John Taylor,
President of the Virginia Institute for Public
Policy, publisher of Virginia Viewpoint.
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With
Virginia
facing a billion dollar plus deficit, it will take
some creative thinking to balance the budget.
The key, of course, is doing so without
cutting services or raising taxes.
Several ideas have been put forward, many of
them new and untried in the state.
However, one old idea with which Virginia
has prior experience still remains as viable today
as it did when the Commonwealth first tried it in
1998.
New
research shows that not only do the private prisons
themselves save money, but they also put external
pressure on the public prison system further
constraining the escalation of costs — a win-win
for Virginians as our legislators in Richmond try to
balance the budget.
Virginia
is not alone: About three-fifths of all U.S.
states have private prisons.
Virginia
has one, the Lawrenceville
Corrections
Center. A host of
studies have been conducted that show significant
savings in the range of 5 percent to 20 percent when
the corrections function is privatized.
However, two new studies take a slightly
different approach to prison privatization and cost
savings. These
studies sought to identify the effects of
competition and privatization on the prison system
as a whole as opposed to just one institution.
James
Blumstein and Mark Cohen, both professors at Vanderbilt
University, conducted the first study.
They analyzed whether the use of private
prisons by state correctional departments had any
impact on the rate of growth in states’ public
corrections system operating budgets. Anecdotal
evidence of this phenomenon already existed from
time-series data in Texas
and Arizona, but a systematic analysis had never been done.
Using
data for 1999-2001, the study found that states
utilizing private prisons had considerably more
success in keeping public corrections spending under
control than states with no private prisons. During
the period studies, states with private prisons saw
the growth in daily costs of housing prisoners in
the public corrections system reduced by 8.9
percent, or about 4.45 percent each year.
One
of the most significant findings was that turning
over even a small portion of prison populations
resulted in big savings.
States with less than 5.0 percent of their
prison populations in private facilities experienced
a 12.5 percent increase in expenditures versus an
18.9 percent increase in those states with no
private prisons. However,
states with larger percentages under private
management had even greater savings with growth in
expenditures at only 5.9 percent during the period
studied.
A
second study was conduced by the Rio Grande
Foundation in New Mexico. It compared
state per-prisoner budgets across forty-six states.
This study measured an entire department’s
spending rather than just a particular prison’s
spending, accounting for the cost-savings public
prisons achieve in response to private
competition. Not
surprisingly, the results were in line with those of
Blumstein and Cohen.
To
measure the extent of privatization, the study
relied on the percentage of prisoners in each state
currently under private management.
Holding other factors constant, and
controlling for factors that could affect spending,
they found that states with 5.0 percent of their
prison population in private prisons spent
approximately $4,804 less per prisoner in 2001 than
states without any privatization.
However, as states increase the use of
privatization, they increase their savings as well.
For example, New Mexico
which houses 45 percent of its inmates in private
facilities spent $9,660 less per-prisoner in 2001
than states with no privatization.
This savings was equal to nearly a third of
what the median state spent per prisoner.
While
the Blumstein and Cohen study looked at
privatization’s effect on the growth of
prison expenditures, the Rio Grande
study was more of a snapshot of how expenditures
differ subsequent to varying degrees of
privatization in 2001.
While the two studies didn’t measure the
exact same things, the similar findings nonetheless
tell a compelling story. States that utilize
competition and privatization for corrections save
money. Furthermore,
the more one privatizes, the more money one saves.
Virginia
currently has one private prison housing 1,570
inmates. Out
of a total prison population of 27,213 (1,046 are
out-of-state), 5.8 percent of Virginia’s inmates are in private prisons.
According to the two studies, by partially
privatizing Virginia is saving money and is constraining its costs better
than states that have not privatized correctional
facilities. However,
both studies also note that as more competition and
privatization occurs, savings escalate.
Virginia
has not privatized any correctional facilities since
its first venture in 1998.
Simply increasing the number of facilities
subject to competition would save millions of
dollars. Even
if one were to cut the Rio Grande estimate in
per-prisoner savings almost in half to only $5,000
per prisoner, if Virginia increased corrections
competition and privatization to New Mexico levels
(45 percent) the state would save more than $130.8
million dollars. It’s
an idea our leaders in Richmond
can’t ignore.
--
July 14, 2003
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