Apples-to-fish: public and private prison cost comparisons.

• Author: Friedmann, Alex
• Position: III. Cost-Shifting D. Transportation Costs Factors through Conclusion, with footnotes, p. 531-568

4. Transportation Costs

   The cost of transporting prisoners to and from privately-operated facilities is sometimes paid by the public agency rather than the private prison company. For example, a 2010 contract between Florida and MTC for operation of the Gadsden Correctional Institute provides: "The CONTRACTOR shall not be responsible for inmate transportation from the [FDOC] to the Facility or from the Facility to the inmate's destination upon transfer except as provided for in

   Section 5.13 [related to specific types of transfers]." (136) Also, a 2013 contract between the Tennessee Department of Correction and CCA to house prisoners at the South Central Correctional Facility specifies that, "[t]he Department will be responsible for all other Inmate transportation via connection at Turney Center Industrial Complex [the closest state prison] for Department-mandated moves of prisoner groups for assignment purposes." (137) Transportation costs may be minimal, particularly when prisoners are moved to facilities within the same state. However, consider that over 10,500 prisoners are housed in out-of-state private prisons, according to a 2013 report by Grassroots Leadership. (138) Prisoners from California, Idaho, Vermont, and Hawaii are held in CCA-operated facilities in other states, and are transferred back and forth via ground transportation or airplane.

   Who pays for these more expensive interstate transportation costs? According to a 2008 contract between the Hawaii Department of Public Safety and Pinal County to house prisoners at CCA facilities in Arizona, "[t]he STATE shall be responsible for the cost of transporting Inmates to and from the STATE." (139) Similar language was included in a 2008 contract between Hawaii and CCA to house prisoners at the company's Otter Creek Correctional Center in Kentucky. (140) A 2011 contract between California and CCA states that "CDCR shall reimburse CONTRACTOR for the cost of transporting offenders between the transfer point in California and Facility, and between Facility and transfer point in California...." (141) Those costs include "cost of airframe and crew," as well as expenses associated with CCA transportation officers, including the "cost of salary and fringe benefits for each guard accompanying the transportation of offenders," plus CCA "shall be entitled [to] administrative overhead on said amounts calculated for guarding at a rate of 15%." (142)

   Such costs can be substantial. According to a 2009 report by the Hawaii Department of Public Safety, transportation expenses for sending prisoners to and from private prisons on the mainland totaled $1,506,144 in FY 2009 alone. (143) Particularly with regard to interstate transfers to private prisons, the shifting of transportation costs to public agencies can be significant.

5. Prisoner Labor Costs

   Most correctional facilities rely on prisoner labor to perform essential functions such as kitchen, laundry, janitorial, maintenance, clerical, and grounds keeping services. While private prison companies benefit from prisoners' labor, the wages that prisoners receive are sometimes paid or reimbursed by the contracting public agency.

   Pursuant to a 2008 contract between the Hawaii Department of Public Safety and Pinal County to house prisoners at CCA facilities in Arizona, "[t]he State shall reimburse the [private prison contractor] for Inmate pay, which amount shall be included as a separate item on the monthly invoice." (144) Identical language was included in a 2008 contract to house Hawaii prisoners at a CCA-operated facility in Kentucky. (145) At immigration detention centers, private prison contractors benefit from detainees employed in "voluntary" work programs. (146) Immigration and Customs Enforcement (ICE) reimburses private contractors for wages paid to such detainees, at the rate of $1.00 per day for each worker. (147) For example, a 2010 Intergovernmental Service Agreement between ICE and Karnes County, Texas, to house detainees at the GEO Group-operated Karnes County Civil Detention Center states that in addition to the per diem rate, ICE will provide compensation of one dollar a day for "Detainee Work Program Reimbursement." (148)

   Prisoners' wages, while typically paltry, add up due to the number of prisoners who work each day, year after year. According to a 2009 Hawaii Department of Public Safety report, the cost for wages paid to prisoners held at CCA facilities in FY 2009 was $607,344--a cost shifted to the state, while CCA benefited from the prisoner labor. (149) According to Professor Jacqueline Stevens at Northwestern University, as a result of cut-rate detainee labor costs at immigration detention facilities, private contractors achieve substantial savings--though when detainee wages are reimbursed by ICE, those savings come at a cost that is shifted to the public sector. (150) Using the minimum wage to calculate the relative value of detainee labor at privately-operated immigration detention centers, Professor Stevens --found that "[f]or 2012, GEO brought in an estimated $33 to $72 million profits from labor savings, and CCA an estimated $30 to [$66] million from its labor savings, or about 25% of the company's total profits." (151)

   Public prisons use prisoner labor, too, of course. But if private prisons had to pay for the prisoner labor they use and from which they benefit, their operating costs would be higher. Instead, expenses related to prisoners' wages are sometimes shifted to the public contracting agency.

6. Administrative Overhead

   According to one study, administrative overhead costs at correctional facilities range from eight to twenty percent, (152) and not all of those costs can be shifted to private prison contractors.

   Even when prisoners are housed at privately-operated facilities, there are certain functions that still must be performed by public officials. These administrative overhead duties, sometimes called central office functions, include, among others:

   * Calculating prisoners' sentences and applying good time credits;

   * Recordkeeping related to prisoners' institutional files and/or trust fund accounts;

   * Intake and initial classification for prisoners entering the prison system;

   * Reviewing grievance appeals;

   * Reviewing and/or approving disciplinary decisions by private prison employees;

   * Planning, procurement and budget development related to private prison contracts, including the development of RFPs and evaluation of bids by private prison companies;

   * Parole hearings and parole-related services; and

   * Responding to public records requests.

   These tasks require the expenditure of staff time and resources by public contracting agencies, and therefore should be factored into cost comparisons. (153) Additionally, most private prisons are subject to monitoring by public corrections officials. In some cases those expenses are paid by the private prison company, while in others the public contracting agency is wholly or partially responsible for the cost of monitoring. A 2012 contract between the State of Idaho and CCA to house Idaho prisoners at the company's Kit Carson Correctional Center in Colorado provides that CCA will pay for the monitor's salary and benefits. However, the state "is responsible for all costs associated with the IDOC Contract Monitor other than salary and benefits," including expenses, travel and lodging. (154) In this case, travel and lodging costs are higher than usual as the prisoners are housed at an out-of-state facility.

   Costs associated with private prison monitoring may be minimal, such as when one or two employees are assigned to oversee one facility. But in other cases state prison systems have an entire department devoted to private prison contract monitoring and compliance, such as the Mainland/FDC Branch of the Hawaii Department of Public Safety, (155) the Private Facility Contract Monitoring/Oversight Division of the Texas Department of Criminal Justice (TDCJ), (156) and Florida's former Correctional Privatization Commission. (157)

   As of 2010, California's Contract Beds Unit (CBU) reportedly had seventy-three staff members assigned to monitor out-of-state private prisons--an usually high number with a correspondingly higher cost to the state. (158) According to the CBU, monitoring costs are paid by the state and not by the private contractors. (159) The CBU's proposed budget for FY 2014-2015 was $398,284, representing costs shifted to the public sector for private prison monitoring. (160)

   Finally, public agencies sometimes must absorb administrative costs related to litigation involving private prisons, such as when both private prison officials and state officials are named as defendants in lawsuits. A 2013 report by Hawaii's state Auditor noted that state prison officials were not including litigation expenses when calculating private prison-related costs. "[T]hese costs, if included, would have the biggest impact on per capita costs for housing inmates in out-of-state facilities, since the biggest lawsuits involve these facilities," the Auditor wrote. (161)

   One researcher has noted that even when private prison companies indemnify the public agencies with which they contract, costs of litigation absorbed by the companies may be passed on to those agencies through cost increases when the contracts are renewed or rebid: "[l]itigation expenses, settlement agreements, and adverse court judgments against private prison operators and their employees augment the Government's expenses by way of contract pricing increases and a higher degree of liability exposure than would exist under a purely public system." (162)

   Other litigation expenses are incurred by the public sector when private prison companies sue government agencies, such as after a contentious contract termination. Examples include when CCA filed suit against Hernando County, Florida, in 2010 over a dispute about deferred maintenance and repairs at the county jail, (163) and...