Is the Private Prison Industry Still Too Big to Fail?

The astronomical rise of the private prison industry has coincided with a parallel rise in mass incarceration since the 1980s. To defeat one, we must defeat them both.

By Carl Takei

Tagged criminal justiceDepartment of JusticeObama AdministrationPrisonsprivate prison industry

On August 18, the U.S. Department of Justice announced that the Bureau of Prisons would begin phasing out its private prison contracts because, as Deputy Attorney General Sally Yates wrote, “time has shown that they compare poorly to our own Bureau facilities.” The ACLU, along with other advocates, had been pressuring the Justice Department to make this move for years, but the final straw for the industry was a scathing report by the Department’s own Inspector General. In addition to finding that private prisons had more lockdowns, violence, and contraband than federally run prisons, the report identified dangerous practices stemming from the company’s constant drive toward profit maximization. For example, one private prison chose to operate without a full-time physician for eight months, apparently because it cost the company less to pay understaffing penalties than a doctor’s salary.

The Justice Department’s announcement is not, on its own, a death blow to the private prison industry. However, it has created the opportunity to strike such a blow—and, in doing so, end the obscene practice of profiting from the mass caging of human beings in a system that offers big shareholder payouts for overcrowding, neglect, and the denial of medical care.

In a 1988 interview, Corrections Corporation of America (CCA) co-founder Tom Beasley glibly described the company as being just like any other consumer business—“You just sell it like you were selling cars, or real estate, or hamburgers”—but, unlike demand for these consumer goods, the rise of this industry, beyond its questionable moral grounding, owes everything to government policy. In the mid-twentieth century, when U.S. incarceration rates were comparable to those of most Western European countries, private prisons did not exist. But as the War on Drugs and harsh new sentencing laws converted America into the world’s biggest jailer, private prisons quickly took hold. When CCA’s first prison opened for business in 1983, it was the only private prison in the United States and held fewer than 100 people. By 1990, there were 7,000 people held in private prisons in the United States. By 2000, there were 87,000. And by 2014, there were more than 131,000.

For corrections officials, private prisons offered a convenient way to rapidly add new prison capacity. Instead of having to obtain voters’ approval for new construction bonds, they just needed an extra line item in their budgets—something easily secured from legislators who believed the magic of the free market would drive down costs and foster better management. Private prisons also offered a glittering deal to struggling rural towns with few other opportunities for economic growth: In exchange for financing the prison’s construction and providing other development subsidies, the town would receive new jobs and—they hoped—a secure economic future.

Neither promise was ever fully realized.

The new prisons often provided locals with fewer jobs than anticipated, and recent research has confirmed that private prison construction is actually associated with negative job growth and depressed wages in host communities. Many towns went deeply into debt to finance these new prisons, only to be left with unpaid bills and ruined bond ratings after the company failed to secure a steady flow of prisoners. For example, the town of Hardin, Montana defaulted on a $27 million prison construction bond after the private prison company they partnered with failed to obtain a state prisoner contract. The company eventually left town, and the city council, in desperation, offered to house Guantanamo detainees in the empty prison.

The evidence of cost savings has been mixed, at best, and introducing the profit motive into prison management has turned out to be a recipe for abuse, neglect, and misconduct. But once a private prison contract is signed, it is usually very hard to cancel. A 2015 audit by the Justice Department’s Inspector General found that the Bureau of Prisons repeatedly renewed its contract with one particular private prison company even though the contractor struggled to meet baseline contractual standards, was repeatedly fined for failing to provide adequate medical staffing, and received “deficient” or “unsatisfactory” ratings in six of 12 award fee evaluation periods.

In fact, once government officials hand individuals in their custody over to a private prison, there are only four options for responding when issues arise there—including deaths, riots, and other failures. These are: imposing penalties while continuing to rely on the same private prison, transferring the prisoners to another private prison company, waiting while a new public prison is built to replace the private one, or hoping that prison populations will somehow fall low enough to render the contract unnecessary. The first and second options are both unsatisfactory; these companies have become too big to be seriously harmed by most penalties, and they inhabit a non-competitive market dominated by only three companies with very similar business models. The third option is problematic because new prison construction is slow, expensive, and ends up further entrenching mass incarceration. The fourth is ideal, but requires the legislature to first commit to criminal justice reform measures that will reduce the overall prison population.

Thus, state legislators and advocates should treat ending mass incarceration and shutting private prisons as two complementary goals. The Justice Department’s announcement is an example of this approach: Because the Fair Sentencing Act of 2010 and the Sentencing Commission’s new drug sentencing guidelines contributed to a 25,000 person decline in the federal prison population between 2013 and 2016, the Bureau of Prisons can phase out private prison contracts without new prison construction.

Unfortunately, a mere drop in the prison population may no longer be enough. In response to recent sentencing reform intended to reduce state prison populations, the two biggest private prison companies—CCA and GEO Group—are aggressively buying up community corrections facilities: halfway houses, reporting centers for people on parole, and other probation-related services. CCA has acquired multiple smaller halfway house operators, and now controls nearly 5,000 halfway house beds. GEO has acquired some 3,000 halfway house beds, 64 day reporting centers, and a company that conducts GPS monitoring of probation supervisees. Their goal seems to be a vertically-integrated, privatized criminal justice system in which there is only one type of outcome that would not feed corporate revenue: people leaving the criminal justice system and not coming back.

But to shut the private prison industry out of our criminal justice system, state-level reforms will have to be ambitious. They cannot merely shift people from for-profit prisons to for-profit halfway houses and GPS supervision. Instead, legislators and local governments will need to adopt policies that limit people’s unnecessary or prolonged involvement in the criminal justice system, and take steps to address societal challenges such as poverty, substance abuse, and mental illness outside of, and beyond, the criminal justice system. One example is Law Enforcement Assisted Diversion (LEAD) programs, which are a successful and growing initiative.

That is a significant challenge. But the good news is that the Justice Department’s announcement (on which Donald Trump has been silent, and Hillary Clinton has voiced her support) has left the private prison industry more vulnerable than at any other point in the past 15 years. As state governments follow the Justice Department’s lead and let private prison contracts expire, that vulnerability will increase. With each contract lost, companies must pay to maintain one more empty prison no longer filled with revenue-generating human bodies. If they lose enough major contracts over a short enough period of time, the companies will become trapped in a death spiral of rising debt and shrinking revenue—and will eventually be forced out of business. We might then be able to, finally, bring an end this unaccountable, profit-driven system that uses our taxpayer dollars to reward itself for its inhumane cruelty and neglect.

Read more about criminal justiceDepartment of JusticeObama AdministrationPrisonsprivate prison industry

Carl Takei is a Staff Attorney at the National Prison Project of the American Civil Liberties Union. He litigates prison, jail, and immigration detention conditions class action lawsuits in federal court and performs advocacy on issues of mass incarceration, prison privatization, and immigration detention. He is a lead author of the 2014 ACLU report Warehoused and Forgotten: Immigrants Trapped in Our Shadow Private Prison System and a co-author of the 2016 ACLU/NIJC/DWN report Fatal Neglect: How ICE Ignores Deaths in Detention.

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