africa Seeks Private Investment for Energy Projects," GlobalAtlanta
"Govt. to pay for 20% cost of mega development projects under PPP model," Thaindian.com
"Govt forms Joint Hydropower Public Private Partnership Committee," Regional Times
"TOKİ cancels Ataköy land privatization tenders," Today's Zaman
"Kuwait launches first public-private partnership power scheme," MEED
"Romanian President Says Privatization Auth Was Wrong To Shut Down Tractor Maker," Mediafax
"China Steelmakers Block Privatization," Wall Street Journal
"OECD to Israel:Privatize farmland, cut water subsidies," Ha'aretz
"BCWD privatization: Creating equity to Butuanons access to cheaper water rates, better service," Philippine Information Agency
"Port workers vow to stop privatization of North Harbor," Business Mirror

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

Privatization News Roundup, 8/14/2009

leonard.gilroy@reason.org (Leonard Gilroy) — Fri, 14 Aug 2009 14:52:00 EDT

The articles below are some privatization news highlights from the last week that haven't been covered elsewhere on the blog:

FEDERAL

"Let's Outsource the Post Office," New York Times
"US Postal Service's Sticky Situation," The Epoch Times

STATE & LOCAL:

"Puerto Rico Public-Private Partnerships Authority Launches Its Website," BusinessWire.com
"Glitches Mar Indiana's Effort to Outsource Social Services," Wall Street Journal
"OUR ABCs: Rationales for Liquor Monopoly Don't Hold Up," Richmond Times-Dispatch
"Oklahoma lawmakers tour private prison in Lawton," Forbes.com
"State workers group seeks injunction for state agency's privatization plan," KFSM.com (Oklahoma)
"Bing: Privatizing can save city cash," Detroit Free Press
"Kansas City will explore options to improve bulky item pickup," Kansas City Star
"Gwinnett to bid out property appraisals," Atlanta Journal-Constitution

INTERNATIONAL:

"New Zealand Fin Min: Potential To Use Private-Public Partnerships More," NASDAQ.com
"Polish Government Approves Asset Sales to Cover Swollen Deficit," Bloomberg.com
"Poland's Asset Sales May Be Best Option to Finance 2010 Deficit," Bloomberg.com
"Borovo takes first step towards privatization," ISI
"Belgrade Fair won't be privatized," B92.net
"Chile's privatized pension system gets high marks, but many don't participate," Sun Journal

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

Taking on California's Mighty Public Engineers, Prison Guards Unions

leonard.gilroy@reason.org (Leonard Gilroy) — Thu, 13 Aug 2009 19:52:00 EDT

You'd think that everyone in California would understand by now that one of the biggest obstacles to meaningful government reform in Sacramento is the impressive political power wielded by the state's public employee unions. Yet the seeming permanence of the state's fiscal crisis leads me to doubt it.

Luckily and coincidentally, on the same day we get a strong reminder from two different sources. First, the American Council of Engineering Companies – California issued a statement taking to task the Professional Engineers in California Government (PECG) for a recent ad campaign attacking privatization and suggesting cost savings from bringing contracted services back in-house (I both cringe and laugh at this ridiculous notion). From the statement:

"In today's difficult economy of layoffs and furlough notices, it is incomprehensible to us that PECG is spending tens of thousands in taxpayer-generated dollars to create and run a series of ads attacking contracted out services and spreading misinformation about state pensions. [...]

The fact is that a 2007 report by the former head of the non-partisan Legislative Analyst's Office showed the comparable cost of in house (state-employed) engineers ranged from $173,434 to $209,212 while the average cost of an outside (privately-employed) engineer was $193,000. [Read the entire report: www.celsoc.org/userdocuments/File/LECG_Rpt_2007.pdf]

While seemingly close in salary costs, when you consider the extra liability per state worker in pension and health care benefits – sometimes more than a million dollars – short-term contracts are a much cheaper option for the state and can actually help reduce costs. [...]

Furthermore, less than 10 percent of transportation engineering and design work conducted by the state is contracted out to private engineering companies. Ninety percent is handled by state employees. In light of this dramatically one-sided statistic, it is disingenuous of the union representing state workers to suggest that cost savings of any kind can be made by further restricting contracts. If anything, the opposite is true.”

This is what governments always do to defend themselves against privatization and keep the budget gravy train rolling—take long-term pension and health benefits off the table to make themselves look cheaper than they ever could possibly be if forced to account for the ture "all-in" costs of service delivery. How easy it becomes to game the system when those costs disappear from the ledger. Kudos to the ACEC for calling a spade a spade.

The second piece is noteworthy, and one I've been waiting for for a long time. National Public Radio's All Things Considered does an incredible public service by shining a critical spotlight on the mighty prison guards union—the California Correctional Peace Officers Associations—which had perhaps the biggest hand in creating the state's prison crisis and which remains the biggest obstacle to privatization and meaningful prison reform. The CCPOA has literally driven California's correctional system over the cliff and still has its foot on the accelerator. As NPR reports:

In three decades, the California Correctional Peace Officers Association has become one of the most powerful political forces in California. The union has contributed millions of dollars to support "three strikes" and other laws that lengthen sentences and increase parole sanctions. It donated $1 million to Wilson after he backed the three strikes law.

And the result for the union has been dramatic. Since the laws went into effect and the inmate population boomed, the union grew from 2,600 officers to 45,000 officers. Salaries jumped: In 1980, the average officer earned $15,000 a year; today, one in every 10 officers makes more than $100,000 a year.

Lance Corcoran, spokesman for the union, says it does what is best for its members. "We have advocated successfully for our members," he said.

Unfortunately, success for CCPOA's members translates into a correctional system death spiral for taxpayers. But I digress:

But [Corcoran] disputes that the union has purposefully tried to increase the prison population. [...] Campaign records, however, show much of the funding to promote and push for the passage of the laws came from a political action committee the union created. It is run out of a group called Crime Victims United of California.

Its director, Harriet Salarno, says the committee is independent from the union. But a review of the PAC's financial records shows the PAC has not received a donation from another group besides the union since 2004. [...]

But Corcoran acknowledges that the union has benefited from the increase in the prison population after these laws passed. "We've had the opportunity to grow," Corcoran says, "and that has brought with it both success and criticism."

To me, here's the most damning part of the NPR piece—former state corrections secretaries calling out the CCPOA:

[Former state corrections secretary Jeanne] Woodford says she stepped down as secretary of the corrections department when she found out that the union had been going on behind her back to negotiate directly with the governor's office. "The union is incredibly powerful," Woodford says.

Former Secretary Roderick Hickman resigned for the same reason in February 2006. "The biggest problem that I had was the relationship that I had with the union," Hickman says.

Hickman says the union was able to control the department's policy decisions, including undermining efforts to divert offenders from prison and reduce the prison population. "Maybe I was just impatient," he says, "or it wasn't going to go fast enough, but [the department] is still in the same place I left it, with an over $8 billion budget. Now it's over $10 billion."

Today, 70 percent of that budget goes to pay salaries and benefits to the union and staff. Just 5 percent of the budget goes to education and vocational programs — the kind of programs that study after study in the past 10 years has found will keep inmates from returning to prison.

California taxpayers should be appalled and outraged. These comments are coming from the people who ran the system and were stymied by the CCPOA juggernaut. As I wrote here back in June:

Prison guards are California's largest personnel expense, and their unions lead the charge to prevent private competition for their jobs. They fight tooth-and-nail for taxpayer money in the form of higher salaries and gold-plated pension benefits that are far more lavish than most in the private sector receive. These inflated personnel costs are a major reason taxpayers pay roughly $45,000 a year to house each inmate (the highest among the 50 states).

When looking at the billions in California prison spending it is very easy to see why government prison guards earning $73,000 a year—plus tens of thousands in overtime, plus outstanding health benefits, plus amazing retirement benefits—wouldn't want to face competition from private prisons.

The guards and unions have a great gig going. Unfortunately that gig is appallingly expensive for taxpayers.

If there's any hope for rescuing California's failing corrections system, it will only come when policymakers shove CCPOA out of the way and get on with the long-overdue and necessary work of reform. Privatization can and should play an important role in this process, as it already is through the state's contracts for thousands of beds in out-of-state private prisons, which helped the state ease the most severe overcrowding (and which, of course, CCPOA sought an injunction to prevent—and lost).

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

UPDATE: The CCPOA's influence is an old, old story that people only may be just waking up to. Here's a 2003 Wall Street Journal editorial that takes them to task.

Kentucky Chamber Advocates More Prison Privatization, Cites Lower Costs

leonard.gilroy@reason.org (Leonard Gilroy) — Wed, 12 Aug 2009 22:38:00 EDT

The Kentucky Chamber of Commerce is recommending that the state increase its use of private prisons to ease pressure on the corrections budget. According to The Courier-Journal (emphasis mine):

The chamber cited figures from the Department of Corrections that show the average annual cost of housing an inmate in the three privately run prisons in Kentucky is $2,500 less than the average cost in the 13 facilities operated by the state.

"We do not present that as a panacea but clearly one of the items that needs to be considered if you are interested in (saving) $2,500 per inmate," chamber President and CEO Dave Adkisson said during a meeting last week of the General Assembly's interim joint Judiciary Committee.

The state's prison population — about 21,000 — is the fastest-growing in the nation and could reach 31,000 within 10 years, according to a recent report by the Pew Center on the States.

Kentucky spends about $500 million a year to house prisoners, compared with $7 million in 1973. Even adjusting for inflation, the state spends about 14 times as much to house inmates now than it did then. [...]

As of Friday, 6 percent of Kentucky's total prison population — 21,386 — was housed in one of the three private prisons.

State corrections officials are less sanguine about expanding the use of private prisons, saying that it has been "very useful" to the state but does not need to be increased. They also cite higher medical costs at state-run facilities than the private institutions as one potential explanation for the cost disparity.

I'd counter that increasing competitive contracting in corrections would help to drive down both medical and incarceration costs, based on the experience of numerous other states. As discussed in Reason Foundation's new Annual Privatization Report 2009, a 2008 study published by Vanderbilt University found that states that contracted with private corrections companies significantly reduced their prison costs compared to states that did not.

Study author James Blumstein says, "The fundamental conclusion is that, over that six-year period, states that had some of their prisoners in privately owned or operated prisons experienced lower rates of growth in the cost of housing their public prisoners—savings in addition to direct cost savings from using the private sector." In addition to saving money at privately operated prisons, the study found that public facilities that remain under state operation also had reduced costs. States could save an average of $13-15 million per year (based on an average of $493 million in state corrections expenditures) through the introduction of private prisons, according to the study.

Private prisons are playing a critical role in helping states deliver quality correctional services and programming and easing the financial burden on cash-strapped states during the ongoing recession. The Kentucky Chamber is definitely on the right track here.

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Prison Privatization Research and Commentary

Privatization News Roundup, 8/7/2009

leonard.gilroy@reason.org (Leonard Gilroy) — Fri, 07 Aug 2009 14:02:00 EDT

Reason Foundation's new Annual Privatization Report 2009 wasn't the only news in the privatization world this week. The articles below are some privatization news highlights from the last week that haven't been covered elsewhere on the blog:

FEDERAL

"Energy weighs freeing feds from competitive sourcing agreements," Government Executive
"More problems reported with Defense Contract Audit Agency," Government Executive

STATE & LOCAL:

"Tennessee appeals court rules that CCA is subject to open records law," WREG
"Chicago-area bidder for Virginia port operation adds a partner," The Virginian-Pilot
"Put first things first in proposals to operate Va. ports," The Virginian-Pilot
"State Senate candidates spar over Houma hospital," Daily Comet
"City Council seems ready to let Dallas Zoological Society run zoo," Dallas Morning News
"St. Pete moves forward with plans to privatize BayWalk sidewalk," Tampa Tribune
"In Pomona, outsourcing takes in-house indecision," Inland Valley Daily Bulletin

INTERNATIONAL:

"10 companies reported contending for Odessa Port-Side Plant," Ukrainian Journal
"Aviation Workers Protest Concession of Nation's Airports (Nigeria)," ThisDay
"Land reform to privatize parts of Jewish state," Jewish Telegraphic Agency
"Government will not privatize Zampost – Mubita," Lusaka Times
"South Korea to Privatize 9 Firms by Year's End," New York Times Blogs
"Privatization: No fire sale, please," Business Mirror (Phillipines)
"About 280 state-owned enterprises and small facilities privatized," APA
"Cabinet to privatize 50 percent plus 1 shares in Kharkivmetrobud," Kyiv Post

» Reason Foundation's Privatization Research and Commentary

California Prison Overcrowding and Costs, Part II

adam.summers@reason.org (Adam Summers) — Thu, 06 Aug 2009 22:48:00 EDT

In my last post, I discussed the recent federal judges' decision to force the State of California to come up with a plan to release some 43,000 prisoners to relieve overcrowding and poor conditions at the state's correctional facilities. I also touched on the costs of housing prisoners in the state, and how the prison guards' union contributes to these inflated costs. On Thursday, an Orange County Register editorial expanded upon these issues:

What's going on with California prisons is a crime. We don't like federal courts dictating to local governments. But California officials have invited federal intervention for years by stuffing prison cells to nearly twice their capacity and ignoring the resultant deadly consequences, all the while padding paychecks of the increasingly politically powerful prison guards union.

A federal three-judge panel this week ordered release of 43,000 prisoners, a fourth of the inmate population, and gave state officials 45 days to come up with a plan or face federal takeover of the prisons. The action is necessary, the panel scolded, "to prevent death and harm." In typically delaying fashion, the state is expected to appeal to the U.S. Supreme Court.

[. . .]

Sacramento almost never responds in a timely fashion to any crisis, whether it's the budget or prison overcrowding. But when the state assumes the responsibility of housing human beings, whether in hospitals or prisons, it has the responsibility to do it humanely. Federal authorities say inmates in the state's obscenely overcrowded prisons die at the rate of one per week from treatable or avoidable illnesses. A separate federal receivership already has negotiated with state officials an overhaul of prison medical care expected to cost $1.9 billion in construction costs for new facilities.

This death, inhumane overcrowding and escalating expense occur in a system in which the per-inmate cost is $49,000 a year, twice the national average by some estimates. The situation will require decisive action to reduce overcrowding and meet humane levels of care. This is achievable by contracting with other states for housing prisoners, early release of nonviolent offenders, early parole of prisoners nearing the end of their sentences and shifting some inmates to county jails – all steps that should have been taken without making a federal case of it.

In addition to contracting with other states for housing prisoners, as the editorial suggests, California should contract with private-sector providers for its own (in-state) facilities to reduce corrections costs and improve services. Of course, this would mean going up against the politically-powerful prison guards' union, and legislators have already demonstrated that, even in the state's current desperate fiscal climate, they are not wont to rock the boat and enact significant, needed reforms.

Other Resources:

» Corporate Corrections? Frequently Asked Questions About Prison Privatization

» Reason's Prisons and Corrections Research and Commentary

Federal Judges Order Release of 43,000 California Prisoners Due to Overcrowding

adam.summers@reason.org (Adam Summers) — Thu, 06 Aug 2009 00:02:00 EDT

Just when you thought things couldn't get much worse for the California government, a three-judge federal court has ruled that conditions in the state's prisons are so deplorable that the state must come up with a plan to release over 40,000 prisoners to relieve overcrowding. As reported by the L.A. Times,

California’s prisons are so overcrowded that the state is violating inmates’ constitutional rights, three federal judges ruled today in a decision imposing a cap on the prison population that will force the state to release nearly 43,000 prisoners over the next two years.

The 185-page opinion also accused the state of fostering “criminogenic” conditions, compelling former prisoners to commit more crimes and feed a cycle of recidivism.

[. . . ]

The ruling by three federal judges stems from challenges by two inmates alleging that the state’s network of 33 prisons is so overcrowded that they are denied adequate health care and treatment of mental illnesses.

California’s prisons, designed to hold 84,000 inmates, house 158,000, much of the overflow contained in converted sports facilities arrayed with triple-tier bunks. That exposes prisoners to infectious diseases, the lawsuits alleged, constituting cruel and unusual punishment in a system suffering a shortage of doctors, nurses and technicians.

One reason there is so much overcrowding in the state's prisons is that there are so many laws, many of which are unnecessary or even immoral. Take, for example, the state's drug laws. Nearly one in five state prisoners were incarcerated for drug-related offenses. In a free society, the government has no right to tell you what you can--or cannot--put into your own body, regardless of how inadvisable it may be to consume a particular substance. Even setting aside the moral question of one's ownership of his or her own body, from a purely practical standpoint, the drug war has been a complete and utter failure. In deciding which prisoners to release, the state should start with non-violent drug offenders (those who committed violent crimes in connection with drug offenses should, of course, remain locked up) and others convicted of victimless crimes. Better yet, Gov. Schwarzenegger should pardon all those convicted of non-violent victimless crimes.

There is also the issue of costs. It costs California approximately $49,000 a year to house an inmate, nearly 70% higher than the national average of $29,000 per prisoner (see p. 12). This is due, in large part, to the strength of the prison guards' union, which has proven that it is still every bit as formidable as when Gov. Gray Davis was in office. Needless to say, California needs to reduce its corrections costs. One way to do this while maintaining (or, likely, improving) service levels would be through contracting prison operations to private-sector companies, as has been done in numerous places across the nation. The union has effectively stonewalled such attempts to the past, and look how well things have gone under their management. Can we now admit we need to try something else and let the private sector give it a shot?

Other Resources:

» Corporate Corrections? Frequently Asked Questions About Prison Privatization

» Reason's Prisons and Corrections Research and Commentary

Policymakers Turn to Privatization Amid Prolonged Government Fiscal Crises

leonard.gilroy@reason.org (Leonard Gilroy) — Thu, 06 Aug 2009 00:00:00 EDT

Governments at all levels are facing severe budget deficits and prolonged fiscal crises amid the national economic recession. With the federal government facing a record $1 trillion deficit and at least 44 states facing a cumulative $281 billion in budget deficits through 2011, privatization and public-private partnerships have become increasingly prominent in fiscal policy debates and will remain so over the coming year as policymakers attempt to reduce the price of government in response to ongoing budget woes.

Now in its 23rd year of publication, Reason Foundation's Annual Privatization Report is the world's longest-running and most comprehensive examination of privatization news, developments and trends. The 2009 report finds politicians looking for solutions to growing deficits. Even seemingly privatization-resistant states like California, New York, Massachusetts and New Jersey are now turning to the private sector to help solve major fiscal and capital investment challenges.

The report's federal government section forecasts a bleak outlook for privatization and competitive sourcing under the Obama administration because the current Congress, controlled by Democrats, has been openly hostile to many competition-based initiatives. There are some highlights at the federal level, such as NASA's planned partial privatization of the manned space program, which will use private companies to design, build, and launch manned spacecraft while NASA finishes its own fleet to replace the Space Shuttle. Also, the highly successful military housing privatization initiative—which is modernizing and improving the quality of hundreds of thousands of military housing units nationwide—has spawned a new initiative to privatize on-post lodging for soldiers at Army installations.

In the state government section of the Annual Privatization Report, we profile the increasingly dire fiscal conditions in the states and offer a comprehensive review of the latest state privatization action. Due to deficits and falling tax revenues, policymakers’ interest in state privatization and government efficiency boards is demonstrably on the rise, and advisory commissions on privately-financed infrastructure have been established in California and other states. In Louisiana, the new Commission on Streamlining Government (CSG) is exploring ways to reduce the cost of state government through downsizing, streamlining and privatization to address a looming budget crisis. In other highlights, New Jersey enacted a law with overwhelming bipartisan support that privatizes the cleanup of nearly 20,000 contaminated properties in the state, while Illinois policymakers passed a partial privatization of the Illinois Lottery to help fund a massive public works bill.

At the local level, we profile Chicago's groundbreaking—but controversial—$1.15 billion parking meter system lease. Los Angeles, Pittsburgh and other cities are closely monitoring Chicago's situation as they contemplate similar parking meter initiatives to generate municipal revenues in the economic downturn. We also review Georgia's fifth new contract city, Dunwoody, which followed the lead of neighboring Sandy Springs by incorporating under a privatized city government model in which contractors provide nearly all non-safety-related services. There are also a number of privatization initiatives proposed or announced in Los Angeles, Indianapolis and numerous other cities.

The Annual Privatization Report also provides a comprehensive overview of domestic and international developments in air and surface transportation, including a wide-ranging overview of the current state of the infrastructure finance market, a review of the latest in highway and airport privatization, and a review of the latest in air traffic control reform and aviation security.

The report also examines four emerging issues attracting significant attention in policy circles. First, we offer a summary of the federal bailouts and stimulus spending to date, which currently totals a staggering $12.9 trillion spent since early 2008. We also review efforts that expand and modernize port infrastructure through public-private partnerships.

The report also reviews the latest developments in the fields of private corrections and mental health services. We review Arizona's groundbreaking prison lease proposals, a new Vanderbilt University study finding private prisons reduce state corrections costs, the looming battle to protect private prison operators' proprietary rights, and numerous other privatization developments in domestic and international corrections.

This week, the Associated Press reported: "Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion."

The federal deficit is astronomical. But states are also swimming in red ink and local governments are out of cash. Taxpayers have been hit hard by the recession and cannot be expected to bail out big spending politicians. To deal with today's economic realities, political leaders need to seek out innovative public-private partnerships and tap the efficiencies in the private sector. The Annual Privatization Report details hundreds of ways to move towards better, cheaper government.

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

Annual Privatization Report 2009

leonard.gilroy@reason.org (Leonard Gilroy) — Thu, 06 Aug 2009 00:00:00 EDT

With governments at all levels facing severe budget deficits and prolonged fiscal crises amid the national economic recession, privatization and public-private partnerships have become increasingly prominent in fiscal policy debates, according to Reason Foundation's Annual Privatization Report 2009.

"Governments are swimming in red ink and realizing the effects of the recession will be felt long after the economy recovers," said Leonard Gilroy, editor of the report and director of government reform at Reason Foundation. "Interest in privatization is sky-high and rightly so. Now more than ever, policymakers need to study their priorities, re-examine what are really core government functions, and then tap the private sector's expertise in all of the areas where they can save taxpayer money and improve the delivery of services."

The Annual Privatization Report details the latest trends and examples of how public officials at the federal, state and local level are reducing costs and improving service delivery through public-private partnerships, outsourcing and performance-based government. It also examines privatization's progress in transportation, education, corrections, water and wastewater services and telecommunications.

Privatization News Roundup, 7/31/2009

leonard.gilroy@reason.org (Leonard Gilroy) — Fri, 31 Jul 2009 16:57:00 EDT

The articles below are some privatization news highlights from the last week that haven't been covered elsewhere on the blog:

FEDERAL

"OMB instructs agencies to save $40 billion annually by streamlining acquisitions," Government Executive
"OMB Moves to Cut Outside Contractors," Washington Post

STATE & LOCAL:

"Jindal touts privatizing as solution," The Advocate
"Ind. budget panel to look into welfare contract," Chicago Tribune
"Oklahoma (private) prisons to take other states' maximum-security inmates," The Oklahoman
"Seminole libraries won't go private," Orlando Sentinel
"Novato Sanitary forges ahead on privatization plans," Contra Costa Times
"How to Privatize the Fire Department," Daily Kos
"Oakland County (MI) approves worker verification system," Detroit Free Press
"Redding council appoints privatization committee," Record-Searchlight

INTERNATIONAL:

"Iraq starts privatization drive, but progress slow," Reuters
"Korea Development Bank to Be Split into 3 Parts for Privatization," The Chosun Ilbo
"Tube signalling contract out to tender," Building
"(Iran) Petrochemical industry to be fully privatized," Tehran Times
"China goes farther on privatizing state-owned performing groups," Xinhua
"Wholesale Electricity Spot Market," The Manilla Times
"Paraguay May Privatize Petropar, INC," Tulsa World

» Reason Foundation's Privatization Research and Commentary

Forbes: Strong Outlook for Private Prisons

leonard.gilroy@reason.org (Leonard Gilroy) — Fri, 24 Jul 2009 17:38:00 EDT

Per Forbes, the outlook for the private prison industry remains strong, as the ongoing fiscal crunch is likely to prompt more states to look for opportunities to cut costs through correctional services privatization (emphasis mine):

One group of contractors, though, may benefit from states' newfound attention to cost-cutting and budgeting. Publicly traded companies that run prisons—the business is known as private corrections—could see their portfolios increase dramatically as states look to cut costs, writes RBC analyst Jamie Sullivan. Some state prison systems are bursting with inmates and could shift the burden to private contractors to relieve overcrowding. One sign that these firms have become indispensable to state governments is that although corrections budgets are falling in states that use private prison firms, the amount going to those firms is increasing.

Three firms dominate the business of running prisons: Corrections Corp. of America, The Geo Group and Cornell Companies. CCA, the biggest of the three, owns and runs most of its own prisons in 19 states. Geo mixes in some overseas contracts as well as mental health and residential programs. Cornell adds youth detention and group homes for adults. All three get about a third of their business from federal agencies. [...]

The gap in state finances is big, $183 billion in the next two years by some reckonings and tax revenues are falling rapidly in states that boomed with the real estate or financial markets. That has led governments in states that use private firms to slash prison budgets by about 2.9% this year but the amount of money going to those contractors is up 2.6%, says Sullivan, who estimates that the private firms offer states savings of 15% to 20%.

As for winning new customers, Sullivan notes that among states not already using the firms, between 11 and 17 have as many or more inmates than their facilities can handle with little money available to build new prisons.

» Reason Foundation's Corrections Privatization Research and Commentary

New South Wales (Australia) Parliament Report Supports Prison Privatization

leonard.gilroy@reason.org (Leonard Gilroy) — Tue, 30 Jun 2009 23:02:00 EDT

Prison privatization is not just a U.S. phenomenon, but rather a management tool used in numerous other countries, including Australia and the U.K. And while the location may vary, the public policy issues surrounding private prisons are very similar. Hence, there is an opportunity for U.S. policymakers to learn from their counterparts overseas, particularly given the growing interest in prison privatization in U.S. states as they grapple with major fiscal issues and work to rein in inflating corrections budgets.

In this context, a recently released New South Wales (Australia) Parliament report on prison privatization couldn't have come at a better time. Prepared by a general purpose Parliamentary committee, the report details the results of the committee's inquiry into the privatization of prisons and prison-related services in NSW, covering such topics as cost savings, public safety and escape rates, rehabilitation programs, staffing levels and the impact of privatization on publicly managed prisons.

The 228-page report (available here) is quite thorough and largely positive on prison privatization, well worth a read for anyone interested in the subject. Here are a few of the inquiry's more relevant findings:

[W]e are confident that the private management of prisons will also likely produce greater cost savings and efficiencies than if they were to remain in the public system.
[T]he Committee notes that the evidence received suggests that the privatisation of correctional facilities can assist in achieving the primary objectives of the operation of the prison system, which are: 1. fulfilling the principles of sentencing; 2. improving inmate welfare and; 3. lowering rates of recidivism in a cost effective manner.
The Committee notes the concerns raised by prison officers and their families. It is clear that for many staff affected by the decision to privatise, none of the three options available to them are satisfactory, and many prison officers will be left with no choice other than to accept a disadvantageous option. Whilst this is not a desirable outcome, the Committee emphasizes that the primary goals of the operation of a prison system are to...(see list above).
Based on the evidence provided during this Inquiry, the Committee is satisfied that there is no evidence to suggest that assaults on inmates and/or staff are likely to increase as a result of privatisation.
The Committee notes that inmate allocation is a matter for government, and not a decision of the private contractor [...] [W]e are satisfied that there is no evidence that privatisation of prisons will result in overcrowding.
The Committee notes that the Department determines inmate classifications, and makes its decisions independently of private operators. Therefore we do not believe that privatisation will impact upon classification levels.
The Committee notes that government regulation has a primary role to play in ensuring appropriate staff training standards and qualifications exist in both publicly and privately run prisons. On the evidence presented, the Committee is satisfied that concerns raised regarding the level of training and professionalism of prison officers at private institutions in Australia are misconceived. [...] The Committee believes that training and qualification requirements must be applied consistently in all prisons, regardless of whether they are run by DCS or a private provider.
[T]he majority of the Committee supports the introduction of competition into the public sector due to the innovations and efficiencies it brings. We note the range of innovations outlined in evidence, and the corresponding effect that they have had on the public system through cross-fertilisation.

These findings are generally consistent with Reason Foundation's corrections-related work, which is available here