States Reap Huge Savings When They Contract with Private Prisons, New Study Finds: News Releases: The Independent Institute

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News Release
July 2, 2014

States Reap Huge Savings When They Contract with Private Prisons, New Study Finds
Prison Break Authors Identify States that Benefit the Most and Solve the Puzzle of How to Calculate Cost Savings

OAKLAND, CA—Most states use private prisons for some of their corrections needs, but critics have challenged the notion that contracting out is worthwhile. Fortunately, a new study from the Independent Institute goes a long way toward resolving the debate by calculating the fiscal benefits of breaking free of the government-prison monopoly.

Authored by two leading experts on public-private partnerships, economists Simon Hakim and Erwin A. Blackstone, Prison Break: A New Approach to Public Cost and Safety find that using contract prisons often results in cost savings two or three times as large as the 5 to 10 percent minimum that some states require.

In some cases, the long-run savings are much higher, such as for California (up to 58.61% at one prison), Oklahoma (up to 36.77%), and Texas (up to 44.95%).

“Our study finds that contracting our inmates to private prisons saves state governments money while maintaining performance at least at the same quality as government,” Hakim and Blackstone note.

Broad in its sweep, the study also discusses the history of corrections in the United States and surveys previous studies on cost performance of public and contract prisons. At its core, however, are original economic models using state and federal cost data that calculate a state’s “avoidable costs”—costs that a state no longer incurs when using private contractors. The authors include such often ignored costs as underfunded pensions, retiree healthcare, and capital.

The study focuses on ten states (Arizona, California, Florida, Kentucky, Maine, Mississippi, Ohio, Oklahoma, Tennessee, and Texas); looks at their reasons for using contract prisons; and compares their short- and long-run avoidable costs with the cost of government prisons.

“Exposing public prisons to greater competition should lead to lower costs and improved performance of both public and private prisons,” Hakim and Blackstone say. “Given the high costs of incarceration, society deserves as great efficiency and effectiveness as possible in the provision of prison services.”

Prison Break received some funding by members of the private corrections industry and is available for free at the Independent Institute’s website:

Prison Break: A New Approach to Public Cost and Safety

For media requests, contact Kim Cloidt at 202.725.7722 or [email protected].

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