Private Prisons in Oregon: A Good Idea

by Darren T. Board

EXECUTIVE SUMMARY

The management and operations of nine of Oregon's thirteen adult correctional facilities ought to be contracted out. A growing body of literature is demonstrating that private prisons are legally and administratively feasible, constitutionally and philosophically defensible, qualitatively equal or superior to government-run institutions, and economically efficient. By contracting with private prison providers, Oregon could both raise the quality of service provided to inmates and save millions of taxpayer dollars.

Private prisons have a solid base of political support and a broad base of political acceptability. Sixteen states have accepted prison privatization. Currently, there are twenty companies operating 67 minimum and medium security facilities, incarcerating nearly 25,000 adult inmates at an average of $40.00 per manday. The privately run facilities have received higher quality ratings by inmates and employees in several surveys, and the private companies continue to make a profit.

By comparison, the Oregon Department of Corrections incarcerates 4,650 adult medium and minimum security inmates at an average of $50.78 per manday, plus an allocated overhead cost of $6.59 per manday.

Private prisons have some vocal, and sometimes powerful opponents, but each and every single one of the concerns presented by opponents can be successfully managed through contractual agreement, through independent financial audit, through State monitoring, and through accreditation by the American Corrections Association. And if the output of two prison providers is the same, then it only makes sense to utilize the less expensive, more efficient provider.

Reprints of the complete report with appendices and exhibits are available from Cascade Policy Institute.

INTRODUCTION -- PRIVATE PRISONS WILL BENEFIT OREGON

Since the passage of Ballot Measure 5 in 1990, Oregon has been actively seeking new and more efficient way to provide services. But obviously, not enough has been done. The decision by government to replace lost Ballot Measure 5 dollars with a sales tax was criticized on the streets and at the polls. Clearly, Oregon taxpayers have paid enough. Additionally, if one takes a look at Oregon's 1993 annual report, total revenues increased $1,036.0 million (10.54%) to $10,756 million during the state s fiscal year ending June 30, 1993. In fact, during the four years since fiscal year end 1989, Oregon's revenues have increased almost 43%. Do we really have a budget shortfall in Oregon, or a spending problem?

Just because there is an increase in revenues, that does not negate or defer the efforts the state should make to improve efficiencies of service delivery. One of the best tools available to achieve these efficiencies is private contracting, or what this paper will refer to as "privatization." And one option that ought to be implemented is the privatization of state prison facilities that operate under the Oregon Department of Corrections (ODOC). Rather than the state directly managing the prison facility, the state should contract with a private corporation to act in lieu of the state as the actual provider of the service. The state would in turn pay the company for providing the service. This practice is actually quite common and the results have been favorable for both governments and inmates.

The primary beneficiary is the taxpayer. The operating efficiencies held by private providers allow the contractor to operate, on average, at eighty percent of ODOC s operating cost. The secondary beneficiary is the inmate. The private provider can enhance the living conditions, programs, and support of the inmates and still save taxpayer dollars. The third beneficiary can be the prison employees. Private providers offer flexible and more efficient scheduling, training, benefits, and promotion opportunities while typically maintaining salary levels for staff and security personnel. All this can be accomplished utilizing the resources and efficiencies available in the private sector. And if the output of public and private providers is the same, then it only makes sense to utilize the less expensive, more efficient provider.

Taxpayers realize they benefit from government services when it comes to transportation, education, safety, and the social services provided by local, state, and federal government. But even Thomas Jefferson noted that, all things being equal, the private sector manages services better than government does itself:

Having always observed that public works are always much less advantageously managed than the same are by private hands, I have thought it better for the public to go to the market for whatever it wants which is found there, for there competition brings it down to the minimum value.(1)

Jefferson realized there is a significant cost differential between the public and the private sector--one that favors the private provider. Government should establish a system that provides the highest quality service at the best price.

The amount of government control should not be the issue. The level of government power should not be the issue. When the Oregon government fails even to examine relinquishing the control it has over certain state functions, then government is valuing control more than it values the quality and efficiency of service provided to the public.

In light of recent events in Oregon, a reasonable question to ask of government, in fact, a reasonable challenge to pose to government is: Is it necessary for government to actually provide the service in question? A distinction needs to be made when a government has the obligation to provide for a service and when it must actually provide the service. Charles Logan answers this question as he writes his article on prisons and competition:

It is one thing to believe that only the state has a right to imprison someone. It is another matter entirely to believe that only the state can run a prison in a fair, humane, effective and economical fashion. The first belief is a matter of political philosophy; the second is an empirical proposition.(2)

Perhaps some other entity can successfully provide the service under the administration of the state. Sufficient evidence exists in the marketplace to demonstrate that private prisons provide a similar or better service than their public counterpart. While taking advantage of efficiencies not available in the public sector, the private prison provider can save the state a minimum of 10% while operating at 80% of the cost of the state prison and still make a profit. (See The Financial Answer).

Additionally, current state employees who are hired by the private company will find themselves faced with opportunities for merit-based career advancement and employee stock ownership plans not found in the public sector. If Oregon is ready to address some of the key barriers to privatization, other agencies will have an incentive to achieve the efficiencies of the private sector.

PRIVATIZATION

In a general sense, the privatization process is made up of six steps:

• Decide whether to privatize. The main reason for privatization is to reduce costs while maintaining the quality of service. Comparing the costs of a public agency to the private provider is not easily or scientifically accomplished. However, the final outcome of a cost analysis should be the maximum cost per bed the state would be willing to pay if it were to consider shifting financing, construction, and management to the private sector. There may be other reasons to privatize that need to be investigated and defined. An examination of obstacles confronting the privatization effort will also create an understanding of the many issues surrounding prison privatization in Oregon.

• Establish goals. Explicit goals and objectives and their relative weights are essential for successful privatization. The goals should reflect what the legislators and government officials wish the private provider to obtain and need to become part of the request for proposal.

• Organize the system. Review of the existing system is a basis for any consideration of its alteration. The planners should analyze the strengths and weaknesses of the current system and the roles of the various agencies involved.

• Analyze the legal and liabili!y issues. Oregon Revised Statutes, sentencing guidelines, union contracts, and other state and local ordinances may affect privatization efforts. This information will help determine some barriers to privatization and the type of liabilities governments may later assume.

• Prepare the request for proposal (RFP). The RFP sets performance criteria and general qualification requirements. It needs to be clear, comprehensive, and provide all the necessary information for the contractor to make an informed decision.

• Evaluation and monitoring. The government system that will review and control the private provider should be outlined in the RFP. Continuous monitoring is required to assure quality of service. Government cannot relinquish responsibility and ultimate liability for the individuals in correctional institutions and must maintain close monitoring of the contractor.

While many other approaches could be offered as the steps to privatization, they would be different in definition only. The objective would still be the same, as would the process. The most important step is the decision to privatize. This may be the most controversial step, yet it seems to require the least amount of technical skill to evaluate.

THE DECISION TO PRIVATIZE

While cost savings are an important argument in favor of privatization, other factors must be investigated to support the assertion that services provided and the quality with which they are delivered are measurably equivalent. There are numerous books, articles, and papers written about the viability of privatization in general, and more specifically, the privatization of prisons. The growing body of literature is demonstrating that private prisons are legally and administratively feasible, constitutionally and philosophically defensible, qualitatively equal or superior to government-run institutions, and economically efficient.(3) The evidence is clear that not only is there a big push for privatization, but that privatization meets, and many times exceeds all expectations.

The arguments against the privatization of corrections are based upon the historical evidence of the private prison movement which began around 1750.(4) But it was the atrocities in public prisons in the 1970's that prompted the renewal of prison privatization. In response to overcrowding and the promise of a lower cost per manday, governments began to contract with private prison providers once again. Obviously, there have been gargantuan steps taken in inmate rehabilitation and a dramatic improvement in prisoner rights during the interim period. Despite these improvements, many still oppose incarceration for profit. Deferring to the leading authority on prison privatization in the United States, Dr. Charles H. Logan:

"Private prisons have a solid base of political support and a broad base of political acceptability. However, they also have some very vocal, sometimes powerful opponents. Organized opposition comes from public employee labor unions, who oppose all forms of privatization; from the National Sheriffs' Association, who wish to keep control of jails in the hands of sheriffs; from certain members of the American Civil Liberties Union, who want to see less imprisonment and are afraid that more efficient prisons will mean more of them; from academics, who fear business even more than they fear government; and from a certain subcommittee with the American Bar Association, whose objections relate much more to policy than to law."(5)

In essence, opponents to prison privatization are making their challenges for two purposes. One is preservation of their own interests. The other is protecting the inmate, which challenges only the integrity of the private prison provider. And who is to say that government is beyond corruption and reproach?

THE ANSWER

The length of a prison sentence should not be a function of economics, except in recognizing that it is cheaper to incarcerate a criminal than allow him or her to continue being a criminal. (In support of this, John J. Dilulio Jr. and Anne Morrison Piehl make a conservative conclusion in 1991 that, while it costs on average $25,000 per year to incarcerate the average criminal, the average criminal would have cost society $46,072 in criminal activity had he or she not been imprisoned. The above-average criminal costs society $369,000 each year).(7) Nor will the length of a prison sentence be a function of politics. It would require the mobilization of the general public to seek longer sentences for criminals. Private providers of corrections are no more likely to gain the political power to lengthen prison sentences than day care providers lobbying to restrict birth control and abortion.

Privatization is not meant to replace Oregon's provision of corrections, but to provide an alternative source with additional and improved capacity. Private operators do not have control over the sentence length of prisoners. In almost all cases - whether for furlough, probation, or permanent discharge - decisions are made by the appropriate governmental body. Most jurisdictions handle all "good behavior" decisions. For those that do not, standard procedures are used and closely monitored.

Opponents assume that private operators will be desperate for inmates to fill their cells. Even though the day when there is a shortage of prisoners is a long way off, the private operator has tremendous flexibility to adjust to changes in the prison population. The private provider can cut back on staff and eliminate certain unnecessary services and programs that the state prison may not be able to do because of employee union contracts.

The Oregon courts use a sentencing guideline grid to determine the length of the sentence for felons. This table is reviewed and revised periodically to adjust to new laws or other conditions. Sentencing is a function of many variables, including severity of the crime, and the history of the convicted felon. But it is also a function of the availability of prison space. As Oregon has roughly 6,500 prison beds available, the more serious crimes take precedence over the less serious crimes, and in effect we end up with a revolving door policy where convicted felons are released before they have served their sentence. As a result, as space becomes less available, the courts must change the sentencing guidelines usually causing a reduction in the sentence of a convicted felon. This is an example of the supplyside argument that many opponents to privatization fear, only with the opposite effect.

What should be most disturbing to taxpayers and public service employees is the fact that Oregon taxpayers, at this point, have spent hundreds of thousands of dollars and hours to convict the felon, but because of a lack of space, and an increase in the number of more serious crimes, the felon cannot serve out the full sentence.

Thomas, Dr. Charles W., Private Adult Correctional Facility Census, Sixth Edition, Center for Studies in Criminology and Law, University of Florida.

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