The Profit Motive Behind Private Prisons

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The old saying “crime pays” has typically been used to explain organized crime, but few people consider organizations on the other side of the law, where private prisons profit for every additional prisoner housed in their facilities. These companies have been developing a significant amount of political clout recently, and their influence on state and local governments only continues to grow.

Some quick facts about prisons in the United States:

  • In 2010, there was an estimated 2,266,832 prisoners in the United States.

  • There were 130,950 prisoners in private correctional facilities in 2011, which is more than 12 percent of total prisoners in the U.S.

  • The private prison population has almost doubled since 1999.

  • The U.S. incarceration rate (prisoners per 100,000 U.S. citizens) has risen from 131 in 1978 to 492 in 2012.

  • The United States has the largest amount of prisoners in the world, in both total number and percentage of its population. [NY Times]

Prison privatization in the United States began in the 1980s when massive growth in prison populations forced many states to find new solutions for housing their criminals. This trend has picked up again in recent years, as budgetary constraints have caused local governments to pursue methods of cutting costs in public detention facilities. Although the financial benefits of privatized prisons has been called into question, states continue to agree to large contracts with the major private corrections companies.

The United States houses 16.4 percent of its federal prisoners and 6.8 percent of its state prisoners in privately owned correctional facilities. A report published by the American Civil Liberties Union (ACLU) determined that there has been a 700 percent increase in the U.S. prison population from 1970 to 2005, an increase that far exceeds the population and crime rate changes during the same period. The effects of the prison population growth has primarily been reflected in private correctional facilities, as their increase in prisoners has dramatically outpaced those in public facilities.

The bottom line is: people are being sent to jail more frequently than ever before, and the private prison industry is experiencing significant benefits as a result.

The most shocking detail about the recent prison privatization trend has been the presence of “occupancy guarantees” in contracts made between state governments and prison contracting companies. Many of these guarantees require states to maintain 90 to even 100 percent occupancy rates in private facilities. Not only can such guarantees cost states money when requirements are not met, but it may even prevent sentencing reform, as local governments now have an interest in keeping their prisons full.

Click here to see the Huffington Post’s map detailing the locations of prisons that have occupancy rate guarantees of 90 percent and above.

A recent example of occupancy guarantees’ negative financial consequences occurred in Colorado. In this case, the state managed to close five different prisons since 2009 because of its declining crime rate, but as a result Colorado was forced to move over 3,000 prisoners from public prisons to private ones in order to fulfill its contractual obligations.  An article in the Washington Post notes that doing so cost the state nearly $2 million in 2013 compared to what the use of public correctional facilities would have cost.

Corrections Corporation of America (CCA) and the GEO Group are the two largest private prison companies in the United States. CCA, the largest company in the industry, posted revenue numbers totaling at $1.75 billion in 2012 alone, according to the companies’ most recent SEC filing. The private prison industry is extremely large, and as CCA’s board of trustees states in its annual letter to investors, “our revenue is primarily from government entities at the federal, state, and local level”. Prison expenses are a significant part of most states’ budgets; according to a survey of 40 states conducted by the Vera Institute of Justice, the average cost per inmate was $31,286, and total expenses added up to almost $39 billion each year, among the states who participated.

The private prison lobbying groups have also been gaining a significant amount of political influence, as politicians have started to rely on campaign donations from the industry. According to a report by the Justice Policy Institute, the three major methods that the prison lobbying groups have employed are direct campaign funding, lobbying, and the formation of relationships with legislators.

Corrections Corporation of America was co-founded by three men in Tennessee, one of whom was Tom Beasley, who prior to starting the company was the head of the State Republican Party in the same state. CCA has had close ties with politics from its inception, and because nearly all of its business is done with the government, therefore, it was able to penetrate the market with ease.

Both the GEO Group and CCA have their own political action committees (PACs), which they have been employed to lobby for bills and donate to congressmen with favorable policy views. To avoid attention, most of the companies lobbying efforts are spent on campaign donations, rather than specific bills and ballot measures. However, the connections that the company has formed provides unique political power. According to an article in the Tulsa World, CCA’s spokesman Steve Owen stated that it has historically been company policy to not lobby or advocate for any policy that would affect the “basis or duration of an individual’s detention or incarceration”. Yet, a lot of gray area remains regarding what constitutes supporting a policy or its policymaker.

Two notable political issues where the private prison industry has profited the most are the war on drugs and the immigration debate. According to the Bureau of Justice Statistics, 52.1 percent of federal prisoners and 17.4 percent of state prisoners have been imprisoned due to drug related offenses. Because drug crimes contribute to a very large proportion of U.S. prisoners, they have been able to keep the demand for correctional facilities high.

Private prisons have also taken on a greater role in housing illegal immigrants in their facilities, as more and more people are being detained each year. According to the AP, there are some 400,000 illegal immigrants in US prisons each year, which cost Americans nearly $2 billion in 2012 alone. Like the war on drugs, immigration detainment has had significant effects on maintaining and increasing the american prison populations, which statistics show have unevenly benefitted private prisons in recent years.

Private prisons have been dramatically increasing their share of the United States prison population in recent years. Budgetary pressures and corporate lobbying has placed pressure on public officials at the federal, state, and local levels to pursue new means of imprisonment. The CCA and the GEO Group have gained an unprecedented amount of political influence, leading to the creation of what some have referred to as the “Prison Industrial Complex”. Their influence continues to grow as incarceration rates remain high and very little has been done to control their ability to develop relationships with politicians. Arguably, the most startling product of this political allegiance has been the adoption of contracts with occupancy guarantees, which have costed states large amounts of money that many of them cannot afford. As the cost effectiveness of private prisons continues to be debated, the question remains: why are representatives from every level of government pursuing privatization?

Featured image courtesy of [Kate Ter Haar via Flickr]

Kevin Rizzo
Kevin Rizzo is the Crime in America Editor at Law Street Media. An Ohio Native, the George Washington University graduate is a founding member of the company. Contact Kevin at



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