Private prisons could be the charter schools of incarceration

One of the many consequences of the explosion in inmate populations since the 1980s has been our state and federal governments’ inability to keep up with demand for prisoner beds. As a consequence, they have relied increasingly on private prisons to house just over 8% of US prison inmates.

Private prisons, however, are incentivized entirely in opposition to the outcomes required by taxpayers and communities. They are paid as cheap hotels — being rewarded for inmate volume, rather than for successful rehabilitation and re-entry.

As you might imagine, these prisons are responding appropriately, actively promoting policies and contracts that make our society far worse off. Private prisons quietly support federal and state politicians (Marco Rubio, I’m looking at you) who bring them:

1. Revenue-generating policies that create more inmates (tougher laws, longer sentences, mandatory minimums, stricter immigration detention).
2. Revenue-stabilizing contracts that include guaranteed minimums, or lockup quotas, that ensure a high-capacity daily rate, even if the actual number of inmates falls.
3. Cost-reducing contracts that prohibit high-cost inmates such as those who are elderly or with medical conditions, from being admitted to private facilities.

Ironically, states and federal correctional departments have their own powerful internal constituency lobbying for many of these same nefarious policies. State- and municipality-funded correctional officers’ unions, such as the California Correctional Peace Officers Association (CCPOA) in CA and the infamous Corrections Officer Benevolent Association in NYC, are working hard to ensure expanded prison sectors, minimized inmate rehabilitation, solitary confinement, and reduced officer oversight and accountability. They also happen to loathe the private prison industry, which largely avoids using union labor, and have successfully blocked their entry into some states.

I suspect the officer unions are too entrenched to be persuaded to be forces for recidivism reduction. I’m far more interested in challenging policymakers to rethink incentives to the private prison operators such that their success aligns with taxpayers and our communities. With the right recidivism-reduction motives combined with operating flexibility, for-profit providers could become the well-respected private and charter schools of incarceration: hubs of innovation that — in some cases — promote better outcomes while continuing to bring some level of returns to their shareholders.

As a policymaker, I would consider a framework that harnesses the speed and ingenuity of these providers in support of the proper outcomes. Make them your allies, rather than a necessary evil. Here’s a sketch of a formula that could work:

1. Pay a base rate per per inmate that is well below the fully-loaded cost to house him/her (perhaps 50%?).
2. Require private prisons to take inmates regardless of cost. This reform reminds me of the pre-existing condition clause for health insurance.
3. Give prisons bonus payments post-release for the same # of years that their ward was committed, if their ward doesn’t return to any prison system. The amount of these payments, in total, should be well over 100% of what the prison would have received to incarcerate that person.
4. If that person re-offends, the provider’s bonus would be reduced. If that person is re-committed, the provider would be back at square one.

• For example, Joe is locked up for 4 years. The prison provider would be paid, say, 50% of the actual costs of incarceration for the 4 years, plus a larger sum for the 4 years post-incarceration. In total, the amount paid should be far greater than what the company would have been paid for simple incarceration.

In an ideal world, the bonus should be scaled based on the increasing size of the former inmate’s IRS-reported W2. e.g., if the inmate simply stays out of prison for the next n years, the prison should receive $x/year for those years. If the inmate pays taxes, the prison should receive annually, $x + y% of all taxes paid, up to a cap. This would incentivize correctional facilities to focus on skills-building for long-term success.

Of course, there will inevitably be unanticipated secondary consequences to this kind of policy (prison providers lobbying to reduce policing and sentences springs to mind) so there would need to be testing and oversight to ensure that society is the ultimate beneficiary.

As an innovative correctional facility under this new regime, I’d be focused on providing high-quality rehabilitation, education, and vocational training; building deep relationships with prospective employers; and providing excellent legal resources for those who are at risk of incarceration.

Ultimately, this is a form of prison-industrial complex I could get behind. You?

Background reading on the private prison industry today: There are two major companies controlling the lion’s share of the $3.3b+ US private prison market. Corrections Corporation of America (CCA) and GEO Group. These private providers are operating at about 85% capacity, but each is building new facilities, fast, in response to government demand in specific locations.

The Federal government — including the Federal Bureau of Prisons (FBoP), the US Marshal Service (USMS), and the US Immigration and Customs Enforcement agency (ICE) — is by far the largest client for both CCA (44% of revenue) and GEO (42% of revenue).

The total number of inmates in private prisons in 2014 was about 131,000 — down by 2,000 from 2013. In spite of this slight reduction in inmates, private prison companies are bullish about their chances for long term success.

Drivers for private prison growth are powerful and entrenched, and include:

1. Overcrowded prisons: 19 states and the Federal Bureau of Prisonshave facilities that were over 100% of their maximum capacity by 12/31/14. 18 additional states were at or over 90% capacity. Courts are starting to mandate reductions in overcrowding, so offloading inmates to private prisons (operating as REITs) is a convenient way to avoid state-funded prison building.
2. Increased use of private facilities to detain immigrants and their families: According to Grassroots Leadership analysis, Private prisons now house nearly 62% of ICE detainees. Note, though, that overall detention of immigrants has fallen substantially in the last year, and may present a risk to private prison revenues in the long term.
3. Aging state facilities: According to the 2014 CCA annual report, states are under pressure to replace old facilities, at significant cost. Over 200,000 inmates are housed in facilities that are over 75 years old. Private prisons are bidding to purchase or replace state facilities to bring an immediate inflow of cash to states and reduce their burden of maintenance.
4. Pension obligations: According to the 2014 CCA annual report, many states are struggling to keep up with their growing underfunded pension and retiree health obligations for state correctional workers. Moving to private prisons would reduce taxpayer costs by stemming the growth of long-term state retiree health and pension obligations.