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Private Prisons Do Not Save Money

Proponents of prison privatization claim that private contractors can operate prisons less expensively than the government. Promises of savings in the range of 15 percent to 20 percent are commonly promoted — but fail to materialize. Despite the claims of private management firms, the big promise of double-digit savings simply do not exist.

This was the case during the recent legislative session in Tennessee, which featured a bill to turn over nearly the entire Tennessee correctional system to private profiteers. The prison privatization crusade failed because its proponents could not establish credibility in their contentions that privatization would save taxpayers' money. Initially, supporters claimed up to $100 million would be saved. Later, that was scaled down to $25 million, but even then a close examination of the evidence proved the claims were exaggerated and tenuous.1

The United States General Accounting Office (GAO), a nonpartisan congressional agency, spent a full year examining comprehensive studies of private and public operational costs of several state prisons. The GAO detected "little difference," "mixed results," and ultimately "could not conclude whether privatization saved money."2

per diem rates of public and private facilities bar graph

The GAO report analyzed five studies (from California, Washington, Tennessee, New Mexico, and Louisiana) of which only three compared actual operational costs.

Other studies also document that private prisons do not save money:

Florida:

The 1996-97 Annual Report found that the cost to Florida taxpayers for private prisons ranged from $45.04 to $47.57 per inmate per day, while the average cost of a comparable institute operated by the Department of Corrections (DOC) was $43.79. It was difficult for the DOC to compare the "true" cost of privatization because private firms in Florida enjoy many financial advantages (e.g., cap on health care costs, services provided by the state, etc.). When the DOC adjusted its analysis to capture these "hidden costs," it found that the cost of incarcerating inmates in private facilities ranged from $48.04 to $49.16. Meanwhile, the adjusted cost for DOC-operated facilities was $43.14.3

Oklahoma:

A 1996 state legislative analysis found that the corrections department was paying 45 percent more — $6.3 million more per year — to house inmates at the private Davis Correctional Facility in Holdenville, compared to costs at a comparable state-owned facility, the publicly operated Dick Conner Correctional Center in Hominy. According to the report, the cost per inmate per day at the Corrections Corporation of America (CCA)-run facility was $42.15 compared to $29.04 at the state facility. The differential doesn't include an additional $4 per inmate per day that the state will pay for transportation, records management, and major medical services at the privately operated facility. According to State Sen. Cal Hobson, the "government is doing a better job at managing our resources than private industry."4

U.S. Marshals Service:

The U.S. Marshals Service uses hundreds of local and state-owned institutions to house its 22,000 inmates. Less than a dozen of these are privately run. The U.S. Marshals Service found that in the same regions, the privately operated jails cost 24 percent more than publicly operated ones.5

1 Tom Humphrey, "Private Prisons Bill Bites Dust for This Year," Knoxville News-Sentinel, April 15, 1998.

2 U.S. General Accounting Office, "Private And Public Prisons: Studies Comparing Operational Costs and/or Quality Of Service", GAO/GGD-96-158, August 1996, pgs. 3, 7, 9, 23.

3 Florida Department Of Corrections Website.

4 Anthony Thornton and Randy Ellis, "Holdenville Prison Lease Sets Stiff Terms For State," The Sunday Oklahoman, December 15, 1996.

5 Jeff Gerth and Stephen Labaton, "Prisons For Profit," New York Times, November 24, 1995.

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