Prison Business Booms in the US
Many states allow private firms to operate prisons, but contractors manage only 2 percent of beds
IF you're looking for a growth industry, look no further than the nearest jail. Americans now spend $20 billion a year to keep criminals behind bars. The numbers of prisoners and the cost of keeping them locked up is growing dramatically.
The United States has more people behind bars than any other country. The US is in the midst of the largest prison expansion ever. Taxpayers will spend $10 billion over the next few years for 170,000 new prison beds. Experts say it will not be enough.
For private prison companies like Wackenhut Corrections Corporation and Corrections Corporation of America (CCA), more prisons means more business. Virtually unknown a decade ago, prison contractors are gaining in popularity as states look for cheaper ways to finance, build, and operate their prison beds. Because they are able to run prisons for 10 to 15 percent less than state governments, private companies are currently operating prisons in 16 states.
While the overall prison population is growing at 8 percent this year, the number of privately run prison beds is rising 30 percent a year, says Charles Thomas, director of the Private Prisons Project at the University of Florida.
"Internationally, if you include contract awards on facilities under construction and the facilities now open, about 30,000 beds are being run by private contractors," Mr. Thomas says.
Nashville-based CCA dominates the world's private prison business. Founded in 1983, the company oversees more than 9,000 beds in six states, Britain, and Australia. Company revenues have tripled since 1988 and are growing at about 30 percent a year. In 1992, CCA's revenues were $90.1 million.
Texas, with more people behind bars than Britain, leads the trend to privatization. Nearly one half of the private prison beds in the US currently in use or under construction are in the Lone Star State, which is spending $2 billion a year to house prisoners. To make space for more prisoners, the state has spent an additional $2 billion since 1987 to build 87,300 more beds.
The Travis county sheriff recently ordered inmates to pitch six large tents at a prison on the outskirts of Austin. The tents will house 144 inmates that could not fit in the county jail.
The push for prison privatization in Texas has ensnared at least one Texas politician. Ray Hutchinson, husband of Texas's newly-elected senator, Kay Bailey Hutchinson (R), is a defendant in a $70 million lawsuit that alleges he and others were part of a conspiracy to defraud bondholders. The bonds were issued in 1989 to build private prisons in six Texas counties. But the state refused to use the prisons after they were built. The bond debt went unpaid. Texas Democrats are hoping the lawsuit will be a pr ominent issue in Sen. Hutchinson's reelection campaign next year. High-profile facility
Despite past problems with private contractors, the Texas Department of Criminal Justice is relying on Wackenhut to run one of the most visible facilities in the state. The New Vision prison in Kyle (which was profiled in the Monitor on July 26) treats inmates with chemical dependency problems. It is the first of 14,000 beds the state legislature has designated for drug treatment.
Open since May of last year, the prison was among the first of several specialized correctional facilities to be run by private contractors.
In February, Wackenhut opened a 500-bed prison in Lockhart, Texas, that will teach inmates a trade. Jeff Spoon, vice president for project development at Wackenhut, says it is the first privately run facility of its kind in the US. "We want to train these prisoners with high-tech and computer skills so they can compete in the job market," Mr. Spoon says. Several other states are interested in the trade prison concept, he says.
Wackenhut Corrections now operates 6,100 prison beds worldwide. The company operates 18 percent of all the privately run prisons in the US. Revenues for Wackenhut Corrections are climbing about 12 percent a year. Stock market responds
The move toward privatization has not gone unnoticed on Wall Street. Wackenhut's stock split 2 for 1 in January. And stock analyst Bill Oliver is bullish on CCA. "CCA is well positioned because we expect America's prison population to increase by 200,000 to 1.4 million by 1994," says the Nashville-based employee of The Equitable.
The international market also appears fertile for private prison companies. New Zealand and Australia are increasing the number of privately run prisons. Britain is also considering privatization. Several contracts were recently awarded and insiders say that half of Britain's prisons may ultimately be run by private concerns.
With less than 2 percent of all US prison beds run by private firms today, there appears to be plenty of room for expansion. Industry officials say that private firms could ultimately run 10 percent of US prisons, a figure that Spoon says is conservative.
Today, 25 states, the District of Columbia, and Puerto Rico have enacted legislation that allows contractors to run correctional facilities.
"That means that since 1980, the number of areas where prison contracting is legal has grown from zero to half the nation," Thomas says. "I don't think anybody knows how big this industry can get."