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How Much Money Do Private Prisons Make Per Inmate?

The private prison industry has grown significantly in the United States over the past few decades. As of 2019, 8.2% of prisoners in the U.S. were housed in private prisons run by for-profit companies like CoreCivic and GEO Group. This amounts to around 116,000 inmates in private facilities.

A major criticism of private prisons is that they incentivize mass incarceration by profiting off keeping more people behind bars. So how much money do private prison companies actually make per inmate? Let’s take a closer look at the economics behind the private prison industry.

The Costs of Housing Inmates

The amount of money private prisons receive per inmate varies based on the contract with the government. Most contracts are structured as per diems, which are daily rates paid to the prison company per inmate.

According to a 2021 report by the Sentencing Project, the average per diem rate paid to house an inmate in a private state prison is $60.79. For private federal facilities, the average per diem is slightly higher at $67.08.

These per diem rates must cover all costs associated with housing inmates, including:

  • Facility operations and maintenance
  • Staff wages and benefits
  • Food and supplies
  • Medical care
  • Programming and education
  • Security and monitoring
  • Utilities
  • Administrative expenses
  • Profit margin

To put these numbers in perspective, the Vera Institute of Justice estimates that the average cost to house an inmate in a public state prison is around $85 per day. Private prisons are able to operate at lower costs partly through lower staffing levels.

How Much Revenue Do Private Prisons Generate?

Multiplying the average per diem rates by the number of inmates housed shows how much revenue private prison companies are bringing in.

For example, CoreCivic reported total revenue of $1.9 billion in 2019. With around 65,000 inmates in CoreCivic facilities that year, the company generated approximately $105 per inmate per day in revenue on average.

Meanwhile, GEO Group had total revenue of $2.48 billion in 2019 while housing 49,000 inmates. This equates to average revenue of $141 per inmate per day.

These back-of-the-envelope calculations provide a rough estimate of the revenues flowing to major private prison operators per inmate. The actual amount varies based on factors like security levels, facility sizes and locations, contract structures, and occupancy rates.

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How Much Profit Do Private Prisons Make?

To determine how much private prisons profit off inmates, we need to look at net income after subtracting operating expenses.

GEO Group reported $174 million in net income in 2019. Across its average inmate population of 49,000, this works out to profits of around $9 per inmate per day.

CoreCivic had $188 million in net income in 2019. Spread across its average population of 65,000 inmates, CoreCivic made approximately $6 per inmate per day in profit.

Based on these top two companies, private prisons generate between $6-9 in profits per inmate daily. The exact number fluctuates year to year.

Critics argue these business models depend on keeping a steady or increasing number of inmates to maintain profits. However, private prison operators counter that they do not determine criminal justice policies and merely provide contracted bed space.

Political Influence and Lobbying

While private prison companies may not directly control incarceration rates, they do invest significant resources into political lobbying and influence.

An analysis by the Justice Policy Institute found that GEO Group and CoreCivic spent a combined $25 million on lobbying and political contributions at the state and federal level from 2001 to 2018.

Some of the policies private prison companies have lobbied for include immigration detention expansion, harsher criminal sentences, prison privatization, and “tough-on-crime” bills that increase incarceration.

Having significant capital to spend on lobbying provides private prison operators indirect means to shape criminal justice policies that fuel their bottom lines.

Trends in Incarceration Rates

Looking at historical data provides mixed evidence around whether private prisons increase incarceration rates.

Between 2000 and 2016, the number of inmates in private prisons increased five times faster than the overall prison population. This disproportionate growth aligned with private prison companies’ financial interests.

However, from 2016 to 2019, inmate populations in both public and private prisons declined. The private prison population shrank somewhat faster than public prisons during those years.

So while the earlier spike in private prison growth is concerning, the past few years reflect broader trends of declining incarceration that private companies have limited control over.

More research is needed to fully understand the complex relationship between the existence of private prisons and national incarceration rate trends over time.

Alternatives to Private Prisons

Due to human rights, cost, and lobbying concerns, some advocate abolishing private prisons altogether. Between 2016 and 2019, five states passed legislation to ban private prison contracting.

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However, eliminating private prisons without broader criminal justice reform may just shift costs back to overcrowded public facilities. Wider solutions could include:

  • Sentencing reform – Reducing mandatory minimums and enabling earlier parole could lower overall incarceration.
  • Justice reinvestment – Redirecting prison spending into rehabilitation and re-entry programs to reduce recidivism.
  • Drug policy reform – Decriminalizing certain offenses and promoting treatment instead of incarceration.
  • Mental health and homelessness support – Investing in social services to address underlying issues that contribute to incarceration.

Phasing out private prisons should happen alongside making the overall justice system more humane, equitable and rehabilitative in focus.

Key Takeaways

Some key points about the economics of private prisons:

  • Private prisons receive around $60-67 per inmate per day from government contracts.
  • Major companies like GEO Group and CoreCivic generate $6-9 in profits per inmate daily.
  • Lobbying by private prison companies aims to shape policies leading to higher incarceration rates.
  • Simply eliminating private prisons does not address wider issues like overcriminalization and lack of rehabilitation.
  • Along with private prison bans, broader criminal justice reforms are needed to change incarceration incentives.

There are still open questions around private prisons’ impacts on justice policies and outcomes. But the numbers illustrate how these companies benefit from economies of scale in managing inmate populations.

Frequently Asked Questions about Private Prisons

Here are answers to 5 common questions about the private prison industry:

When did private prisons first emerge in the US?

The first modern private prison in the US was the Immigration and Naturalization Service Processing Center, which opened in 1984 in Houston, Texas. The Corrections Corporation of America (now CoreCivic) operated this detention center for immigrants awaiting hearings or deportation.

Private prisons expanded through the 1980s and 1990s with the “tough-on-crime” movement and “War on Drugs” policies driving incarceration rates up. The industry grew both through federal immigration contracts and state-level prison management deals.

How do private prison contracts work? Are they subject to transparency laws?

Private prison companies sign contracts with federal, state, and local governments to house inmates in their facilities for a negotiated per diem rate. These contracts are often long-term, such as 10 years, with options for renewal.

The contracts have historically not been very transparent. But growing public scrutiny has led more jurisdictions to pass laws requiring open contracting processes and public disclosure of terms. This enables better oversight into how taxpayer dollars are being used.

Do private prisons perform better or worse than public prisons?

Multiple studies have compared performance indicators like safety, security, recidivism rates, and facility conditions. The findings are mixed, with some studies showing private prisons performing somewhat worse on safety and recidivism.

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However, drawing direct comparisons is complicated by differences in inmate populations, facilities, and reporting standards. Some research suggests the lower costs of private prisons may come at the expense of quality and rehabilitation spending.

Are private prisons subject to Freedom of Information laws?

Most states have Freedom of Information Act (FOIA) or public records laws allowing the public to request information from government entities. However, because private prison companies are not technically government agencies, they have argued they should be exempt from releasing records.

Some states have clarified that private contractors must comply with transparency laws, especially when performing essential government functions like incarceration. But there are still gaps in the public oversight and accountability of private prisons compared to public ones.

How profitable are major private prison companies compared to other industries?

While private prisons generate millions in profits from incarcerating inmates, their profit margins are lower compared to other industries. GEO Group and CoreCivic have net profit margins around 10%, below the S&P 500 average profit margin of 13%.

Their business models have attracted controversy more due to moral issues around profiting from incarceration compared to generating outsized returns. However, opponents argue any profits are unacceptable when depriving humans of liberty.

Conclusion

The rise of private prisons over the past few decades has fundamentally changed the incarceration landscape in the United States. Driven by promises of lower costs, private prison companies now hold over 100,000 inmates in facilities across the country.

Yet as their revenues and political influence grew, so did public unease about the ethics and oversight of profiting off prisoners. Private facilities face allegations of skimping on rehabilitation programs, healthcare, and safety to squeeze higher profits from their per diem contracts.

Banning private prisons altogether is challenging when systemic issues plague the wider justice system. Holistic reforms to sentencing, diversion programs, and mental health support are needed to reduce incarceration demand.

Nonetheless, the prison industrial complex incentivizes maintaining “tough-on-crime” policies that sustain inmate counts. The question of whether private prisons worsen these drivers remains disputed. But their financial incentives to lobby for harsher laws certainly raise conflict of interest concerns.

The complicated ties between private profits and public policy show the need for more transparency in prison contracting. And ultimately, reducing reliance on incarceration itself is needed to align justice systems with rehabilitation instead of retaliation. This requires looking critically at the roles public and private prisons play in society.

Prison Inside Team

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Welcome to ‘Prison Inside,’ a blog dedicated to shedding light on the often hidden and misunderstood world within correctional facilities. Through firsthand accounts, personal narratives, and insightful reflections, we delve into the lives of those who find themselves behind bars, offering a unique perspective on the challenges, triumphs, and transformations that unfold within the confines of these walls.

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