Study by Temple University Professors finds privately operated prisons can substantially cut costs at equal or better levels of quality

A new study by Temple University economics Professors Simon Hakim and Erwin A. Blackstone, released on April 29, 2013, found that privately operated prisons can substantially cut costs – from 12 percent to 58 percent in long-term savings – while performing at equal or better levels than government-run prisons.

In the study, the Temple University professors analyzed government data from nine states that generally have higher numbers of privately held prisoners (Arizona, California, Florida, Kentucky, Mississippi, Ohio, Oklahoma, Tennessee and Texas), and Maine, which does not contract its corrections services. The professors calculated both short- and long-run savings per state, finding that contracted prisons generate significant savings without sacrificing quality.

The study uses economic models to determine each state’s avoidable costs, which are compared to the contracted per diem rates charged by the private operators and also takes into account underfunded pensions and retiree healthcare costs.

Key findings of the study include:

• Contract prisons save money while maintaining at least the same quality as public prisons: The private facilities generally met industry standards established by the independent American Correctional Association and, in several cases, offered more rehabilitation programming than public counterparts. Further, interviews with departments of corrections officials found that contracts with private companies mandate performance levels, which the states closely monitor. Private correctional officers are generally paid comparable wages and receive similar training to public officers.
• Competition yields savings and better performance for private and public facilities: Even though private contractors comprise less than 7 percent of the state corrections industry overall, they have generated substantial competitive benefits. As more contractors compete, both private andpublic facilities work to provide lower-cost and higher-quality service. Further, more managerial and technological innovations are introduced in both segments of the industry.
• Adoption of the “managed competition” model could foster even greater efficiency in delivering corrections services: In this model, public workers and private contractors competitively bid to provide public services. As a result, both groups have an incentive to find managerial and technological innovations and to offer services at competitive prices.

The study, which received funding from members of the private corrections industry, can be found at: http://bit.ly/11S6vUS

The Blade (Ohio): Privately run prisons offer value to Ohio Click here to read more

Detriot Free Press (Michigan): Data Shows Running Prisons for Profit is a Win-Win Click here to read more

Kennebec Journal (Maine): Private prisons offer big savings for corrections budget Click here to read more

The State Journal (Kentucky): State would benefit from private prisons Click here to read more

NewsOK (Oklahoma): Temple economics professors: Private prisons make fiscal sense Click here to read more

SunSentinel (Florida): Blackstone, Hakim: Prison privatization can provide real benefits Click here to read more