Privatization of Prisons

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Privatization of Prisons
Private Prison, Inc.

Introduction
America has been getting tougher on lawbreakers. This is something that the public long has been demanding. The problem it creates, however, is a shortage of prison capacity to hold the increased numbers of convicted criminals. This has led to: prison overcrowding, sometimes prompting court actions against penal systems; rapidly rising operational outlays; and taxpayer resistance to the cost of new prisons. A partial answer to the problems of prison overcrowding and high costs may be the "privatization" of prisons. Costs and overcrowding problems are the driving force behind the privatization phenomenon. As a national average, it costs roughly $20,000 per year to keep an inmate in prison. There are approximately 650,000 inmates in state and local prisons. This costs taxpayers an estimated $18 billion each year. More than two thirds of the states are facing serious overcrowding problems, and many are operating at least 50 percent over capacity. Cost comparisons between private and government operation of prisons show frequent cost savings under private management. While the national average cost to hold a prisoner in a government run prison is $40 per inmate a day, many privately run prisons charge the governments on average lower fees. U.S. Corrections Corporation (USCC), a private company headquartered in Louisville charges Kentucky charges a daily fee of $25 per inmate. In their first year of operation in 1986, USCC saved Kentucky an estimated $400,000. A competitor of USCC is Corrections Corporation of America (CCA), based in Nashville, Tennessee, and founded in 1983, is the largest private corrections organization in the country. CCA runs the Bay County Florida county jail. CCA charges Bay County, Florida $29.81 per day per inmate to operate the Bay County Jail. Before privatization of the facility, the daily cost was $38 per inmate. In 1985, CCA's first year to operate the jail, CCA saved Bay County over $700,000.

Economic Conditions of Privatizing Prisons Today
Now that one can see there is an opportunity to make money as a company in a way that helps everyone in America, i.e. saving taxpayers money, what are the economic conditions surrounding the prison system? The market structure is unique. Demand for prisons seems to be ever increasing. Nearly every prison in America is overcrowded and will continue to be so if new prisons are not built. We could help lessen this problem or prison shortages by supplying more prison space at a lower cost than federal prisons can. This market is special because demand for prisons is high, while supply of prisons is low. That's what makes this industry so appealing. We never have to worry about being thrown out the window or not having enough business. Our niche is that we are a substitute good for the federally run prison. As their costs go up, the more government will desire our services. Our laws ensure that we will have inmates. Technology won't be a problem since most prisons have very basic amenities and haven't changed dramatically over the past years. Let's look at how the privatization of prisons will work at the state level first. Basically, prison privatization means the transfer of prison functions from the government sector to the private sector. By using the private sector to build or manage prisons, many states believe that they can reduce costs. So far, most state correction agencies have used the private sector only to manage minimum-secure or non-secure "community" correction centers, such as juvenile institutions and halfway houses. To date over half the states, in the United States have passed legislation to allow for this form of prison privatization. In the state penal systems, privatization can take various forms in the case of prisons.

I. Contracting out services:
This is the most common form of prison privatization. Currently, 39 states hire private firms...
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