Report Finds Two-Thirds of Private Prison Contracts Include “Lockup Quotas”

by Joe Watson

An analysis of private prison contracts from across the United States reveals that state and local governments commonly enter into agreements that require them to keep prisons filled or pay for unused, empty beds.

In the Public Interest (ITPI), a Washington, D.C.-based research and policy group on public services, reported in September 2013 that it found so-called bed guarantees in around 65% of the more than 60 private prison contracts it analyzed, including contracts from Texas, Ohio, Colorado and Florida. The bed guarantees, or “lockup quotas,” ranged from 70% minimum occupancy in at least one California facility to 100% occupancy at three Arizona prisons. The most common bed guarantee was 90%.

Public officials who agree to lockup quotas, according to corrections experts, become obligated – against their communities’ best interests – to keep prisons filled to ensure that taxpayer dollars aren’t being wasted.

“It’s really shortsighted public policy to do anything that ties the hands of the state,” said Michele Deitch, a senior lecturer at the University of Texas School of Public Affairs and an expert on private prisons. “If there are these incentives to keep the private prisons full, then it is reducing the likelihood that states will adopt strategies to reduce prison costs by keeping more people out.”

To illustrate the impact of private prison bed guarantees, ITPI cited the contract between Utah-based Management and Training Corporation (MTC), which runs a state prison complex in Kingman, Arizona, and the Arizona Department of Corrections (ADC).

In July 2010, three prisoners escaped from the Kingman facility, leading authorities on a two-week, multi-state manhunt that ended only after the escapees had brutally murdered an Oklahoma couple as they were driving through New Mexico. In the aftermath, the ADC found gross mismanagement at the Kingman prison complex, including malfunctioning alarms and other serious security breaches. [See: PLN, March 2011, p.24].

ADC Director Charles Ryan ordered over 200 “high-risk” prisoners removed from the Kingman complex, stopped sending new prisoners to the facility for nearly a year while MTC addressed security lapses and refused to honor the state’s contract with the company, which included a 97% bed guarantee.

In January 2011, MTC filed a claim against the ADC for failing to meet its contractual obligations related to the lockup quota, asking for almost $10 million to cover the company’s losses under the bed guarantee. State prison officials relented, agreed to honor the 97% quota beginning May 1, 2011 (although the empty beds were not filled by then) and paid MTC $3 million in damages.

MTC is also contracted to operate a prison complex in Marana, Arizona with a 100% bed guarantee. Two other prisons, operated by GEO Group in Phoenix and Florence, Arizona, have 100% lockup quotas, too.

“Why do we promise a corporation that they will be paid, with taxpayer funds, even for prisoners they don’t house?” asked PLN managing editor Alex Friedmann, who contributed to the ITPI report. “I can think of no other comparable context where the government pays private contractors for services they do not perform.”

According to MTC spokesman Issa Arnita, lockup quotas allow them to give better rates to government agencies due to the “stability” it provides to private prison operators, which then don’t have to worry about empty beds and the potential losses they would incur.

But since 2008, when the ADC agreed to 100% lockup quotas with MTC and GEO, the per-prisoner, per-diem rates at the three private prisons in Marana, Florence and Phoenix have increased by an average of nearly 14%. So much for stability and better rates.

Steve Owen, spokesman for Corrections Corporation of America (CCA), the country’s largest for-profit prison firm, said corrections agencies sometimes request the lockup quotas to ensure the company won’t sell the bed space to another agency.

“This helps them ensure that they have the space they need to safely and effectively house inmates,” Owen stated.

The only things lockup quotas ensure, Friedmann countered, are profit margins for private prison companies. “The state must pay for unfilled beds below the minimum bed guarantee level but there is no financial downside or penalty for the contractor,” he noted.

To avoid the “broad, negative implications” of lockup quotas, ITPI recommended that local and state governments “should reject bed guarantee clauses” and, instead, adopt contract language that pays private prison operators “on the actual daily count of the number of inmates housed in a facility.”

“When entering [into] a contract to operate a prison, a private company should be required to take on some risk. If the company fails to perform well, a bed guarantee clause should not serve as the company’s financial safety net,” the ITPI report concluded. “In many cases, private prison beds were intended to be a safety valve to address demand that exceeded public capacity. It was never intended that taxpayers would be the safety valve to ensure private prison companies’ profits.”

Another way to address private prison bed guarantees is to make the public and public officials aware of them. Following the release of the ITPI report, the Tennessean newspaper in Nashville, Tennessee reported that taxpayers had paid $487,917.27 for empty beds at the CCA-operated Metro-Davidson County Detention Facility, under a contractual 90% bed guarantee for female prisoners. When the contract with CCA was renewed in February 2015, the lockup quota was removed.

Sources: “Criminal: How Lockup Quotas and Low-Crime Taxes Guarantee Profits for Private Prison Companies,” In the Public Interest (September 2013); www.inthepublicinterest.org; www.huffingtonpost.com; Tennessean

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