A Fortune Look at Arizona’s Private Prisons

A tip of the hat to this Fortune story from a couple of weeks back highlighting the prison-industrial complex in Arizona, which has tried to privatize all the state’s prisons (emphasis mine):

According to research firm IBISWorld USA, private corrections is a $22.7 billion industry with an annual growth rate in the last half-decade of 4.7%. While growth slowed from 2009 to 2010, projections for the industry remain largely optimistic.

“The prison population continues to grow regardless of what the economic conditions are,” says George Van Horn, senior analyst at IBISWorld.

Yeah, it’s a great idea to put a profit motive behind taking people’s liberty away. But that’s a philosophical issue. The tradeoff has been supposedly cheaper costs for states now that at any given time we have more than one in 100 American adults locked up. But Fortune says the cost argument may not be a good one:

But more recently, an internal Arizona Department of Corrections report released in February 2010, found that, in 2009, those savings narrowed to around $2.75 per inmate per day, and in certain instances, private facilities were found to cost even more per day than public ones.

“There’s nothing definitive saying publics are better or privates are better. There’s a lot of propaganda,” says Michel Jacobson, director of the Vera Institute of Justice, a non-partisan research organization.

Plus there are significant externalities:

The Urban Institute’s John Roman argues that at times private prisons also lack the incentive to help prepare inmates to return to society, leading to a higher rate of recidivism (inmates returning to prison) and a higher overall cost to the prison system.

I would have liked to have seen Fortune quantify the assertion that private prisons have higher recidivism rates. That’s a critical fact, if true.

And this is hard to fathom:

Arizona Attorney General Goddard says that his state Department of Corrections has nearly zero oversight over the prisons that house out-of-state inmates in his state.

“They don’t have to show proof of financial responsibility, they don’t have to comply with Arizona prison construction standards, they don’t have to report disruptions…and both the training and staffing is up to the private operator,” Goddard says. “There were a couple of private prisons that went on lockdown and refused to allow the Department of Corrections to come in.”

What? Who’s overseeing them then? Sounds like Arizona has ceded too much control already.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.