For years the critics of corrections privatization have claimed that a true comparison between public and private "costs" was unattainable. The apples-to-apples comparison wasn't there - and so savings would be difficult to quantify.

But new research has emerged that indicates that even without this evaluation, privatization may account for some cost savings to public entities anyway- by creating competition between the publics and privates and promoting new efficiencies.

On the other side of the debate are those that say this research fails to take into account other factors, such as quality, and that it is limited in impact because it only covers a few years worth of data.

Nevertheless, the research has opened a new avenue of discussion about the benefits and pitfalls of corrections privatization.

"I think privatization has been healthy for our agency and for [the private operator] in the sense that we try to out perform them in a lot of ways," said Daron Hall, Sheriff of Davidson County, Tenn. "For me competition has been good; we have ACA audits and we try to out-score them."

Hall comes from a unique vantage point in that he has worked for both the public and private side of corrections. When Corrections Corporation of America was selected to manage one of the county's facilities, it hired Hall to oversee it. He stayed for three years and then returned to the county sheriff's department.

Since then, he has been on a mission to compete with the privately-run jail in his jurisdiction.

"What is fair to say is that we are competing. Prior to that, it was a monopoly. My favorite example [of this] is overtime. In CCA's world there isn't overtime," he said. "[But years ago on the county side] I had people who would buy new cars or houses on overtime checks. We compete now and we basically have no overtime now."

This kind of anecdote had never been examined closely until researchers from Vanderbilt University received funding from the private prison industry to see if a correlation existed between increased competition by privates and decreased costs on the public side.

Mark Cohen, Senior Associate Dean and Professor, Owen Graduate School of Management, Vanderbilt University, and James Blumstein, Centennial Professor of Law, Vanderbilt Law School, examined this relationship in their 2003 study The Interrelationship Between Public and Private Prisons, which was funded by CCA and the Association for Private Correctional and Treatment Organizations (APCTO).

The research indicates that states that used private companies to manage corrections facilities had a decrease in cost growth among the public facilities.

Hall's experience is a clear example of how competition can impact efficiency at the public level. But Hall also understands that there are other dynamics in the public-private relationship that should also be examined as part of a cost analysis.

"There are problems with the comparison. We are dealing with more complex problems - women and mental health issues," he said. "In an ideal world, you'd build two identical facilities and let the privates run one for a month and then us, and then compare."

One aspect of the private side that Hall thinks can be problematic is the idea that an empty bed means lost money.

"They look to fill the empty beds in a facility that might not be ready for that," he said. "From the business standpoint and the private side of the fence, an overcrowded facility is more money. To the public side, an overcrowded facility is more costly and more problems."

But the Vanderbilt researchers say they looked strictly at the economics of the comparison and at growth trends in particular.

Study Examines Growth

"What we looked at is not how much the state spends per prison, but rather growth in spending. If one state is a higher spending state for the reasons of higher services, that's fine, they might want that. We are looking at growth over time and are they increasing expenditures faster than other states," said Cohen.

Cohen, who said that the industry funding of the study had no influence on the results, explained that, in the study, researchers controlled for growth in government expenditures overall - so that if a state had particularly high expenditures overall that would be accounted for. The researchers also controlled for any court orders that might have skewed expenditures.

"What we were looking at is, does the effect of having a private prison put pressure on the state prison to be more efficient. That's the important part of our findings. The public prison costs go down," Cohen said.

The study's findings show that between 1999 and 2001, states that utilized private prison companies experienced lower growth. Those with 20 percent or more prisons managed by privates experienced growth per capita of 5.9 percent; those with 10-20 percent, had 9.7 percent growth; those with 5-10 percent, had 12.1 percent growth; those with less than five percent of prisons privatized experienced a 12.5 percent growth and those with no private prisons experienced 18.9 percent growth.

He said the findings reflect what happens in other markets with privatization and support basic economic theory.

"There's a reason why we have a government monopoly. It often has to do with economies of scale or the public good, but it often creates inefficiencies. But competition can drive costs down," he said.

Cohen acknowledges that the data about private prisons was not plentiful and that the study only covers 1999-2001. Nevertheless, he believes that a further extrapolation of the numbers to include additional years would produce similar results.

Other researchers, however, believe that the study falls short on this point and on other levels.

Missing in the equation, said Kevin Pranis of Justice Strategies, is a discussion of quality in relation to competition and savings.

"They say the savings is in competition and it keeps the public sector people on their toes. That's interesting because doesn't it drive down standards? If the publics are pushing their costs down to compete, [then] does the private side drive down standards?," Pranis said.

Pranis said there may be a degree to which competition can reduce costs in some innovative ways, but he also cautions that the pressure to cut costs can have a detrimental effect on the prison population - something that isn't accounted for in the Vanderbilt research.

"There are pressures to cut costs and they come up with all sorts of savings, but some are really terrible such as eliminating drug treatment from all prisons. You put pressure on a system and you'll get changes, but there's no scale for this stuff," Pranis said.

He also questions the analysis because, he believes, there could be a difference in the per capita costs for those states with privatization and those without it anyway. Pranis suggests that those states with privatization may have started with high populations and therefore, the higher the population - the lower the per capita cost.

This is what Pranis found when he analyzed the fiscal impact of private prisons in Arizona. His study, Cost-Saving or Cost Shifting, sponsored by Private Corrections Institute, a non-profit organization that opposes privatization, the American Friends Service Committee and the Arizona Leadership Institute, examined the information used by Arizona officials prior to recommending the use of private prison management there.

In his examination of the use of private prisons in Arizona, Pranis looked at assignment policies for private prisons, allocation of costs, financing and changes in cost over time.

According to Pranis, Arizona officials believe that privatization has driven costs down, but in reality their perception is based on an artificial growth in the number of offenders in the state.

"In the Arizona data, the more you keep packing people in, the cost goes down," he said.

The incentive to keep the private beds full, Pranis says, may create an unnecessary need to shift people from public facilities to private ones, or even to sentence people to prison when they don't necessarily need to be.

"This is rearranging deck chairs on the Titanic," he said. "Even if you accept all the cost savings, the state couldn't afford to lock up everyone they wanted to lock up. It becomes so focused on this, without taking a step back to look at whether we could afford 4,000 or 5,000 new prison beds."

Pranis believes that a discussion about sentencing and the future costs of corrections is needed, in Arizona and in other states, before the state expands its relationship with private prison companies.

Others who study privatization, however, are convinced that a balance of private and public institutions does mean a real cost savings to states.

Reason Foundation Looks at Research

The Reason Foundation, a public policy think tank that supports the use of privatization in many industries, has followed the growth of prison privatization over the years. In doing so, it has looked at the impact in various states as well as nationwide.

A recent paper written by Geoffrey Segal, Director of Government Reforms at the Reason Foundation, and the Georgia Public Policy Foundation, recommended that Georgia officials continue to look at prison privatization as a way to control costs.

"The competitive process is each side learning from each other and benefiting. We don't suggest an entirely private corrections department will remain efficient. I can't tell you what the right mix is, but what the data does show is that at least some level of competition is needed to restrain costs," said Segal.

Segal's paper suggests that Georgia, which already has three private prisons, would stand to gain more efficiencies if it considered further privatization.

In addition, Segal said some of the recent research, such as the Vanderbilt study, has tapped into built-in inefficiencies at the government level that can also be seen in many other public sectors.

"Typically government agencies ask for more than they need. They can because they know there will be cuts. In services like corrections, in tight budget times, it does make them stretch the dollar, [but] does it make them more efficient [in the end]? It's not the structural change that competition would do," Segal said.

And in addition to keeping costs down, Segal and others at the Reason Foundation believe that private contracts could be an opportunity to improve quality. By requiring private prison operators to accredit their facilities through the American Correctional Association or by building in performance-based incentives, government agencies can ensure they receive the quality they want.

In the case of Davidson County, Sheriff Hall and other leaders did just that and took the opportunity to enhance supervision of the privately-run jail.

"If you raise the bar by going to private, then I think everyone can benefit. [These improvements] might no t be feasible on the county side," he said.

Michael LoBue, Executive Director of APTCO, said that the quality of private facilities is high - and encourages skeptics to just look at the numbers.

"If you look at quality - 50 percent of privately operated and managed facilities are accredited by ACA. That's significantly more. Why? Because the public [side] isn't incented to do it," LoBue said.

LoBue suggested that public agencies should spend more time ensuring that contracts were written exactly the way they wanted them and then monitor them closely.

But those at the Reason Foundation and others who study privatization and corrections also know that a deeper analysis of incarceration trends is needed to truly understand how to save money and continue to keep public safety a priority.

Segal said that improving parole services and utilizing available technologies such as electronic monitoring are also systemic changes that could mean a reduced bottom line for corrections departments.

"Those are options that the states have been looking at and, frankly, the biggest opportunity they aren't touching on is reclassifying their drug laws," said Segal.

Pranis agrees with this position and further suggests that a focus on re-entry and the services offenders receive both inside and outside of prison will make a marked impact on the cost of corrections as a whole. If agencies and governments, for example, pay attention to the quality of health care offenders receive, then it might mean a lower cost in the public health budget when they come out, he said.

"In the really smart states, the pressure [on the budget] has meant that they get people out of prisons. No one's looking at the long term impact of prisons," Pranis said. "I think we should be looking at the system impact, but it should go beyond the type of prison we build."

Pranis would like to see the next round of prison privatization research focus on the financial impact of growth in private and public prisons.

"What's the impact of privatization on the actual outcomes of the prison and what happens when they come out?," he said.

The corrections industry may have to wait a little longer for that research to be completed.

Resources:

Justice Strategies - www.justicestrategies.net

The Reason Foundation - www.reason.org

APCTO - www.apcto.com