Prisons house thousands, make billions

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Big prison populations can equate to big money for privately held prison corporations in the United States — and Colorado is no exception.

One of every 36 adults in the United States was under supervision of the federal, state or local correctional system by the end of 2014, according figures released in December by the U.S. Bureau of Justice Statistics.

Responding to overpopulated prison conditions, Colorado began outsourcing prison services to private firms in 1993. The purpose is to hold the overflow of prisoners that the state prison system cannot house.

In a Dec. 29 report, The U.S. Bureau of Justice Statistics shows the need for jail space has been declining every year since 2007. The same is true of Colorado: Gov. John Hickenlooper’s budget request for the Colorado Department of Corrections equated to a 5.9 percent decrease, or 297 fewer beds for the current fiscal year.

Three corporations operate private prisons in Colorado: the Corrections Corporation of America (NYSE: CXW), the GEO Group Inc. (NYSE: GEO) and Community Education Centers Inc.

Investing in prisons

Area financial advisers suggested investors research the details of any business before deciding to invest. Also, they say potential investors should consider the politics and industry trends before they put money in a company.

Mike Piper, Manitou Springs CPA and author of the Oblivious Investor blog, said he thinks people should avoid investing in individual stocks completely.

“At any given time, the market’s expectations for a given company are already built into the price of the stock,” Piper said.

“So the only way for an investor to succeed with stock picking — aside from simply getting lucky — is to know something that the market doesn’t.”

And that typically doesn’t happen.

“The private prison business is big business.” 

– Dale Payne

Colorado Springs’ certified financial planner Dale Payne said he would not advise clients “one way or the other” on investing in private prisons.

“The private prison business is big business,” Payne said, adding that large businesses like Wells Fargo and Morgan Stanley invest in CCA.

“It’s not whether it’s a good investment. It’s whether it’s the right investment for you,” Payne said. “Are you trying to make a quick buck?”

Some investments tend to be successful over the long-term, so the investor’s age needs to be considered, he said.

“I would want to know the organization’s corporate structure, the ownership percentages, their length of time in business, the expertise of the officers and major directors. You would want to look at their financials … go back a couple years to get a broad knowledge. If they’ve had losses, that could be normal, but you want to know why,” Payne said.

Digging for information in online sources like the U.S. Securities and Exchange website (sec.gov) will also help, he said. The SEC site will disclose insider sales.

“If you have a president who’s dumping stock, that will raise an eyebrow,” he said.

Politics also plays a part, he said. With recent government trends to reduce prison population, investing in private prisons may not be a good idea now, he said.

Public dollars

The state pays private prison companies $56.02 for every offender each day, said Adrienne L. Jacobson, associate director of legal services for the Colorado Department of Corrections. To compare, the average cost to house a prisoner in DOC prisons is $101.07 a day for every offender.

“There are a lot of costs borne by the state prison system that the private prisons do not have, such as transportation, high mental health and/or medical needs, sex offender treatment services, intake and assessment services, time computation, offender movement tracking,” Jacobson said in an email. Those costs are included in the $101.07 average.

Governments have come under fire for including minimum occupancy requirements in their contracts with private prisons.

Jonathan Burns, CCA director of public affairs, said fewer than half its contracts have minimum occupancy guarantees. Those that do include the requirement also have a provision that allows the government to terminate the agreement if it is determined that the capacity isn’t needed, Burns said.

“The idea that somehow our partners are locked into capacity they don’t need is grounded more in politics than fact,” he said.

Minimum guarantees are needed to cover the fixed costs of the prisons, such as staff and utilities, he added.

“Additionally, some of our government partners insist on these guarantees themselves to ensure that they have the capacity they need to safely and effectively house inmates,” Burns said.

Big business

Since incorporating in 1983, CCA has become one of the largest privately held jail systems in the nation. Its national system has grown to more than 85,000 prison beds.

CCA owns and operates three prisons in Colorado: Bent County Correctional Facility in Las Animas, opened in 1996; Crowley County Correctional Facility in Olney Springs, opened in 2003; and Kit Carson Correctional Center in Burlington, opened in 1998. The CCA-owned Huerfano County Correctional Center in Walsenburg, closed in 2010. Altogether, CCA operates 5,600 prison beds in the state.

From its headquarters in Tennessee, GEO operates 87,000 prison beds in the United States and internationally.

The GEO Group owns and operates the Aurora Detention Facility for the U.S. Immigrations and Customs Enforcement to hold people in the country illegally. GEO also operates the Southern Peaks Regional Treatment Center in Cañon City, a youth residential center with a capacity of 160. This center treats people age 10-21 with behavioral and mental health issues, along with drug and alcohol abuse.

In all, GEO is responsible for 2,918 prison and treatment center beds in the state.

Based in New Jersey, CEC has six operations in Colorado, including two in El Paso County, the Cheyenne Mountain Re-entry Center and Community Alternatives of El Paso County. Collectively, they house 970 prisoners preparing to be released to the public.

1 COMMENT

  1. Steven Shepard

    It is disgusting and shameful that the USA has the largest prison population in the world. One big reason this country is turning into a prison state is because corporations are making money off the oppression and incarceration of American citizens. How or why US citizens allow and condone this is a true mystery. We should be storming these institutions like the French did the Bastille. Someday.