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Private Prisons and Public Money: Hidden Costs Borne by Colorado’s Taxpayers

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Over the past two decades the prison population of Colorado has skyrocketed, following a national trend in lengthy sentences and harsh parole policies. In fact, since 1980 the number of state prisoners has increased over 500%, with accompanying growth of the Department of Corrections (DOC) budget (see Figure 1). In an attempt to save money, Colorado has turned to private, for-profit prisons in the hopes that privatization would provide money-saving efficiencies in prison construction and operation. In 2000, Governor Owens directed the DOC to change state policy in order to increase the number of Colorado prisons which could be housed in private prisons from 25% of the total inmate population to 30%.

Due to the increased emphasis on housing many of Colorado’s prisoners in for-profit prisons, there are now four private correctional facilities in the state.* Three are operated by Corrections Corporation of America (CCA) and one is operated by Dominion Correctional Services.

Private prison operators rely on cooperation from elected officials who are willing to continue funding experimentation with privatization within the correctional system. Accordingly, private prison companies, have given a combined total of $21,950 to state candidates and political parties (both Republican and Democrat) since the beginning of 2001. Wackenhut and New Jersey based Community Education Centers each gave $5,000 to Governor Bill Owens’s reelection campaign—this despite the fact that neither company operates any facilities under contract with Colorado. Both companies are, however, currently seeking to win a state contract for a new 500-bed medium security prison along the Front Range.

Section 1 of this paper reviews the available literature concerning private prison performance and cost data. Data from Colorado and across the nation show that the performance of private prisons has been troubled—poor inmate programs, security problems, and fiscal woes have befallen all of the major private prison companies. Studies private prisons’ fiscal performance have yet to show any conclusive cost savings through contracting. Moreover, some states (including Colorado) tend to send “low cost” inmates (i.e., those with no medical or disciplinary problems) to private facilities, leaving the DOC with the most difficult prisoners thus distorting cost savings.

When the Colorado DOC discusses privatization cost savings, it does so by making a direct comparison between the cost of housing a medium security prisoner in a state prison versus the legislatively-mandated price that the state pays private prisons. This method of cost comparison is problematic since it fails to take into account administrative overhead costs borne by the state. Section 2 examines the administrative costs that the Colorado DOC absorbs for inmates in private facilities. Since these indirect (or “hidden”) costs are not factored in to the cost per inmate per day for prisoners housed in private prisons, the supposed cost savings may not exist.

The Colorado Criminal Justice Reform Coalition’s recommendations on how to address this issue are presented in Section 3. We feel that a legislative audit is necessary to examine performance records and cost data pertaining to Colorado’s use of private prisons in order to determine whether or not this is a practice that we, as a state, wish to continue.