Private Prisons Could Cut Georgia’s Spending, Studies Suggest

Published March 1, 2005

With the state of Georgia facing a budget shortfall, legislators are looking for new areas of saving to help balance the budget. Although Medicaid and education have received most of the attention recently, numerous studies, including two new ones, show one idea with which Georgia has prior experience remains as viable today is it did when the state first implemented it in 1997: private prisons.

Research shows the private prisons themselves save money and also put external pressure on the public prison system, further constraining the escalation of costs.

Whole System Studied

About three-fifths of the states have private prisons. A host of studies show significant cost savings, in the range of 10 to 15 percent, when the corrections function is privatized.

Two studies take a slightly different approach to the analysis of prison privatization and cost savings. These studies sought to identify the effects of competition and privatization on the prison system as a whole, as opposed to just one institution.

James Blumstein and Mark Cohen, both professors at Vanderbilt University, analyzed whether the use of private prisons by state correctional departments had any impact on the rate of growth in states’ public corrections system operating budgets. Anecdotal evidence of this phenomenon already existed from time-series data in Arizona and Texas, but a systematic analysis had never been done.

Using data for 1999-2001, the study found states utilizing private prisons had considerably more success in keeping public corrections spending under control than did states with no private prisons.

During the study period, states with private prisons saw the growth in daily costs of housing prisoners in the public corrections system reduced by 8.9 percent, or about 4.45 percent each year.

Competition Generates Big Savings

One of the most significant findings was that turning over even a small portion of prison populations resulted in big savings.

States with less than 5 percent of their prison population in private facilities experienced a 12.5 percent increase in expenditures, versus an 18.9 percent increase in states with no private prisons. States with larger percentages under private management had even greater savings, with growth in expenditures at only 5.9 percent during the study period.

Another study, by the Rio Grande Foundation in New Mexico, compared state per-prisoner budgets across 46 states. The analysts measured an entire department’s spending rather than just a particular prison’s spending, thus identifying the cost savings public prisons achieve in response to private competition.

The results were in line with those of Blumstein and Cohen.

Further Privatization Promising

Public safety is the third-largest area of expenditure in Georgia’s state budget, after education and human services. Most of the $1.2 billion spent annually on public safety is spent on prisons.

Georgia currently has three private prisons housing 4,550 inmates. Of a total prison population of more than 54,000, roughly 8 percent of inmates are in private prisons.

The two studies suggest this limited foray into privatization already saves Georgia money and constrains total prison costs better than states that have not privatized correctional facilities. The studies suggest further privatization would save Georgia taxpayers even more money.

Prison Alternatives Also Available

The private sector also could assist in Georgia’s effort to find less-costly alternatives for offenders who pose little risk to the public. Additional parole revocation centers, for example, can divert parolees who commit technical violations of parole away from expensive state prison beds and into short-term, treatment-oriented work camps.

Similarly, transitional centers could be used as a back-end alternative for certain inmates, particularly those convicted of non-parolable crimes with no supervision to follow their release, who will have to be transitioned back into the community.

Studies show privatization is most efficient when contracts specify clear, measurable objectives without needlessly micromanaging operational decisions. Additional savings are possible if existing private prisons in Georgia are given the flexibility, as they are in many other states, to adopt their own best practices, purchasing practices, staffing patterns, and operating procedures.

Georgia has not privatized any correctional facilities since its first such venture in 1997. The studies show increasing the number of facilities subject to competition and removing costly bureaucratic regulations would free up millions of dollars in the state budget without reducing services, raising taxes, or jeopardizing public safety.

Geoffrey Segal ([email protected]) is director of privatization and government reform policy at Reason Foundation and an adjunct scholar with the Georgia Public Policy Foundation. Kelly McCutchen ([email protected]) is executive vice president of the Georgia Public Policy Foundation.