Reason Foundation

http://reason.org
http://reason.org/news/show/forbes-strong-outlook-for-priv

Reason Foundation

Forbes: Strong Outlook for Private Prisons

Leonard Gilroy
July 24, 2009, 5:38pm

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


Leonard Gilroy is Director of Government Reform


Print This