Michigan’s Prison Costs And What To Do About Them

(The following column was written for the January 2003 Michigan Information Research Service newsletter)

Michigan’s Department of Corrections spends more than $1.6 billion a year, consuming at least 17 percent of the state’s general fund revenues — about double what the Department spent barely a decade ago. The state’s prison population, now almost 50,000 inmates, rose by more than 40 percent since the early 1990s, and that doesn’t include another 67,000 offenders on probation and parole. Something has to be done to get these numbers under control, a fact only accentuated by the current budget crisis.

One way to reduce corrections costs is to relax some mandatory minimum sentences and bans on early parole. As the Detroit Free Press argued in a special series in early 2002 (https://www.freep.com/voices/columnists/issues2002.htm), "Mandatory minimum sentences for drug offenders take away judicial discretion and, in some cases, lock up potentially productive young men for life." Recently, the Legislature and Governor Engler did the right thing by reforming the infamous and draconian "650-Lifer law" and restoring more judicial discretion. Rep. Bill McConico should be commended for introducing legislation last fall (signed by Governor Engler in late December) that went even further and put flexible sentencing in place of Michigan’s harmful mandatory minimums.

The Legislature should also offer more alternatives to prison for nonviolent offenders. Certain education and vocational programs, because they reduce recidivism, can be expanded — especially successful programs like Prison Build, in which inmates learn construction skills by building houses for low-income people.

States all across the country have been grappling with how to operate their respective prison systems as efficiently and effectively as possible. One option that has been growing in popularity is prison privatization. In states as diverse as Texas, Tennessee, and to a limited extent even in Michigan, private firms have been used to lower the cost of running corrections systems. This is a trend that should be explored further in Michigan as taxpayers, state officials, and prisoners themselves have not yet fully benefited from outsourcing prison management.

The Michigan Department of Corrections (MDOC) is responsible for administering criminal penalties to 117,700 individuals who have been convicted of some crime under Michigan law. It does this by operating 42 prisons and 11 camps and by monitoring parolees at "half-way" houses, through electronic tethering, (where prisoners wear an electronic ankle bracelet and are monitored by officials from a distance) and by intergovernmental contacting. With respect to intergovernmental contracting, the state actually contracts with counties to house certain inmates. Indeed, in Fiscal Year 2001, the state of Michigan paid more than $17 million to house some 4,700 prisoners in county jails rather than house them in the state’s own prisons. Operating a department of this magnitude is not an inexpensive proposition. MDOC requires nearly 19,000 employees — half of which are guards — and $1.7 billion to operate annually.

One way the state of Michigan has sought to reduce the cost of the overall corrections system was by contracting with a private firm, Wackenhut Corrections Corporation, to build and operate a single correctional facility in Baldwin. Opened in 1999, the Michigan Youth Correctional Facility has space for 450 men under the age of 20. The MDOC estimates that it saves between $6,975 and $19,125 per day based on comparisons it makes with similar state-run prisons.

These savings are not uncommon. In an analysis of 28 studies of prison privatization it was found that virtually all the studies concluded that private prisons save money — typically between five and fifteen percent over the cost of government prisons. In addition, a May 2002 article published by the Harvard Law Review references three recent studies in particular that found cost savings from 3.75 percent to 14 percent with no decrease in the quality of services. One of those studies found that private prison construction costs in Florida were 24 percent lower than they would have been had the state built their own facilities instead. The full study, by Alexander Volokh, can be accessed at http://kuznets.fas.harvard.edu/~volokh/prisons.html.

Cost savings, while impressive, are not the only reason that units of government adopt privatization for building and/or operating correctional facilities. Other reasons include:

1. It reduces overcrowding. Privately constructed and operated prisons allow governments to get increased capacity quicker. Private firms in Pennsylvania, for example, built a prison in two years less than it took the state to build a similar prison nearby — and for $38 million less — while saving the county in which it was built $1.5 million annually in lower debt costs. In Houston a new Immigration and Naturalization Service facility was expected to cost $26,000 per bed and take 30 months through normal government construction procedures. A private firm did the job for $14,000 per bed and in less than six months.

2. It improves quality. States need not sacrifice quality when they use contractors. A review of 18 prison quality studies by the Reason Foundation in 2002 found that 16 of them performed at least as well as government-run prisons. By some measures the private prisons do better. While only 10 percent of the country’s 48,000 government prison facilities are accredited by the American Corrections Association (ACA), an impressive 44 percent of privately run facilities are accredited. The ACA is a private, nonprofit group that, in-part, as a private regulatory body. In order to earn ACA’s accreditation, which is the corrections equivalent of the "Good Housekeeping" seal of approval, a prison must meet performance guidelines established by ACA.
   
   If this weren’t compelling enough, the Harvard Law Review also looked at studies of public and private prisons to determine if the quality of prison services suffered when they were delivered privately. According to the authors, ". . . [N]one of the more rigorous studies finds quality at private prisons lower than quality at public prisons on average, and most find private prisons outscoring public prisons on most quality indicators"; and

3. It allows prisons to obtain innovative new system designs and technologies. Private firms can offer states more flexibility in planning and designing prisons and prison operations. An outsider who brings a different set of expectations and important incentives — profit for example — can introduce innovative ideas to old bureaucratic practices. For instance, a private prison administrator discovered, for example, that the Virginia Department of Corrections maintained expensive warehouses for food out of fear that deliveries would not reach prisons. This was a long-standing custom begun when food was delivered to prisons by pack mules. The system simply had no reason to change until a private firm was hired to save the state money. Meanwhile, private prisons in Florida have introduced new designs and increased use of technology, such as more advanced locking systems and a greater use of camera surveillance.

In Michigan there is one single, large example of prison privatization to which we can point as an example of successful prison privatization. Other states have done much more and with great success. In New Mexico 44 percent of state and federal inmates are housed in facilities under private management. In Oregon 43 percent of inmates are under private management. In Michigan, only 0.9 percent of all state inmates are incarcerated under a private management system. Clearly, Michigan would not be alone among states if it chose to expand the role of outsourcing in its prison system.

No state in the union has succeeded in privatizing the management of its entire correctional system, but that does not mean that states could not or should not. In 1998 the state of Tennessee came close to being the first but moved away from such an arrangement due to political pressure, not because it wouldn’t save money or was too technically challenging. Tennessee expected to save more than 22 percent annually — or $100 million — by contracting with Corrections Corporation of America (CCA), a private, for-profit prison management business. If CCA could shave just 20 percent from Michigan’s corrections budget the state would see annual savings of $340 million.

Tough times call for tough decisions. Will legislators choose to cut state spending or will they increase the tax burden on Michigan citizens? If they choose the former, outsourcing management of at least part of the state’s enormous criminal justice system could save taxpayers millions of dollars while simultaneously improving services.

(Mr. Reed, president of the Mackinac Center for Public Policy, would like to acknowledge and thank Mackinac Center scholars John R. LaPlante and Michael D. LaFaive for their research assistance in preparing this essay.)