The prison business has for years been a good business to be in, especially for GEO Group and the Corrections Corporation of America, the nation's largest private jailers. Between 1999 and 2010, federal private prisons saw inmate levels rise from 3,828 to nearly 34,000, and as late as 2014, private prisons held about 19 percent of federal prisoners. Corrections Corporation of America alone has an 80,000-bed capacity across more than 60 facilities and records billions in profits -- a far way from the opening of its first facility in Houston in 1984.
But as more politicians advocate for lenient sentences and distance themselves from the tough-on-crime rhetoric of the past, private prisons could soon see profits drop. About 6,000 drug offenders were released throughout the weekend from federal prisons, highlighting a national campaign by the Obama administration and Congress to reduce prison populations. The policy change could mean bad news for private prisons that rely on the federal government's expansive prison budget and depend on a high number of prisoners to make money.
“As they look at what is going on at the federal system and state system, they’ve got to be worried,” said Michele Deitch, a lawyer and lecturer at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin who studies U.S. prisons. “Reducing the number of people who are locked up, just trying to generally decrease size of the prison population ... when you’re doing that, you’re reducing the market.”
Private prison companies have for years made money on contracts with the federal government to house prisoners. The largest two, GEO Group and the Corrections Corporation of America, record combined profits around $5 billion with more than 100 facilities across the country.
“These contracts are very lucrative,” said Bob Libal, executive director of the Austin-based justice advocacy nonprofit Grassroots Leadership. “A reduction in the number of prisoners could be a huge threat to the private prison corporations’ bottom line.”
Of the nation's nearly 165,000 federal inmates, more than 24,000 are housed in private prisons. This weekend's prison release came after the U.S. Sentencing Commission’s April 2014 decision to reduce drug offender sentences. Another 46,000 more drug offenders could soon be released under the policy shift.
The release is part of a growing political trend to reconsider the nation's drug laws. President Barack Obama has granted clemency in recent months to other nonviolent drug offenders and the U.S. Justice Department has told its prosecutors not to charge low-level drug offenders if they are not violent or connected to gangs. In Congress, the bipartisan Sentencing Reform and Corrections Act of 2015 would decrease mandatory minimum sentences for certain drug offenders, according to the Hill. Obama championed the legislation Monday by visiting a halfway house and drug-treatment center in Newark, New Jersey. He also was expected to announce measures to help convicted criminals obtain employment from the federal government and clarify federal policy on eligibility for subsidized housing for people with arrest records.
Amid the push to reduce prison population, the Bureau of Prisons, which funds federal prisons, could look at ways to reduce expenses. This could result in reduced private prison funding or a refusal to fund the opening of any new private prisons, said David Shapiro, a Northwestern University law professor and former staff attorney for the American Civil Liberties Union’s National Prison Project.
“[Private prisons] have been living off the government’s largesse in an era of mass incarceration, and they may not be getting the same paycheck from big government they’ve always gotten,” Shapiro said.
Each prisoner adds to the bottom line. In most cases, private prisons get paid for the number of prisoners they house, said Alex Friedmann, associate director of Human Rights Defense Center, in Lake Worth, Florida.
“For every prisoner held in custody, the company gets a set amount of money,” Friedmann said. “If it’s $50 per diem, [the company] receives $50 per prisoner, per day, based on the count of the population at a specified time.”
Prison corporations have conceded in the past that a change in sentencing laws would be cause for concern. In a 2014 filing with the Securities and Exchange Commission, the Corrections Corporation of America wrote that a decrease in occupancy levels could hurt profitability.
“The demand for our facilities and services could be adversely affected by the relaxation of enforcement efforts, leniency in conviction or parole standards and sentencing practices or through the decriminalization of certain activities that are currently proscribed by criminal laws,” the filing wrote.
Private prisons could also be more susceptible to recent reform efforts compared with public prisons because of the type of prisoners they hold. Private prisons tend to house lower-security prisoners simply because they are easier to manage, Shapiro said. Many of these inmates were put in jail for low-level drug offenses -- the same grouping of crimes the U.S. government has looked to release.
“That is where private prisons may be disproportionately affected in this situation,” Shapiro said. “It’s because these reforms are principally aimed at lower-level offenders.”
Private prison companies have come under scrutiny for years, with some critics arguing they keep people in prison to increase profit and don’t bring any economic benefit to the local communities they promise to serve. A 2015 University of Wisconsin study suggested that private prisons keep prisoners behind bars longer to drive up profits, but the companies that run the facilities have said they do not lobby for policies that determine sentencing.
“While as a matter of long-standing policy, GEO does not take a position on or advocate for or against any specific criminal justice policy, our company has in fact made significant investments in the development of evidence-based offender rehabilitation and community reentry programs, which are in-line with criminal justice reform efforts aimed at reducing recidivism and helping the men and women in our care reintegrate into society,” GEO Group said in a statement.
Steve Owen, communications managing director for Corrections Corporation of America, said in a statement the company has a policy not to lobby for or against legislation on prison sentences. He said Corrections Corporation of America has enrolled thousands of inmates in programs that help them re-enter society.
With the inmate release over the weekend, private prisons were unlikely to immediately feel financial heartache, said Deitch, the lawyer who studies U.S. prisons. But the trend suggests private prisons might need to reconsider their business models in the future.
— The Creators Project (@CreatorsProject) October 28, 2015
“You really need to reach a critical mass of people from a particular facility before it can actually result in substantial cost savings,” Deitch said. “Any single drop may not mean that much, but what it bodes for the future would be a source of concern."