The Arizona Department of Corrections recently released a report comparing costs of the state's public and private prisons, breaking out an old corrections debate with new fervor.

The state's newest comparison shows that, overall, private prisons actually cost between 8.5 and 13.5 percent more than public facilities. After years of reports stating that privately run facilities have saved the state between 10 and 17 percent, this year's numbers have drawn some fire from the private sector.

“In all the preceding studies, private prisons were found much more cost effective than public facilities,” says Paul Doucette, executive director of the Association of Private Correctional and Treatment Organizations. “This year, the formula has changed in conducting the study. As a result, the findings of the study are simply not valid.”

According to Arizona officials, the study accurately shows that private facilities cost the state an additional $3.5 to $5.3 million in 2004.

“I see a responsibility to ensure that private prisons are cost-effective,” says Arizona DOC director Dora Schriro. “The problem is that the private sector doesn't have open books. They want to generate profits for shareholders. Quite frankly, the DOC has to make this analysis. The answer is the answer, even if they don't agree with it.”

Arizona legislation does require cost analysis reports once every five years, and this year the DOC fine-tuned their cost comparison with the help of Maximus, a company that reviewed the methodology behind the state's comparison.

According to Joel Nolan, vice president of the Maximus Financial Services division and author of cost-comparison recommendations, changes were made to the analysis this year to ensure accuracy.

“I went into the Arizona DOC from a business and experience standpoint,” says Nolan. “We have done similar methodology reviews for other states. In Arizona, the state legislature had some questions about previous cost comparisons, and whether or not they were determined appropriately. We just made some recommendations on things they could correct for a more accurate study.”

At the recommendations of Maximus, the AZDOC switched from an operating per capita cost report, which focused on direct and indirect operating costs of public and private ventures, to a state versus private prison cost comparison. According to the Maximus report, the AZDOC initially compared costs on a facility by facility basis, rather than overall public versus private overhead.

“Before, we were comparing apples to oranges,” says Schriro. “Now, we're comparing apples to apples.”

Doucette disagrees, stating that many recent studies have shown the cost-effectiveness of private ventures. Report critics also add that the AZDOC did not add overhead fees to its cost total, unlike private facilities.

“When this comparison was done, there were numerous examples of how unbalanced the equation is. They considered certain costs on the state side and different costs on the private side. The best example of this is the cost of each facility itself; when a private provider builds a facility, the interest is in the per diem. That's the only way a private company can cover the cost of business. When the state does their budget, that's not included in the overall cost,” says Doucette.

Beyond cost-effectiveness concerns, the report stirs up the ongoing debate about the pros and cons of public and private prisons. While many officials believe performance is the most important part of the debate, others see taxpayer savings as the crux of the argument. Schriro emphasizes this report is retrospective and that the state is currently working on a prospective analysis. Doucette believes the report brings to light many misconceptions about private prisons.

“A study like this can be misleading. We believe quality performance should be emphasized. We have three main focuses in the private sector: cost-efficiency, quality, and accountability. Those things are not taken into account in a study like this,” Doucette says.

Parties in private and public camps both agree that quality and performance are top priorities and should be monitored regularly.

“I want to ensure that these facilities, whether public or private, are run effectively in cost and quality,” Schriro adds.

This report is especially important in Arizona as state legislators gear up to build new facilities. According to Schriro, a new prison is in the works but whether or not it will be public or private remains to be seen.

“I'd like to think that good data would make this a reasonable issue. I know that other directors struggle with this, too. Every state has a different story when it comes to private or public prisons, but these findings do need to be viewed and taken into account. It will be interesting to see how the state reacts to this.” Schriro says.