The Case for Privatizing California's Prisons

They'll cut state costs and save taxpayer dollars.

We all know California is swimming in red ink and facing chronic budget troubles. The state deficit is at least $20 billion—again. Debt levels and overwhelming public pension obligations are unsustainable and, unfortunately, leaders in Sacramento cannot agree on how to tackle these problems. There does seem to be agreement that there isn't a single silver bullet solution to this state of continuous crisis. A great many things are going to have to change for California to solve these problems. And, because of its size and the level of mismanagement, a good place to start is with the corrections system.

The Legislative Analyst's Office found that correctional officers account for one in seven state employees and eat up a disproportionately large 40 percent of state personnel spending. The overcrowded state prisons house 167,000 inmates in a system designed for 84,000. As a result, federal judges have ordered California to release 40,000 inmates. And a federal receiver has taken over control of California's prison health care services due to a class action lawsuit and the poor quality of medical care in the system.

California is spending more than $8 billion on corrections this year, more than 10 percent of the massive state budget. State taxpayers spend about $133 per inmate—every day. Texas, which has the second largest inmate population after California, spends less than one-third of that amount—about $42.50 per inmate per day. One reason Texas spends so much less than California on prisons is its extensive use of public-private partnerships. Since 1989, Texas' annual data shows its cost savings from private prisons have averaged 15 percent a year. During that time, there was not a single year in which government-run prisons matched or were below the private prison costs.

A new Reason Foundation-Howard Jarvis Taxpayers Foundation study finds that modest expansion of California's current use of public-private partnerships in corrections would save taxpayers nearly $2 billion over the next five years. Additionally, more aggressive use of private prisons and contracting out some operations of existing prison facilities would save another $400million to $1.2 billion each year.

The first pivotal step for California is to build upon its successful experience transferring inmates to lower-cost privately operated facilities in other states. Expanding this strategy by sending an additional 25,000 low- to medium-security inmates to such facilities—5,000 per year for five years—would save $120 million the first year and up to $1.8 billion in savings by the end of the fifth year.

Not only are costs lower in private prisons, but the competition they provide helps drive down costs in state-run prisons as well. A study of New Mexico—which contracts out 45 percent of its correctional system—found the state spent $10,000 less per prisoner per year than peer states that had no privately operated correctional facilities. A March 2009 Avondale Partners survey of 30 state correctional agencies, many of which use privately operated correctional facilities, found that contracted prisons cost 28 percent less than state-run facilities.

Public-private partnerships won't solve all of the problems facing California's prison system. Many other facets—from who gets incarcerated to how to reduce recidivism—have to be addressed. But expanded use of out-of-state private prisons would be a good start and provide the impetus for some of the broader changes needed. The savings from public-private prisons can take a real bite out of the state's budget problems. As the saying amongst Sacramento lawmakers goes, $1billion here, $1 billion there, and pretty soon you are talking real money.

Jon Coupal is president of the Howard Jarvis Taxpayers Association and Leonard Gilroy is director of Government Reform at the Reason Foundation. This column first appeared in the Orange County Register and Los Angeles Daily News.