To a state grappling with crowded prisons and a ballooning crime rate, it was an irresistible offer: Farm out management of Florida prisons to for-profit corporations.
Efficiency, not bureaucracy, would be the new normal.
Taxpayers would reap millions in savings.
Two decades later, it’s the prison companies hitting the jackpot.
As for taxpayers, the state has failed to lock in savings.
Its calculations distort the bottom line, The Palm Beach Post found. Strip away the contrived formula, and politicians’ promises of 7 percent savings vanish: A Post analysis of three years of prison costs show three of six adult private prisons saved no money at all. Another fell short of 7 percent.
State law ensures private prisons will be paid as if they’re 90 percent full, even if they’re not. Contracts steer the cheapest prisoners to the private companies, leaving the state holding the tab for the sickest, the seriously mentally ill and the most violent. And a watchdog panel designed to make sure taxpayers get the best possible deal hasn’t met since 2005.
“The savings are a fiction,” said Jim McDonough, a Jeb Bush-era director of Florida’s Department of Corrections.
The new math
Certainly Florida’s own figures suggest it is saving big bucks.
This year, state auditors concluded one private prison saved the state as much as 24 percent compared with a public prison. Savings at another prison topped 12 percent. And Boca Raton-based industry giant GEO Group Inc. received the Governor’s Savings Award last December.
“Public-private partnerships in Florida have achieved significant cost savings for taxpayers,” GEO spokesman Pablo Paez said.
Florida’s two other prison management companies, Corrections Corporation of America and Management & Training Corp., echo that statement.
But the rosy figures fade under scrutiny.
“The cost analysis is, in my opinion, flawed,” said Jack Miles. Miles would be in a position to know. As former head of the Department of Management Services, his agency oversees the contracts for private prisons.
Miles quickly grew frustrated with trying to nail down whether the contracts benefited taxpayers. His conclusion: “People who don’t know a lot about procurement came up with the process to do it, probably impacted by lobbyists and people in the business.”
That state formula for calculating savings is anything but straightforward.
It starts with bidding. Florida does not calculate the cost of running a private prison and then invite companies to beat it.
Instead, it determines the costs of running a comparable public prison, a hard-to-determine distinction. It then requires operators to beat that cost by at least 7 percent. If they do, they can bid on the private contract.
But the state calculation typically inflates the public prison costs. That’s because the public prison is almost always assigned costs for programming it doesn’t provide.
Take state-run New River Correctional. At one point, it cost the state 96 cents per prisoner, per day for education programs. It cost a nickel a day for substance abuse programs.
The private prison it was being compared with, though, was going to spend an estimated $3.09 on education and 64 cents on substance abuse programs. That’s because state pays more for programs at private prisons than at public prisons.
So the state added those higher private prison costs to New River’s average daily expenses — even though the public prison didn’t provide that level of programming.
It was a phantom cost: It didn’t exist, except on paper.
These adjustments are meant to give the two prisons roughly the same cost profile so that they can be fairly compared.
But when the math is finished, public prisons almost always appear pricier to run than they actually are. And that makes it easier for a private prison operator to undercut the state’s artifically inflated costs by 7 percent and still make a profit.
“You can make those numbers show anything you want them to,” said Paula Dockery, the former GOP Lakeland senator who helped defeat the Legislature’s 2012 push to privatize most South Florida prisons, work camps and work release centers.
Absent the elaborate adjustments, savings from most private prisons evaporate.
The Post examined the unadjusted costs of running private and public prisons, produced annually by the state Department of Corrections. Using 2009 to 2012 numbers, four of Florida’s six adult prisons failed to generate savings of at least 7 percent. A seventh prison for young adults was not included because there was not a public comparison prison.
Take CCA-run Bay and Moore Haven prisons, both compared with state-run New River. Both should have beaten New River’s daily per-prisoner cost of $44.36.
They didn’t. In 2009-‘10, Bay cost $50.31 to run; Moore Haven, $48.38.
The shortfall was especially dramatic at South Bay, the GEO-run prison in western Palm Beach County. In 2011-‘12, the daily per-prisoner cost was $50.42.
At South Bay’s public twin, Okeechobee, daily costs were almost half that: $33.23.
It was a pattern: In the previous two years, Okeechobee was 27 percent cheaper than South Bay.
Graceville, then a CCA-run prison, was cheaper than its comparison public prison in every year. However, those savings never topped 6 percent.
The state stands by its methodology and says doing the math without adjustments is unfair. “This is not an accurate way to determine if the private prisons are saving money,” spokeswoman Jessica Cary said. “Without the adjustments there are no comparisons.”
No new way found
Right from the start, state auditors trying to figure out whether a private prison was cheaper than a public prison “just had monumental problems with credible arithmetic,” said Charles Thomas, a retired University of Florida professor who had a major role in drafting Florida’s 1993 private prison law.
After years of struggling, the Legislature in 2001 created a formal working group to come up with a better way.
Originally required to meet every year, the only records the state could produce show the Prison Per Diem Working Group met just twice.
And then lawmakers quietly put the brakes on, allowing the panel to convene only if the Senate president or House speaker called for a meeting.
They haven’t done so since 2005.
Yet in the following eight years, the state paid private prison firms hundreds of millions of dollars, all without the working group’s input.
No state agency monitors the contracts on a yearly basis to enforce 7 percent savings. Evaluations come when a contract is up for renewal and typically examine two years of a three-year contract.
In fact, the law doesn’t require actual savings at all, only that companies show they can provide savings before a contract is signed. When they don’t deliver, their contracts aren’t extended, but there are no fines and they can rebid for the same contract.
And while private prisons frequently post double-digit savings using the state formula, not all do and not in all years. In 2011-‘12, for instance, Moore Haven delivered savings of less than 1 percent. Bay’s totaled 5.4 percent.
Apples to fish?
Just selecting which public prison will be compared to a private prison can skew costs.
Critics argue that lining them up fairly is not possible.
“An apples-to-fish comparison,” wrote Ken Kopzynski, who has lobbied on behalf of Florida corrections officers and serves as executive director of the Private Corrections Working Group.
“Finding a truly comparable public prison is a complex and ultimately impossible goal,” concluded a 2010 study from the Florida Center for Fiscal and Economic Policy.
Given the flawed process, the study concluded, “There is no compelling evidence that the privatization of prisons has actually resulted in savings.”
It’s a familiar refrain.
In 1995, the same year Florida’s first private prison contract was signed, and again in 1997, state auditors warned that comparing prisons was dicey.
They haven’t backed away from that position since.
In 2010, auditors held up the example of privately managed Gadsden prison. Gadsden is compared to state-run Lowell Correctional, both women’s prisons.
At first blush, auditors agreed, Gadsden’s savings were spectacular: 28 percent below Lowell.
But, they wrote, Lowell pays for specialized and pricey health care services, including care for very sick inmates. Gadsden doesn’t.
The result, they concluded, is that Gadsden’s reported savings were “artificially high.”
It’s not just one prison.
In 2010, state-run Wakulla prison was compared with CCA-run Graceville. Graceville has one facility. Wakulla has three: a work camp, an annex and a prison, and so three perimeters to be manned, three control rooms and three sets of supervisors.
In the Panhandle, privately run Blackwater River prison is millions of dollars cheaper to run than Apalachee, its comparison prison.
Newer prisons are almost always cheaper to operate, though. Apalachee opened in 1949 and hasn’t had major new construction since 2000. Blackwater is just 3 years old.
DOC acknowledges the challenge in drawing up accurate comparisons and emphasizes that the state is getting progressively better at fine-tuning adjustments.
Even so, in an internal email, the department’s director of institutions wrote in 2012 that, “identifying exact comparison facilities is not possible.”
Further, state contracts typically give private operators the opportunity to transfer inmates who are too sick, too problematic or too mentally disturbed — the costliest prisoners.
When that happens, private prisons get cheaper, and state prisons get more expensive.
DOC, not private prison operators, gets final say over where a prisoner will be housed.
But five of the six contracts for adult private prisons outline the suggested number of chronically ill inmates . In every case, the number is small — or nonexistent.
The results are predictable: Between about 2006-2008, the state shelled out $15.9 million for inmate health care at two public prisons vs. $6.9 million for health care at comparable private prisons.
“It’s the very nature of state prisons that they have to incarcerate everyone: Death Row inmates, juveniles, women prisoners, prisoners with severe mental and medical conditions, paraplegic inmates, inmates needing dialysis and inmates with cancer,” said Alex Friedmann, an ex-convict and associate director of the nonprofit Human Rights Defense Center.
As a result, “costs are skewed upward in the state system and skewed downward in private prisons,” he said.
Hard-to-handle inmates are also more expensive. Inmates classified as close custody, for instance, have to be in leg irons and accompanied by guards when moved off prison grounds for work details.
In 2010, a few months before the Legislature made its first attempt to privatize most South Florida prisons, DOC took a step virtually guaranteeing prisoners in the region would be cheaper to house.
It began moving more than 350 close custody inmates, including mentally ill prisoners, to a North Florida prison.
State prison officials said the North Florida prison was better suited for the prisoners than an aging South Florida facility.
Still, “There’s no question that the wholesale transfer of hard-core inmates out of the south was leaving the cream puffs for the private industry,” said Michael Hallet, a professor of criminology at the University of North Florida.
Public prisons aren’t always left with the toughest customers. Blackwater had significantly more close-custody inmates than state-run Apalachee on Jan. 31.
But Blackwater saves money in other ways.
Lawmakers believed the $110 million-plus prison was built to handle special needs inmates, including those with serious mental illnesses. Internal emails obtained by The Post show that fully 70 percent of Blackwater’s inmates were expected to need regular psychiatric care or medication.
Such prisoners quickly inflate costs, said McDonough, who cites the case of one extremely sick inmate. “If you left him alone for even a minute, he would mutilate himself in horrific ways.”
The warden finally assigned a corrections officer to watch the inmate 24 hours a day, a “major expense,” said the former prisons chief. “But we had to do it.”
However, in a series of behind-the-scenes talks with GEO, state officials eventually agreed Blackwater would accept only inmates with mild mental illnesses and only those in relatively good physical health.
Elva McCraig, a retired nurse who worked at the state-run neighboring Santa Rosa Correctional, recalls getting a stream of inmates transferred out of Blackwater, even those who were mildly ill. “They would send us people who just had asthma,” she recalled.
Blackwater had been filled “with the best possible group of inmates,” a state corrections official wrote in a 2011 email.
Today, Blackwater does have large numbers of inmates diagnosed with mild mental illness, according to DOC figures. But as of Jan. 31, it had no inmates who needed ongoing psychiatric care.
By contrast, Apalachee housed 482 inmates diagnosed with chronic mental illnesses.
“To save is of course easier when you have an easier group to handle,” McDonough said.
Comparing one prison to another isn’t the only way to calculate savings. In fact, there is no shortage of ideas on how to approach private prison deals. Mississippi, for example, analyzes savings yearly, not every three years. Some states are less focused on savings and more focused on expanding educational programs, key to lowering recidivism.
Carlos Lacasa, House appropriations chair in 2001, recalls considering whether the state would be better off with a simpler process: Figure out the cost of running a prison and invite companies to beat it.
“It raised the ire of a great many people in the industry,” he said. “They could not make the numbers work.”
Staff researchers Niels Heimeriks and Michelle Quigley contributed to this story.
THE PRIVATE PRISON SERIES
In an eight-month investigation, The Post takes an unprecedented look at the private prison giants operating in Florida. For five Sundays, we’ll show you the deals that guarantee profit, how allies in key posts get them done and the patterns of rape, murder and riots behind bars.
Taxpayer savings? Minus a byzantine state formula, most private prisons haven’t saved
Tough-on-crime laws filled prisons: Florida legislators and prison companies both members of group that wrote model legislation
Human rights: Patterns of rape, murder, squalor in lockups staffed by too few, often inexperienced guards
Judge says prison firm lied about guards in Idaho: In Florida, two companies fined over staffing
Who’s watching: Guards have been arrested themselves on charges from welfare fraud to grand-theft auto
The politics: Prison operators dominate behind the scenes: big campaign money, embedded allies and laws that grow prison business
The solution: Why conservatives and liberals agree on sentencing changes
Read more about the cases in annotated source documents
$2.1 billion: Florida’s 2011-2012 prison operations budget
90,850: Number of inmates in public prisons in Florida
10,078: Number of inmates in private prisons in Florida
123: Number of publicly run prisons, work camps and work release centers in Florida as of June 2012
7: Number of privately run prisons in Florida
GEO Group Inc (NYSE: GEO)
Based in Boca Raton
Lockups: 73,000 beds at 100 prisons, jails and detention centers in U.S., Australia, South Africa, United Kingdom.
Revenue: $1.4 billion
Their position: “Public-private partnerships in Florida have achieved significant cost savings for taxpayers.”
Corrections Corporation of America (NYSE: CXW)
Based in Nashville
Lockups: 92,500 beds in 67 correctional and detention centers in 20 states and Washington, D.C.
Revenue: $1.75 billion
Their position: “In Florida, where our company has worked in good faith and strong partnership for nearly two decades, the law requires that partnership prisons save at least 7 percent over comparable public prisons, which we often exceed.”
Management & Training Corp. (private)
Based in Centerville, Utah
Lockups: 30,340 beds in 14 prisons and jails, all in the United States
Revenue: $704 million
Their position: “We have a solid track record of operating safe and secure facilities while providing our customers with savings.”
Source: Most recent company reports, interviews