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Private Prisons and the Public Interest
Improving Quality and Reducing Costs through Competition
Paul Guppy, Vice President for Research

The cost of maintaining Washington’s state-run prison system is becoming increasingly unsustainable.  The state Department of Corrections budget has more than doubled over the last ten years, rising from $502 million in the 1997-1999 biennium to $1,072 million in the current biennium.  Corrections costs rose more than 12.3% over the last two years, a rate more than four times faster than inflation.  The increasing cost of operating the state prison system has outpaced the rise in total General Fund spending in every biennium in the 1990s, and is now one of the fastest growing areas of state spending.

Mounting prison expenditures are a major cost driver for state government, and are one reason overall state spending is increasing considerably faster than the rising level of tax revenues.  State legislators now face a $2.4 billion deficit compared to what they had planned to spend in the 2007-2009 biennium.

Every state prison facility but one is overcrowded, some by as much as 50%.  Many of Washington’s 39 county jails are also filled beyond capacity.  Together county jails are designed to hold 8,770 prisoners, but instead house an average daily population of around 10,000, resulting in an average over-capacity of just over 113%.

The state’s tight financial situation lends fresh urgency to privatization and competitive bidding as a long-term way to bring rising spending under control.   Introducing competition from the private sector would allow state leaders to provide critical prison services at lower cost.

Recent research compares two groups of states over four years, 2005 through 2009.  The first group consists of nine states that took strong advantage of competitive forces by devoting at least 20% of their corrections system to privately run prisons.  The second group consists of 24 states with few or no private prisons.  Washington is one of these.  In every rated category, the states in the first group operated a more cost-effective prison system than those in the second group. The results are summarized in the graph.

Comparison of Increasing State Prison Costs Based on Number of Privately Run Prisons

Over the four-year period the states with few or no private prisons experienced significantly faster growth in total spending, higher corrections costs and higher daily prisoner costs than states with a large proportion of privately run prisons.

States that made a greater investment in private prisons enjoyed far lower expenses per day per inmate than other states.  These states had an average daily cost of $82.59 per inmate in 2009, compared with an average daily cost of $123.43 for states with few or no privately run prisons.

In Washington, with little prison privatization, per diem costs in 2009 were $104.25.  Yet in neighboring Idaho, where state leaders made a significant investment in private prisons, per diem costs were 42% lower, just $60.21. 

Other Western states that greatly benefited from lower per day costs because they had significant number of private prisons were Montana ($80.93), New Mexico ($85.89) and Colorado ($67.05).

There is a measurable relationship between states that have invested in private prisons and their ability to control the rise in total structural costs of state government. 

States with 20% or more private prisons saw their total spending increase an average of 24.34% over four years, compared with an average increase of more than 32% for non-privatized states.

Concurrently, such states were better able to contain costs in their Department of Corrections budgets.  In the states with more private prisons, Department of Corrections costs increased an average of 38.12%, while the states that had neglected privatization opportunities saw their corrections budget soar an average of 50%.  Over the same period the populations of the two groups of states rose at similar rates, in the 15% to 18% range.

Details from the study reveal striking examples of the efficiencies states gain from investing in prison privatization:

Utah spends $125.40 per day for each prisoner housed, while neighboring Colorado spends just $67.05 per day for the same service.

Minnesota spends $164.03 per prisoner per day, while Wisconsin spends $93.33 per day, or 43% less.

Tennessee was able to reduce prisoner costs per day by more than 8% over four years, while in neighboring North Carolina per diem corrections costs over the same period increased by 15%.

In Washington per day costs increased almost 25% over four years, while in Idaho they increased at less than one-third that rate, by only 7.4%.

The measurable results of prison privatization have been overwhelmingly positive.  While the private prison system is not perfect, the high quality, safety, low cost and management innovations that resulted from competitive pressures have been beneficial to the public interest.

Adopting a policy of prison privatization in Washington could go a long way to relieving prison overcrowding and slowing the growth in the government’s long-term structural costs.

www.washingtonpolicy.org