Public outrage came fast. Citizens in Youngstown demanded the prison be shut down. Local and national media outlets picked up the story. Mother Jones, a respected, independent investigative news magazine, reported that George McKelvey, then-mayor of Youngstown, told reporters, “Knowing what I know now, I would never have allowed CCA to build a prison here.” The city sued CCA to get the prison to abide by safety standards. Two years later Mother Jones ran an editorial against private prisons using the Youngstown prison as the prime example against privatization. Even the conservative Heartland Institute ran a press statement noting that CCA had made serious mistakes preparing to oversee convicted felons. (The institute later insisted that changes made to the prison in response to the crisis were adequate.)
CCA eventually shut down its Youngstown prison because having to abide by new standards — the same standards the Heartland Institute said were adequate — made it no longer profitable. The prison remained closed for a few years and then opened under a new model — as a holding center for people waiting for federal court hearings.
Today, the Youngstown example seems long forgotten. Last year Ohio became the first state to sell a state-owned prison to a private company. This deal, which was fully supported by Gov. John Kasich and the Republican-controlled Ohio legislature, sold the Lake Erie Correctional Institution in Ashtabula County to CCA, the same company that couldn’t handle running a prison in 1997. Republican state officials proudly touted the sale for its potential taxpayer savings. An executive at CCA even called Ohio a “trailblazer” in its November 2011 earnings call.
The deal is truly a first. In the past, private prison companies built their own prisons, and at times state governments have asked private prison companies to manage state-owned prisons. But this is the first time in history a state prison has been sold to a private company, which will house the state’s prisoners for at least 20 years.
Ohio had actually planned to sell five prisons as part of its 2011-12 budget, but the state government was only able to complete the one CCA deal because none of the other sales saved enough money.
CCA didn’t return multiple phone calls and emails from CityBeat seeking comment for this story.
Critics of prison privatization are not happy with the sale or the precedent it sets. Mike Brickner, a researcher at the American Civil Liberties Union (ACLU) Ohio, remembers the lessons of Youngstown and wants Ohio to remember the security and public policy risks behind private prisons. Policy Matters Ohio, a left-leaning research organization, suggests that private prisons might not end up saving money anyway. These concerns, along with the research backing them, paint a grim picture of Ohio’s public and budget health as the state moves to monetize prison inmates.
The primary concern over the private prison model is the possibility of a fundamental conflict of interest. America’s main private prison companies — mainly CCA, Management and Training Corporation (MTC) and the GEO Group — make more money when more people are incarcerated. But it’s largely believed to be in the public and state interest to imprison as few people as possible and rehabilitate prisoners to be functional citizens. This presents a fundamental contradiction for policymakers. They want to hire private prison operators, but then private prison operators, which gain a substantial amount of power by virtue of owning and running prisons, push against policies the public wants and needs.
“The companies get paid a per diem for the number of people that are in their prison, so it’s in their interest to keep those prisons as full as possible,” Brickner says.
MTC refused to grant CityBeat an interview for this story, instead offering the same written statement that CityBeat had already received from the Ohio Department of Rehabilitation and Corrections. (See “Lockdown at the ODRC” below.)
Brickner says it’s also in the interest of private prison companies to keep the nonviolent, low-risk criminal offenders in jail, even if it might not be in the public interest to overcrowd prisons with such criminals: “One, they lose their numbers, and they make money off that. Two, they’re the easiest prisoners to handle. Private prison companies don’t want to take care of the really high security, dangerous, violent offenders because those cost a lot more money.”
When private prisons take high-security prisoners, they’re forced to pay for more security and specialized health care, which Brickner says hurts the bottom line. If they don’t adopt those services, situations like the one in Youngstown can pop up when inadequate security oversees dangerous criminals.
The conflict between costs and adequate safety measures presents real-life, statistical consequences. A study at George Washington University found private prisons have a 50 percent higher rate of inmate-on-staff assault and a 66 percent higher rate of inmate-on-inmate assault than publicly owned and managed prisons. Another study, in the Federal Probation Journal in 2004, had similar results — it found that, compared to public prisons, private prisons have a 50 percent higher rate of inmate-on-staff assault and inmate-on-inmate assault.
These examples suggest making prisons profitable by cutting costs might not be sustainable. A 2011 ACLU report, which Brickner co-authored, attributed the higher rates of assault in private prisons to poorly trained staff. The report noted high staff turnover rates at private prisons, which see a turnover rate of 53 percent compared to 16 percent at public prisons. According to the ACLU, the high turnover rate creates a vicious cycle involving private prisons consistently shuffling less experienced, poorly trained staff to replace former staff.
The bottom line also presents problems for rehabilitative programs. The ACLU report found the two private facilities in Ohio have fewer rehabilitative programs than prisons managed and owned by the state. The Lake Erie Correctional Institute and North Coast Correctional Treatment Facility, in particular, “have no trauma recovery programs, no contract- or grant-funded job-training programs and no programs addressing mental illness, disease management, general health or sex offender issues,” according to the report.
Brickner says this makes sense from a profit perspective: “It doesn’t make any difference to them whether or not a person eventually integrates back into society. Looking from a cynical approach, it actually helps them if that person (is convicted again) because they come back into their prison and they get money off them again.”
Brickner also cautions that inviting private prisons into a state tends to lead to an expansion of the prison system. He cites the example of Arizona, where Gov. Jan Brewer accepted campaign donations from private prisons a year before passing the controversial illegal immigration law in the state. Brickner says it’s a “dirty little secret” that private prison companies make massive profits from detaining illegal immigrants. Since it is such a lucrative business, Brickner says private prison operators had a direct interest in getting the illegal immigration law passed in the state, and lobbying from private prisons is one reason why public officials passed the law. Brickner fears a similar series of events could play out in Ohio as private prison companies become more and more powerful.
“A lot of that goes to a private prison company wanting policies in place that are going to have more people in prison,” Brickner says. “And being a public company, they can lobby public officials to implement those changes.”
The Arizona timeline given by Brickner echoes the findings of the ACLU report. The report found that private prisons benefit from more prisoners and prisoners staying in prison longer and being locked up more often. A study by the Journal of Law and Economics in 2005 found private prisons increase costs to state governments — and profits for themselves — by encouraging recidivism, which is when former criminal offenders end up back in prison after being released.
The Ohio Department of Rehabilitation and Corrections manages Ohio’s state prisons. It was in charge of securing the sale of the Lake Erie facility, and it has placed private prison companies in charge of operating other state-owned facilities. When contacted by CityBeat, ODRC first denied the interview request based on “scheduling conflicts,” then offered a statement CityBeat would later receive from private-prison company MTC and then stated that the department doesn’t discuss issues that are pending litigation. (See “Lockdown at the ODRC” below.)
There is also the issue of accountability. In Ohio, the state Supreme Court has repeatedly ruled against anyone seeking public records from private entities doing public work. The court instead said private facilities — specifically a nonprofit community corrections organization in the case of Oriana House, Inc. v. Montgomery — does not fall under public records laws.
Brickner claims the ACLU has still been able to get some records from private prisons, even though it typically takes longer. But he’s worried the details behind the CCA deal will make it more difficult to get public records. Brickner says Kasich’s proposal is unlike past proposals because it is not just leasing state prisons and letting private companies operate and manage them. Instead, the state sold the land and prison to a private company.
“Because they own the land and facility, it adds another layer of privatization,” he says.
“It’s still unclear — because it’s still so new — how well we’re going to be able to get those public records.”
Brickner is also worried private ownership of the prison will make it more difficult for the state to take back the prison from CCA if something goes seriously wrong. Unlike past cases, the state no longer owns the prison. It might not have the jurisdiction to seize private property if the contract isn’t demonstrably broken.
But practicality is not the only reason for opposition and criticism of private prisons. The ACLU also opposes the private prison model from a philosophical standpoint.
“The model of prison privatization is that they earn their money off of incarcerating people, and we believe that incarceration is one of the greatest deprivations of liberty that the government can dole out to a person,” Brickner says. “We should not be in the business that private corporations earn money off the deprivation of liberty.”
One of the more surprising assertions made by critics of private prisons is that privatization does not save money. If supporters of private prisons have one thing on their side, it’s that private prisons are supposed to be more efficient because they worry about the bottom line to run a profit. While these companies certainly enjoy profits — CCA posted $162.5 million in net income for 2011 — it turns out those profits might not come at the benefit of the taxpayer.
That was the conclusion of reports released by Policy Matters Ohio in 2011. The reports did not conclusively find that private prisons cost more than public prisons, but they did find that the state is using some fairly shady math to get its savings numbers.
Zach Schiller, researcher at Policy Matters Ohio, says the reports’ findings show the state’s claim that it’s getting more than 5 percent in savings, which is the legally required amount to allow a private prison operation, has not been adequately demonstrated.
The state does demonstrate an immediate, one-time profit on the actual sale of the Lake Erie facility. The facility cost about $43.9 million to build, and the state sold it to CCA for $72.8 million. That is a $28.9 million profit.
Where problems arise is how the state calculates savings from managing prisoners and the facility. Under the contract, the state has to pay two major fees to CCA: a per diem fee, which is how much the state pays each day for each prisoner held at the Lake Erie facility; and an annual ownership fee, which is how much the state pays for using CCA’s facility to house prisoners. The question is whether these fees will cost the state more than managing and staffing the prison would have under public ownership.
Schiller says it’s a possibility the fees might win out. He points to the faulty budget gimmicks unveiled in the Policy Matters Ohio reports. One such gimmick is the state’s assumption that each prisoner transferred to a private prison would result in one-to-one savings for the state. In other words, if the state transferred 5 percent of its prisoners to a private prison, the state government assumed it would produce 5 percent in prison health care savings.
But Schiller says that kind of assumption makes little sense. In reality, if the state is transferring 5 percent of its healthiest, safest prisoners to a private prison — somewhat likely, says Schiller, considering private prisons rarely house the most dangerous, unhealthiest criminals — that is not going to produce 5 percent in health care savings. On the contrary, healthy prisoners use considerably less health services and have less health expenditures, so it’s possible transferring 5 percent of prisons could only produce a fraction of that in medical savings.
That budget trick was used repeatedly in the state’s numbers, including food and education programs, according to the Policy Matters Ohio report. The trick led Gerry Gaes, former research director at the federal Bureau of Prisons and visiting scientist at the National Institute of Justice, to call the state’s numbers “bogus” in the Policy Matters Ohio report.
“These get to be very specific, narrow criticisms, but, nevertheless, I think they undercut the state’s numbers,” Schiller says. “They make it difficult to have any confidence that we’re saving money.”
For Schiller, another telling number came in the state’s announcement detailing what it will do with the prisons that weren’t sold. The state originally intended to sell five prisons, but it couldn’t accomplish that. Instead, the state sold one prison and put two others under private management. The state also took the North Coast Correctional Treatment Facility (NCCTF) that was originally managed by MTC, put it back under public ownership and combined it with Grafton Correctional Institution.
Out of the entire announcement, Policy Matters Ohio found the public takeover and merger of NCCTF showed the biggest savings.
“What we found is the greatest amount of savings was not by private operation,” Schiller says. “It was by taking the one private facility back into public control and combining it with another (facility).”
Schiller acknowledges the merger could play a bigger role in the savings than public ownership, but he says, regardless, the example undermines the cost savings of privatization — and that’s all by using the state’s own numbers.
There are also problems that could pose more costs down the road for taxpayers. To Schiller, one troubling highlight of the deal with CCA is that the state must pay for 90 percent capacity even if the prison isn’t 90 percent full. That means if the state were successful in reducing its prison population — an objective Policy Matters Ohio and the ACLU call desirable — it would still have to pay for 90 percent capacity.
Schiller says such a prison population reduction is unlikely, but if it came to pass within the next two decades it would force the state to either transfer prisoners to the Lake Erie facility or not make full use of the capacity it’s paying for.
But perhaps the most troubling part of the deal with CCA is how straightforward the company is with its intent to raise costs to the taxpayer for the sake of profit. The latest Policy Matters Ohio report on private prisons found part of CCA’s three-pronged strategy for growth is “enhancing the terms of our existing contracts.” In other words, CCA, with its new position of power as the new owner of a former state prison, will eventually try to raise fees to make bigger profits, even if it doesn’t benefit the taxpayer, by renegotiating its contract to include more income and less cost. The contract between CCA and Ohio will be renegotiated every two years.
To illustrate CCA’s tactic, Schiller points to a 2008 case in Colorado. In that situation, CCA threatened to bring in out-of-state prisoners to fill up its beds in one of its four facilities in Colorado if the state did not increase the per diem fee by 5 percent. Colorado eventually compromised with CCA by approving a 4.25 percent hike, but the state later rescinded the hike in the face of budget problems caused by the Great Recession. Still, Schiller says the example shows the extent to which CCA will go to make a profit at the expense of everyone else.
“That’s business,” Schiller says. “As a business, you would not be serving your shareholders if you were selling your services for anything less than you possibly could.”
With the Policy Matters Ohio reports and state numbers in hand, Schiller says it’s not certain whether private prisons will save the state money. He also fears the state could be in a bad negotiating position if it fails to reduce its prison population, giving CCA more ammo to defend the necessity of its services. That could lead to higher costs after contract renegotiations, making it even less likely privatization saves the state money.
CityBeat repeatedly contacted the offices of CCA, the GEO Group and MTC, the three major private corrections operators in Ohio, so they could respond to criticisms leveled by ACLU Ohio and Policy Matters Ohio. MTC did not grant an interview before press time, and CCA and the GEO Group never responded.
Follow the money
If private prisons are so bad, why do state governments continue allowing them? Brickner attributes this to an honest belief among policymakers that privatization is cheaper, but he also points to campaign contributions.
“We can’t ignore that there is a lot of money at play here,” says Brickner, citing the massive profits from private prison companies and the campaign contributions they gave to politicians.
According to campaign contribution data from the Ohio Secretary of State offices, the GEO Group donated $10,000 to Kasich and $52,000 to the Republican Governors Association, which helped fund Kasich’s gubernatorial campaign, in 2010. Between 2003 and 2006, CCA gave $7,000 to Ohio Republicans and former Gov. Bob Taft. In 2010, CCA gave $50,000 to the Republican Governors Association. There were also reports that CCA gave $10,000 to Kasich’s transition fund on December 2010. Between 2007 and 2010, MTC donated a total of $99,000 to state policymakers. Of that money, $22,500 went to Democrats and $76,500 went to Republicans. Of the money that went to Republicans, $4,000 went to Ohio Sen. Bill Seitz, who represents Cincinnati in the Ohio Senate.
That money might not seem like much in comparison to federal campaigns that raise millions of dollars a month from private supporters. But in state terms, that’s a lot of money. In 2010, Ohio broke its own records when the governor race cost approximately $33 million. That’s spending from both gubernatorial campaigns, which received money from hundreds of donors. Three contributors giving a few hundred thousand dollars is a decent amount of cash in that context, and that’s only what can be found in public records.
There are also some questionable connections between state officials and private prison companies. Kasich’s office in particular has been heavily involved with CCA in the past. Gary Mohr, director of ODRC, was a former employee for CCA. Donald Thibaut, former chief of staff for Kasich when Kasich was still in Congress, now works as a lobbyist for CCA. When he was a U.S. senator for Ohio, Ohio Attorney General Mike DeWine helped CCA reopen its Youngstown prison in 2004 with a federal contract.
Rob Nichols, spokesperson for Kasich, said he could not comment on private prison issues because the state is dealing with a lawsuit with the Ohio Civil Service Employees Association (OCSEA), a union for public prison staff, regarding private prisons. State officials typically do not comment on issues facing litigation.
CityBeat repeatedly attempted to contact ODRC to answer questions regarding criticisms of private prisons and the possible conflict of interest presented by Mohr being director of ODRC. The department refused to grant an interview even after offers to extend deadlines. Instead, ODRC offered a statement saying Mohr separated himself from the prison sale process. No further details were provided.
Sen. Bill Seitz admits to the donations and even meeting with MTC officials, but he says that has little bearing on his support of private prisons.
“If I thought private prisons were going to not follow the program of sentencing reform and recidivism reduction through increased training and educational opportunities in prison, I certainly wouldn’t support privatizing prisons,” he says.
Brickner says it’s true that contracts with private prisons typically require them to keep similar standards to state prisons, but he says that’s not how it works out in reality: “They may provide the same number of programs, but that doesn’t go into how effective the programs are. There isn’t really anyone monitoring or holding accountable the private prisons for how effective they are. That’s typically not worked into the contracts.”
To Seitz’s credit, he has pushed for sentencing reform in the Ohio Senate, and he has supported sentencing reform passed by the Ohio House. In general, Ohio Republicans have not backed down on sentencing reform as they have supported private prisons.
In his defense, Seitz cited the Talbert House, a halfway house that he says is “among the most highly respected organizations in all of Hamilton County.” He added: “There’s nothing intrinsically evil about having private companies in this space. Many of them do a very fine job.”
That defense matches what Schiller and Policy Matters Ohio say drives policymakers to support private prisons. Schiller doesn’t want to attribute it to campaign contributions or corruption; instead, he says there is a true ideological difference between supporters and critics. He cited a 2011 Policy Matters Ohio report titled “The Great Ohio Sell-Off,” which found the latest state budget made huge strides in privatization. On top of prisons, it also sought to privatize the Ohio Turnpike and liquor distribution business. It also allowed school districts to contract out their transportation systems, universities to transfer their buildings and parking lots to private entities for up to 99 years and cities to lease parking meters for up to 30 years.
“This is a part of larger push for the privatization of public assets,” he says. “It’s really part of a much broader privatization agenda.”
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