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Lockup Quota Report In the Public Interest 2013

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Criminal

How Lockup Quotas and “Low-Crime Taxes”
ations
Guarantee Profits for Private Prison Corpor

A Publication of In the Public Interest  |  S e pt e m b e r 2 0 1 3

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How Lockup Quotas and “Low-Crime Taxes” Guarantee Profits Guarantee Profits	

Major Findings
£	65 percent of the private prison contracts ITPI received and analyzed included occupancy

guarantees in the form of quotas or required payments for empty prison cells (a “low-crime tax”).
These quotas and low-crime taxes put taxpayers on the hook for guaranteeing profits for private
prison corporations.
£	Occupancy guarantee clauses in private prison contracts range between 80% and 100%, with

90% as the most frequent occupancy guarantee requirement.
£	Arizona, Louisiana, Oklahoma and Virginia are locked in contracts with the highest

occupancy guarantee requirements, with all quotas requiring between 95% and 100% occupancy.

State-specific Findings:
£	Colorado: Though crime has dropped by a third in the past decade, an occupancy requirement

covering three for-profit prisons has forced taxpayers to pay an additional $2 million.
£	Arizona: Three Arizona for-profit prison contracts have a staggering 100% quota, even though a

2012 analysis from Tucson Citizen shows that the company’s per-day charge for each prisoner has
increased an average of 13.9% over the life of the contracts.
£	Ohio: A 20-year deal to privately operate the Lake Erie Correctional Institution includes a 90% quota,

and has contributed to cutting corners on safety, including overcrowding, areas without secure doors
and an increase in crime both inside the prison and the surrounding community.

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How Lockup Quotas and “Low-Crime Taxes” Guarantee Profits Guarantee Profits	

Introduction

I

n 2012, Corrections Corporation of America (CCA), the largest for-profit private prison company in the
country, sent a letter to 48 state governors offering to buy their public prisons. CCA offered to buy and operate a state’s
prison in exchange for a 20-year contract, which would include a 90 percent occupancy rate guarantee for the entire

term.1 Essentially, the state would have to guarantee that its prison would be 90 percent filled for the next 20 years (a
quota), or pay the company for unused prison beds if the number of inmates dipped below 90 percent capacity at any
point during the contract term (a “low-crime tax” that essentially penalizes taxpayers when prison incarceration rates fall).
Fortunately, no state took CCA up on its outrageous offer. But many private prison companies have been successful at
inserting occupancy guarantee provisions into prison privatization contracts, requiring states to maintain high occupancy
levels in their private prisons.
For example, three privately-run prisons in Arizona are governed by contracts that contain 100 percent inmate quotas.2
The state of Arizona is contractually obligated to keep these prisons filled to 100 percent capacity, or pay the private
company for any unused beds.
These contract clauses incentivize keeping prison beds filled, which runs counter to
many states’ public policy goals of reducing the prison population and increasing
efforts for inmate rehabilitation. When policymakers received the 2012 CCA letter,
some worried the terms of CCA’s offer would encourage criminal justice officials to
seek harsher sentences to maintain the occupancy rates required by a contract.3
Policy decisions should be based on creating and maintaining a just criminal justice
system that protects the public interest, not ensuring corporate profits.
Bed guarantee provisions are also costly for state and local governments. As
examples in the report show, these clauses can force corrections departments
to pay thousands, sometimes millions, for unused beds — a “low-crime tax” that

“You don’t want a prison system
operating with the goal of
maximizing profits…The only
thing worse is that this seeks to
take advantage of some states’

penalizes taxpayers when they achieve what should be a desired goal of lower

troubled financial position.”

incarceration rates. The private prison industry often claims that prison privatization

— Texas state
Sen. John Whitmire
in response to the CCA letter

saves states money. Numerous studies and audits have shown these claims of cost
savings to be illusory4, and bed occupancy requirements are one way that private
prison companies lock in inflated costs after the contract is signed.

	 1	Chris Kirkham, “Private Prison Corporation Offers Cash in Exchange for State Prisons,” Huffington Post, February 14, 2012. http://www.huffingtonpost.
com/2012/02/14/private-prisons-buying-state-prisons_n_1272143.html
	 2	American Friends Service Committee of Arizona, Cell-Out Arizona Exclusive, “Part II: Arizona For-Profit Prison Costs Rose 14%; Now Guarantee 100% Occupancy,”
August 3, 2012. http://tucsoncitizen.com/cell-out-arizona/2012/08/03/cell-out-arizona-exclusive-part-ii-arizona-for-profit-prison-costs-rose14-now-guarantee-100occupancy/
	 3	Kevin Johnson, “Private purchasing of prisons locks in occupancy rates,” March 8, 2012. http://usatoday30.usatoday.com/news/nation/story/2012-03-01/buyingprisons-require-high-occupancy/53402894/1
	 4	A Sept. 2010 report by Arizona’s Office of the Auditor General found that privately-operated prisons housing minimum-security state prisoners actually cost $.33
per diem more than state prisons ($46.81 per diem in state prisons vs. $47.14 in private prisons), while private prisons that house medium-security state prisoners
cost $7.76 per diem more than state facilities ($48.13 per diem in state prisons vs. $55.89 in private prisons), after adjusting for comparable costs. See: http://www.
azauditor.gov/Reports/State_Agencies/Agencies/Corrections_Department_of/Performance/10-08/10-08.pdf

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How Lockup Quotas and “Low-Crime Taxes” Guarantee Profits Guarantee Profits	

This Report
This report will discuss the use of prison bed occupancy guarantee clauses in prison privatization contracts and explore
how bed occupancy guarantees undermine criminal justice policy and democratic, accountable government. Section 1
explains the for-profit private prison industry’s reliance on high prison populations, and how these occupancy guarantee
provisions directly benefit its bottom line. Section 2 discusses the prevalence of bed guarantee clauses, drawing on a
set of contracts that ITPI obtained through state open records requests. Section 3 describes how occupancy guarantees
have harmed states, focusing on the experiences of Arizona, Colorado, and Ohio — three states that have agreed to these
provisions to detrimental consequences. Lastly, Section 4 will discuss our recommendation that governments can and
should reject prison occupancy guarantees.

Section 1:

Why quotas are important to the for-profit private
prison company business model

T

he private prison industry has promoted policies and practices that increase the number of
people who enter and stay in prison. It is no surprise that the two major private prison companies, CCA

and GEO Group, have had a hand in shaping and pushing for criminal justice policies such as mandatory minimum
sentences that favor increased incarceration. In the past, they have supported laws like California’s three-strikes law, and
policies aimed at continuing the War on Drugs.5 More recently, in an

“Historically, we have been
successful in substantially filling
our inventory of available beds

effort to increase the number of detainees in privately-run federal
immigration detention centers, they contributed to legislation, like
Arizona Senate Bill 1070, requiring law enforcement to arrest anyone
who cannot prove they entered the country legally when asked.6 The

and the beds that we have

industry’s reliance on a harsh criminal justice system is summed up in a

constructed. Filling these available

statement from CCA’s 2010 annual report: “The demand for our facilities

beds would provide substantial

and services could be adversely affected by the relaxation of enforcement

growth in revenues, cash flow, and
earnings per share.”
— CCA 2010 Annual Report

efforts, leniency in conviction or parole standards and sentencing practices
or through the decriminalization of certain activities that are currently
proscribed by our criminal laws.”7

	 5	Dina Rasor, “Prison Industries: Don’t Let Society Improve or We Lost Business,” Truthout, April 26, 2013. https://truth-out.org/news/item/8731-prison-industries-dontlet-society-improve-or-we-lose-business-part-i
	 6	Laura Sullivan, “Prison Economics Help Drive Ariz. Immigration Law,” National Public Radio, October 28, 2010. http://www.npr.org/2010/10/28/130833741/prisoneconomics-help-drive-ariz-immigration-law
	 7	CCA’s 2010 Annual Report on Form 10-K

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How Lockup Quotas and “Low-Crime Taxes” Guarantee Profits Guarantee Profits	

These companies also spend large amounts of money to lobby federal and state lawmakers to advance policies that
protect their bottom line and keep pro-privatization lawmakers in office. The Center for Responsive Politics reports that
CCA spent $17.4 million in lobbying expenditures from 2002 through 2012,8 while GEO Group spent $2.5 million from 2004
to 2012.9 Similarly, CCA spent $1.9 million in political contributions from 2003 to 2012,10 and Geo Group spent $2.9 million
during the same time period.11
While the for-profit prison industry works
hard to ensure harsh criminal laws and elect
policymakers that support its agenda, bed
guarantee contract provisions are an even
more direct way that private prison companies
ensure that prison beds are filled. These
companies rely on occupancy guarantee
clauses in government contracts to guarantee
profits and reduce their financial risk, since
the ability of private prison companies to
ensure prison beds are filled generates steady
revenues. These contract requirements are an
important tool in private prison corporations’
efforts to maximize profits. Private prison
companies have negotiated these clauses
in both older existing contracts and newer
amendments. They have even lobbied
lawmakers to impose bed guarantees on
prison facilities, as the below example from
Colorado shows. Private prison companies
make no secret that high occupancy rates are
critical to the success of their business. During
a 2013 first quarter conference call, GEO Group
boasted that the company continues to have
“solid occupancy rates in mid to high 90s.”12
By contractually requiring states to guarantee
payment for a large percentage of prison
beds, the prison companies are able to protect themselves against fluctuations in the prison population. These provisions
guarantee prison companies a consistent and regular revenue stream, insulating them from ordinary business risks.
The financial risks are borne by the public, while the private corporations are guaranteed profits from taxpayer dollars.

	 8	Center for Responsive Politics, http://www.opensecrets.org/lobby/clientsum.php?id=D000021940&year=2002
	 9	Center for Responsive Politics, http://www.opensecrets.org/lobby/clientsum.php?id=D000022003&year=2004
	 10	National Institute on Money in State Politics, http://www.followthemoney.org/database/topcontributor.phtml?u=695&y=0
	 11	National Institute on Money in State Politics, http://www.followthemoney.org/database/topcontributor.phtml?u=1096&y=0
	 12	Nicole Flatow, “Private Prison Profits Skyrocket, As Executives Assure Investors Of ‘Growing Offender Population,’” Think Progress, May 9, 2013. http://thinkprogress.
org/justice/2013/05/09/1990331/private-prison-profits-skyrocket-as-executives-assure-investors-of-growing-offender-population/

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How Lockup Quotas and “Low-Crime Taxes” Guarantee Profits Guarantee Profits	

Section 2:

The Prevalence of Quotas in Contracts

T

o understand the prevalence of prison occupancy guarantee provisions in prison privatization
contracts, In the Public Interest (ITPI) analyzed numerous contracts between states and local jurisdictions and

private prison companies. ITPI identified 77 county and state-level private facilities nationwide and collected and analyzed
62 contracts from these facilities. These contracts each relate to the operation of an individual facility within the state or
locality. The contracts that we collected were either given to us by state-level organizations that already had the contracts
in their possession, or we utilized the open records request process with state and local governments. ITPI is currently
following up with states to collect additional information.
Of the contracts that we reviewed, 41 (65 percent) contained quotas. These occupancy requirements were between 80
percent and 100 percent, with many around 90 percent. The highest bed guarantee requirements were from Arizona,
Louisiana, Oklahoma, and Virginia. As mentioned above, Arizona has three contracts that contain 100 percent occupancy
guarantee clauses. Oklahoma has three contracts with

Occupancy Guarantee Provision

a 98 percent occupancy guarantee provision, while

n	 No clause
n	 95% – 100%
n	 90% – 94%
n	 Below 90%
n	Other

a couple of Louisiana’s contracts contain occupancy
requirements at 96 percent, and Virginia has one at 95
percent. All major prison companies, CCA, GEO Group,
and Management and Training Corporation (MTC),
have been successful in negotiating prison quotas in
contracts.
Interestingly, prison companies have also been
successful at winning bed guarantee promises even
after a contract that contains no such provision is
executed. Many of these bed guarantee clauses were
added after the initial contract was signed, usually
in a contract amendment. This is consistent with the
prison industry’s approach to revenue growth. In CCA’s
2010 Annual Report, the company explicitly cites

“enhancing the terms of our existing contracts” as one of the approaches it uses to develop its business.13 Additionally,
bed guarantee clauses may be imposed completely outside the contracting process. As discussed in more detail in the
next section, CCA was able to insert a bed guarantee requirement for private facilities into the Colorado fiscal year 2013
state budget, completely circumventing the contract amendment process.14 The percentage of facilities that actually have
bed guarantee requirements may be higher than an analysis of their contracts alone indicate.

	 13	CCA’s 2010 Annual Report on Form 10-K, page 10
	 14	Colorado WINS, “Imprisoned by Profit: Breaking Colorado’s Dependency on For-Profit Prisons, February, 27, 2013.
http://coloradowins.org/2013/02/27/imprisoned-by-profit-breaking-colorados-dependence-on-for-profit-prisons/

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How Lockup Quotas and “Low-Crime Taxes” Guarantee Profits Guarantee Profits	

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Section 3:

Impacts of Prison Quotas

B

ed guarantee clauses can have measureable impacts on a state’s criminal justice policy, the state budget,
the functioning of a specific facility, and the community. This section focuses on the experiences of Colorado, Arizona,

and Ohio and describes the specific impacts that bed guarantee clauses have had on their states. All three states have
prison facilities operated by private prison companies with occupancy guarantees in their contracts, and all three states
have suffered detrimental consequences as a result.

Colorado
Colorado has experienced a sizable reduction in its prison population.
In the past decade, the crime rate has dropped by a third, and since
2009, five prisons have been closed. The state projects that two to ten
additional prisons could close in the near future, depending on the size of
the facilities chosen.15 This decrease in prison population propelled CCA,
which operates three private prisons in the state, to take action. Last year,
CCA negotiated the insertion of a bed guarantee provision in the state
budget for all three of its facilities for the 2013 fiscal year. Even though all
three contracts for these facilities include explicit language specifying that
“the state does not guarantee any minimum number of offenders will be
assigned to the contractors’ facility,” the company was able to circumvent the contracting process and mandate occupancy
guarantees long after the contract was negotiated and signed.
In 2012, the state began a utilization study to analyze which facilities made the most sense to close, but did not want
any to shut down any facilities until the formal analysis was complete. In response to these preliminary discussions,
CCA threatened to close one of its private facilities. Behind closed doors and without any public hearings, CCA and the
Governor’s Office and the Joint Budget Committee negotiated a deal.16 In exchange for keeping the facility open, the state
agreed to a bed guarantee, which required Colorado to keep at least 3,300 prisoners in the three CCA facilities, at an annual
rate of $20,000 per inmate for the 2013 fiscal year.17
Instead of using empty bed space in its state-run facilities, the Colorado Department of Corrections housed inmates in
CCA’s facilities to ensure they met the occupancy requirement. Colorado taxpayers must pay for the vacant state prison
beds and for the per diem rate for inmates redirected to the CCA facility to fulfill the bed guarantee.18 The Colorado
Criminal Justice Reform Coalition estimates that the deal cost the state at least $2 million.19 The Colorado Springs Gazette
notes that the figure could be even higher. As of March 2013, the state already had 1,000 empty beds in various state
prisons and that number was projected to increase by almost 100 beds per month.20 Legislators predicted that the inmate
	15	Ann

Imse, “State pays millions as prison populations sink,” Colorado Springs Gazette, March 9, 2013. http://gazette.com/state-pays-millions-as-prison-populations-sink/
article/152065
	16	Ibid.
	17	Ibid.
	 18	Colorado Criminal Justice Reform Coalition, “Prison population update and overview,” December 3, 2012.
	19	Ann Imse, “State pays millions as prison populations sink,” Colorado Springs Gazette, March 9, 2013. http://gazette.com/state-pays-millions-as-prison-populations-sink/
article/152065
	20	Ann Imse, “State pays millions as prison populations sink,” Colorado Springs Gazette, March 9, 2013. http://gazette.com/state-pays-millions-as-prison-populations-sink/
article/152065

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How Lockup Quotas and “Low-Crime Taxes” Guarantee Profits Guarantee Profits	

population would drop between 160 to 1,256 people by June 2013, but by February 2013, the total had already fallen
by 1,700 inmates.21 The occupancy requirement not only ensured that CCA continued to receive a guaranteed level of
revenue each month despite the decrease in inmates, but also had the effect of diverting inmates away from available
public prison beds. Colorado originally intended its private prisons to be used for overflow purposes, but the bed
guarantee provisions allowed it to become the first priority for placement.
The below chart shows how the inmate population in CCA facilities decreased as state prison population also decreased
until 2012, when the CCA inmate population increased, as a result of the bed guarantee deal.

CCA Colorado Total Inmate Population

4,000
3,800
3,600
3,400
3,200
3,000

SEPT
2011

JAN
2012

MAR
2012

JUNE
2012

SEPT
2012

OCT
2012

Source: Colorado Criminal Justice Reform Coalition, CO DOC monthly population reports

Arizona
100% Bed Guarantees at Three Facilities
Private prison companies were successful in inserting the highest
prison bed guarantee into contract amendments for the three oldest
private prison facilities in Arizona: Arizona State Prison – Phoenix West
and Arizona State Prison — Florence West, both operated by the GEO
group; and the Marana Community Correctional Treatment Facility,
operated by Management and Training Corporation (MTC). All three
contracts require the state to fill or compensate the company for every
available bed. The bed guarantee provisions were the result of an
agreement between the Arizona Department of Corrections (ADC) and
the private prison companies in 2008. In this “deal,” the corporations
agreed to lower rates for emergency beds meant to temporarily house
an overflow of prisoners, in exchange for the state accepting a 100 percent occupancy guarantee for all regularly-rated
beds in all three facilities. Even with the addition of the 100 percent bed guarantee clauses, an August 2012 analysis from
Tucson Citizen shows that the per-prisoner, per-day rates for the three facilities have increased by an average of 13.9
percent since the contracts were first awarded. 22
	 21	Ann Imse, “State pays millions as prison populations sink,” Colorado Springs Gazette, March 9, 2013. http://gazette.com/state-pays-millions-as-prison-populationssink/article/152065
	 22	American Friends Service Committee of Arizona, Cell-Out Arizona Exclusive, “Part II: Arizona For-Profit Prison Costs Rose 14%; Now Guarantee 100% Occupancy,”
August 3, 2012. http://tucsoncitizen.com/cell-out-arizona/2012/08/03/cell-out-arizona-exclusive-part-ii-arizona-for-profit-prison-costs-rose14-now-guarantee-100occupancy/

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The details of the contract for the Marana facility reveal an even worse deal for Arizona taxpayers. Amendment 14, signed
in June 2011, refers to a dispute between ADC and private prison company, MTC, in which the company claimed that the
5-year contract renewal was not performed in a timely manner. ADC maintained it was. The settlement for this dispute
included ADC paying the company for 500 beds, including 50 which were identified as reduced-rate emergency beds, at
the full per diem rate with the 100 percent guaranteed occupancy requirement. Incredibly, this agreement was applied
retroactively, effectively erasing all but three months of the reduced rate for the emergency beds. The settlement results in
an additional $2,659,390 in revenue to MTC through the remainder of the contract, which expires in October 2013.23
Despite MTC’s guaranteed revenue, the Marana facility has been plagued by safety problems. In a security review in August
2010, state inspectors found broken security cameras, swamp coolers out of commission, insecure doors and windows on
housing units, inadequate perimeter lighting, and broken control panels that failed to alert staff when inmates opened
exterior doors. When inspectors returned in March 2011 to perform the annual audit, problems persisted, including broken
security cameras and control panels.24

Arizona State Prison — Kingman
The Kingman facility, a prison with a 97 percent
bed guarantee clause, has been troubled with
pervasive safety issues, ultimately leading to
the escape of three prisoners in July 2010 and
the murder of a New Mexico couple. Among the
security issues identified at the MTC-operated
facility that allowed for the escape were: a broken
alarm, burned-out perimeter lights, broken security
equipment, and a lackadaisical approach to safety
by the private prison staff, including ignoring
alarms, leaving their patrol posts, and leaving doors
open and unwatched.25 After the escape, the state
pulled 238 high-risk prisoners out of the facility and
refused to send any additional prisoners to Kingman until MTC fixed the identified problems. It took MTC eleven months to
address the issues, during which time ADC refused to pay the 97 percent bed guarantee. In January 2011, MTC filed a claim
against ADC, complaining about the decrease in profits caused by that that the state’s refusal to cover the empty beds. They
asked for nearly $10 million to cover their losses. In another poor deal for Arizonans, ADC agreed to return to paying the 97
percent rate on May 1, 2011, even though the empty beds would not yet be filled, in exchange for MTC dropping its claim.
ADC ended up paying over $3 million for the empty beds.26

	 23	American Friends Service Committee of Arizona, Cell-Out Arizona Exclusive, “Part II: Arizona For-Profit Prison Costs Rose 14%; Now Guarantee 100% Occupancy,”
August 3, 2012. http://tucsoncitizen.com/cell-out-arizona/2012/08/03/cell-out-arizona-exclusive-part-ii-arizona-for-profit-prison-costs-rose14-now-guarantee-100occupancy/.
	 24	Bob Ortega, “2010 escape at Kingman an issue for MTC’s bid,” The Arizona Republic, August 11, 2011. http://www.azcentral.com/news/articles/2011/08/11/
20110811MTC-bid-issue-2010-escape-at-kingman.html
	 25	Bob Ortega, “Arizona prisons slow to fix flaws in wake of Kingman escape,” The Arizona Republic, June 26, 2011. http://www.azcentral.com/news/articles/2011/06/26/
20110626arizona-prison-safety-improvements.html
	 26	Bob Ortega, “Arizona prison oversight lacking for private facilities: state weighs expansion even as costs run high,” The Arizona Republic, August 7 ,2011. http://www.
azcentral.com/news/articles/20110807arizona-prison-private-oversight.html

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Ohio
Ohio’s experiences with prison privatization are plagued with stories
of mismanagement, violence, and unexpected costs. Though crime
rates in the state have been decreasing, the private prison industry
continues to ensure that prisons remain as full as possible. In both the
Lake Erie Correctional Institution and the North Coast Correctional
Treatment Facility, bed guarantees have helped protect the private
prison industry’s profits.

Lake Erie Correctional Institution
The 2011 sale of the Lake Erie Correctional Institution in Conneaut,
Ohio, to CCA was lauded by the private prison industry as an innovative cost-cutting move that would save the state of
Ohio money, while improving the quality of services provided to inmates. A look at prison operations after the sale tells a
very different story.
Bundled with the sale of the facility was a 20-year contract between the Ohio Department of Rehabilitation and
Correction and CCA for operation of the prison. This contract includes a 90 percent bed guarantee clause, which holds
Ohio, and ultimately its taxpayers, accountable for ensuring that 1,530 of the 1,700 available beds in the prison are
occupied, or for compensating for unused beds. After purchasing the prison, CCA squeezed in an additional 300 beds,
even converting an area where prisoner re-entry classes were held into sleeping space.27 A November 2012 government
audit found that the addition of the 300 beds brought the facility out of compliance with minimum square footage per
inmate requirements.28 The high occupancy requirement, especially when applied to a facility not originally designed for
the additional 300 converted beds, has contributed to overcrowding, and the deplorable conditions and safety issues that
persist in the facility. 29
Multiple examples of unacceptable living conditions are described in a troubling government audit from September
2012.30 The report describes a chronically overcrowded facility, with numerous cases of triple bunking, cramming three
inmates into a cell designed for two, which left inmates sleeping on the floor, some without mattresses. Recreation
areas without secure doors were used for housing inmates and minimum square footage per inmate requirements were
not observed. Numerous other health and safety conditions were noted in the audit as well. The overcrowding and
mismanagement of the Lake Erie Correctional Institution has led to numerous safety issues, including a rise in violent
incidents and disturbances. Both staff and inmates interviewed for the audit reported that personal safety was at risk, and
that “assaults, fights, disturbances, and uses of force have all increased in comparison to prior years.”31 Even the city of
Conneaut has seen increased crime related to the issues at the prison, as drugs and other contraband materials thrown

	 27	Chris Kirkham, “Lake Erie Prison Plagued by Violence and Drugs After Corporate Takeover,” Huffington Post, March 22, 2013. http://www.huffingtonpost.
com/2013/03/22/lake-erie-prison-violence_n_2925151.html
	 28	Ohio Department of Rehabilitation and Correction, 2012 Full Internal Management Audit Report, September 25, 2012. http://www.inthepublicinterest.org/sites/
default/files/prison-audit-report%20OHIO.pdf
	 29	The ACLU Ohio continues to monitor the conditions at the Lake Erie Correctional Institution. In May 2013, they released a timeline chronicling problems at the
facility, which can be found at http://www.acluohio.org/crisis-in-conneaut-timeline.
	 30	Ohio Department of Rehabilitation and Correction, LaECI Audit Reinspection, November 15, 2012. http://big.assets.huffingtonpost.com/ccareinspection.pdf
	 31	Gregory Geisler, Correctional Institution Inspection Committee Report on the Inspection and Evaluation of the Lake Erin Correctional Institution, January 22-23,
2013. http://big.assets.huffingtonpost.com/lakeeriereport.pdf

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over the fence for inmates to retrieve have been reported.32 The occupancy requirement not only creates perverse
incentives to encourage the facility to keep as many “heads in beds,” but does so at the expense of the health and safety of
the inmates and the larger Conneaut community.

North Coast Correctional Treatment Facility
The privatization experiment at the North Coast Correctional Treatment Facility in Grafton, Ohio also suffered as a result
of bed guarantee requirements in its contract. In a 2000 contract between the OHDRC and the private prison company
CiviGenics (now part of private prison company Community Education Centers), a 95 percent bed guarantee risked the
safety of the facility. Originally intended to house primarily drunk-driving offenders, the bed guarantee ensured that even
if the state of Ohio did not convict 665 persons of felony drunk driving offenses, they would pay CiviGenics for that level
of operation in their 700-person facility. In an effort to fill North Coast to 95 percent capacity, the state sent inmates who
had been convicted of more serious crimes, including sexual battery, assault, arson, manslaughter, and robbery, when
it could not fill the facility with drunken-driving offenders.33 The facility, designed to hold only felony drunken-driving
and nonviolent drug offenders, was not properly equipped for these changes in the inmate population, and the facility
suffered from riots, safety problems, and other contract violations, as well as unstable staffing, including four different
people serving as warden.34 Ultimately, the contract was taken from CiviGenics and given to another private prison
company, Management Training Corporation, and later combined with the Grafton Correctional Institution and returned
to public control.
As the three case studies show, these small contract clauses can have enormous ramifications. Bed guarantee clauses
bind the state to pay for beds that they may not need or use at the time of contract signing or at any point in the future.
Some prison contracts last for up to 20 years. It is virtually impossible for states to predict prison population trends for a
few years forward, let alone decades into the future. The state loses flexibility to deal with changing circumstances that a
public facility would afford. Furthermore, states may enact policies or engage in practices that keep prison facilities full,
in an effort to fulfill bed occupancy guarantees. As the Ohio experience above shows, this can lead to facilities holding
more dangerous inmates than they are designed to house. Or prisons may be filled beyond capacity, leaving a facility
overcrowded and a breeding ground for violence. The cities in which these facilities are located may feel the effects of the
increased violence, as drug use and gang activity overtake prisons and seep into the community.
If the state decides not to keep prison beds filled, bed guarantee clauses can wreak havoc on state budgets. Numerous
examples show that these provisions can cost states millions of dollars. At a time when government budgets are
shrinking, cities and states cannot afford the financial risk of prison privatization. In the long-term, governments,
taxpayers, and communities cannot afford the damage that these provisions cause to the very foundations of our criminal
justice system.

	 32	Chris Kirkham, “Lake Erie Prison Plagued by Violence and Drugs After Corporate Takeover,” Huffington Post, March 22, 2013. http://www.huffingtonpost.
com/2013/03/22/lake-erie-prison-violence_n_2925151.html
	 33	 ACLU Ohio, “Prisons for Profit: A Look at Prison Privatization.” http://www.acluohio.org/assets/issues/CriminalJustice/PrisonsForProfit2011_04.pdf
	 34	 Policy Matters Ohio, “Selective Celling: Inmate Population in Ohio’s Private Prisons” May 2001. http://www.policymattersohio.org/selective-celling-inmatepopulation-in-ohios-private-prisons

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How Lockup Quotas and “Low-Crime Taxes” Guarantee Profits Guarantee Profits	 12

Section 4:

Recommendations

B

ed guarantee clauses can have broad negative implications for government entities, even beyond
obvious financial concerns. As discussed in the report., these clauses can result in dangerously unsafe conditions,

and tie the hands of lawmakers and correctional agencies. Our analysis leads to one clear conclusion: bed guarantee
clauses should be prohibited in any private prison contract. We offer the following recommendations on ways to avoid
the pitfalls that come with bed guarantees.

Governments Can and Should Reject Bed Guarantee Clauses
As ITPI’s analysis shows, there are a number of private prison contracts without bed guarantee clauses. In our review of
many Texas private prison contracts, we found that no contract contained a bed guarantee clause. The state’s contracts
with private prisons specifically state that the payment schedule is based on occupancy levels determined by the official
count of the number of inmates who are present at the facility at the end of each day calculated at midnight (what
Texas refers to as the “The Midnight Strength Report”). State and local governments should not agree to bed guarantee
provisions during the initial contract signing or any subsequent amendment. Instead payments to the contractor should
be based on the actual daily count of the number of inmates housed in a facility. Enacting state legislation that prohibits
occupancy guarantee clauses allows the government contracting agency to take the discussion of these provisions out of
the negotiating process, and reject them based on state law.
Prison occupancy quotas require the government to spend public dollars on housing and supervision of a certain
number of inmates, whether a prison is empty or full. With governmental priorities pulling public funds in so many
different directions, it makes no financial sense for taxpayers to fund empty prison beds. From a financial standpoint, bed
guarantee clauses are insupportable for government entities.
Private prison companies often attempt to lure governments into agreements with bed guarantee clauses by promising a
lower per diem cost. However, bed guarantees do not secure jurisdictions lower per diem rates, as evidenced by Arizona’s
experience of per diem rates rising 13.9 percent even after the bed guarantee was added to the contracts.35 With better
understanding of the per diem rates in private prison contracts in similar facilities in other jurisdictions, governments can
negotiate reasonable per diem rates without resorting to bed guarantees.
Bed guarantee clauses can also tie the hands of lawmakers. If lawmakers determine that there are more effective ways of
dealing with specific criminal offenses than prison time, bed guarantee clauses may restrict their options. If lawmakers
pass rules that have the effect of decreasing the prison population, if law enforcement officials take action that results in
a reduced prison population, or if the crime rate simply drops, the government might be responsible for funding empty
prison beds. In the words of Roger Werholtz, former Kansas secretary of corrections, “My concern would be that our state
would be obligated to maintain these (occupancy) rates and subtle pressure would be applied to make sentencing laws
more severe with a clear intent to drive up the population.”36
Furthermore, private corporations interested in running public prisons should be forced to run a competitive business in
	 35	American Friends Service Committee of Arizona, Cell-Out Arizona Exclusive, “Part II: Arizona For-Profit Prison Costs Rose 14%; Now Guarantee 100% Occupancy,”
August 3, 2012. http://tucsoncitizen.com/cell-out-arizona/2012/08/03/cell-out-arizona-exclusive-part-ii-arizona-for-profit-prison-costs-rose14-now-guarantee100-occupancy/
36
	 	Kevin Johnson, “Private purchasing of prisons locks in occupancy rates,” March 8, 2012. http://usatoday30.usatoday.com/news/nation/story/2012-03-01/buyingprisons-require-high-occupancy/53402894/1

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How Lockup Quotas and “Low-Crime Taxes” Guarantee Profits Guarantee Profits	 13

the open market. When entering 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.
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.
Elimination of bed guarantee clauses will allow lawmakers to enact policies that are in the public interest, not in a private
prison corporation’s financial interest. Corrections agencies should not be forced to direct prisoners to certain private
facilities because of bed guarantee clauses. Criminal justice policy and programs should be guided by our public goals,
such as reducing the number of people in prison. Rejecting bed guarantee clauses allows public officials to make the best
decisions in the public’s interest.

For additional information about public interest protections in prison privatization contracts, please see In the Public Interest’s
October 2012 publication titled “Essential Public Interest Protections for Prison Privatization Contracts” at:
http://www.inthepublicinterest.org/sites/default/files/Prison_Privatization_FINAL.pdf.
In the Public Interest also recently released a set of legislative proposals, called the Taxpayer Empowerment Agenda. Among other
important responsible contracting provisions, this agenda encourages lawmakers to ban contract language that guarantees
company profits, including provisions such as occupancy guarantees. You can find the full Taxpayer Empowerment Agenda at:
http://www.inthepublicinterest.org/sites/default/files/ITPI-The-Taxpayer-Empowerment-Agenda.pdf.

I n th e p u b lic i n t e r e st

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How Lockup Quotas and “Low-Crime Taxes” Guarantee Profits Guarantee Profits	 14

Appendix
which contracts ITPI received and which contracts contained occupancy guarantee clauses.
Facility

	

How Lockup Quotas and “Low-Crime Taxes” Guarantee Profits Guarantee Profits	 15

Facility

The below chart documents the privatized facilities identified by In the Public Interest, and includes information about

Company

Location

Customer

Have
Contract?

Current

Hudson Correctional Facility

GEO

Hudson, CO

AK

Arizona State Prison —
Florence West

GEO

Florence, AZ

AZ

Arizona State Prison —
Phoenix West

GEO

Phoenix, AZ

AZ

Expiration
Date

September 2013 Section 4.01 — 80% with exceptions for ramp-up
or ramp-down or transportation dates
October 2017

Current

Central Arizona
Correctional Facility

GEO

Florence, AZ

AZ

Arizona State Prison — Kingman

MTC

Kingman, AZ

AZ

Current

Marana Community
Correctional Treatment Facility

MTC

Marana, AZ

AZ

Current

La Palma Correctional Center

CCA

Eloy, AZ

CA

Current

Occupancy Guarantee?

(if known)

July 2017

100%

Company

Location

Customer

Have
Contract?

Expiration
Date

June 2013

Coffee Correctional Facility

CCA

Nicholls, GA

GA

Current

Jenkins Correctional Center

CCA

Millen, GA

GA

Current

Wheeler Correctional Facility

CCA

Alamo, GA

GA

Current
Current

(if known)

Occupancy Guarantee?

2011 amendment — 90%

Silverdale Detention Facilities

CCA

Chattanooga, TN

Hamilton
County, TN

Bartlett State Jail

CCA

Bartlett, TX

Bradshaw State Jail

CCA

Bridgeport Pre-Parole
Transfer Facility

CCA

Dawson State Jail
Mineral Wells Pre-Parole
Transfer Facility

Idaho Correctional Center

CCA

Kuna, ID

ID

Current

June 2014

Kit Carson Correctional Center

CCA

Burlington, CO

ID

Current

July 2014

Marion County Jail II

CCA

Indianapolis, IN

IN

Amendment 9 — 100% for specified period

New Castle Correctional Facility

GEO

New Castle, IN

IN

Current

January 2015

Section 3.01 — 90%

Plainfield Indiana STOP Facility

GEO

Plainfield, IN

IN

Current

March 2015

Current

Included in 2012-2013 budget, guarantee for 3,300
beds for all CCA facilities. Contract: 2.1.1. “The State does
not guarantee any minimum number of Offenders will
be assigned to Contractor’s Facility.”
Section 3.2 — No guarantee for the first 6 months and
then 80% (320/400 beds)

December 2017
Amendment 4 — 90%, also fixed monthly payments
for annex

Marion Adjustment Center

CCA

St. Mary, KY

KY

Tallahatchie County
Correctional Facility

CCA

Tutwiler, MS

CA

Current

June 2013

Section 3.01 — 90%

Winn Correctional Center

CCA

Winnfield, LA

LA

Current

June 2020

Section 3.1 — 96%

Central Valley Modified
Community Correctional Facility

GEO

McFarland, CA

CA

2012

Exhibit 6.14, Amendment 9 — 90%

Allen Correctional Center

GEO

Kinder, LA

LA

Current

July 2020

Section 3.1 — 96%

CCA

Woodville, MS

MS

Desert View Community
Correctional Facility

GEO

Adelanto, CA

CA

2012

Exhibit A, G.7, Amendment 9 — 90%

Wilkinson County
Correctional Facility

Golden State Medium
Community Correctional Facility

GEO

McFarland, CA

CA

Current

McFarland Community
Correctional Facility

GEO

McFarland, CA

CA

2010

Red Rock Correctional Center

CCA

Eloy, AZ

CA/HI

Current CA
portion

January 2024

Bent County Correctional Facility

CCA

Las Animas, CO

CO

Outdated

June 2013

Correctional Treatment Facility

CCA

Washington, DC

DC

Bay Correctional Facility

CCA

Panama City, FL

FL

Current

Graceville Correctional Facility

CCA

Graceville, FL

FL

Current

Lake City Correctional Facility

CCA

Lake City, FL

FL

2009

Indefinite

Original contract, section 7 — 90%

Moore Haven Correctional Facility

CCA

Moore Haven, FL

FL

Current

July 2013

Section 7.1 — 90%

Citrus County Detention Facility

CCA

Lecanto, FL

Citrus County,
FL

Current

September 2015

Blackwater River
Correctional Facility

GEO

Milton , FL

FL

Current

April 2013
July 2014

South Bay Correctional Facility

GEO

South Bay, FL

FL

2009

Gadsden Correctional Institution

MTC

Gadsden, FL

FL

Current

July 2013

p. 93, Section 7.1 — 90%

September 2013 Section 7.1 — 90%

June 2013

June 2013

East Mississippi
Correctional Facility

MTC

Meridian, MS

MS

Marshall County
Correctional Facility

MTC

Holly Springs, MS

MS

Walnut Grove Correctional Facility

MTC

Walnut Grove, MS

MS

Crossroad Correctional Facility

CCA

Shelby, MT

MT

New Mexico Women’s
Correctional Facility

CCA

Grants, NM

NM

Current

Guadalupe County
Correctional Facility

GEO

Santa Rosa, NM

NM

Current

Section 4.1 — 90%

Lea County Correctional Facility

GEO

Hobbes, NM

NM

Current

Section 4.1 — 90%

Northeast New Mexico
Detention Facility

GEO

Clayton, NM

NM

Current

August 2013

Lake Erie Correctional Institution

CCA

Conneaut, OH

OH

Current

June 2032

Original contract w/ MTC, page 12 — 95%, more recent
w/ CCA, noted in attachment 7, cost summary —90%

North Central
Correctional Complex

MTC

Marion, OH

OH

Cimarron Correctional Facility

CCA

Cushing, OK

OK

Current

June 2014

Original contract, Article 7, amndmt 5 & 6 — 98%

Davis Correctional Facility

CCA

Holdenville, OK

OK

Current

June 2014

Original contract, article 7, amndmts 5 & 6 — 98%

Lawton Correctional Facility

GEO

Lawton, OK

OK

Current

June 2013

Amendments 1 & 2, Article 7 — 98%

August 2013
June 2013

Section 4.1 — 580/611 (95%)

Daily credit for unoccupied beds during initial 60-day
ramp-up period

continued

Section 7.1 — 90%
Article 7 — 90%
p. 98, 7.1 — 90%
continued

TN
Davidson
County, TN

June 2014

97% according to AFSC AZ, Amendment 2 — 90%

Included in 2012/2013 budget, guarantee for
3,300 beds for all CCA facilities Contract: 2.1.1. “The
State does not guarantee any minimum number of
Offenders will be assigned to Contractor’s Facility.”

Clifton, TN
Nashville, TN

HI

Section 3.01 — 90%

June 2013

CCA
CCA

GA

Eloy, AZ

June 2013

Current

South Central Correctional Center
Metro-Davidson County
Detention Facility

Milledgeville, GA

CCA

Current

CO

TN

Section — 90% guarantee

GEO

CA

Olney Springs, CO

Whiteville, TN

July 2013

Riverbend Correctional Facility
Saguaro Correctional Center

Sayre, OK

CCA

CCA

TN

CCA

Crowley Correctional Facility

Hardeman County
Correctional Center

Whiteville, TN

ID

Included in 2012/2013 budget, guarantee for
3,300 beds for all CCA facilities Contract: 2.1.1. “The
State does not guarantee any minimum number of
Offenders will be assigned to Contractor’s Facility.”

Customer

CCA

Kuna, ID

Section 3.01 — 90%

Location

Whiteville Correctional Facility

MTC

Exhibit B, 1.C — 70%

Company

2011, 2012, 2013 amendments — 90%

Idaho Capp Facility

Exhibit 6.14 — 90%

How Lockup Quotas and “Low-Crime Taxes” Guarantee Profits Guarantee Profits	 16

June 2013

North Fork Correctional Facility

June 2016

	

Facility

Original contract, p. 2, part 2B & 2013 amendment
— 90%,

Amendments 7, 9, 11: 100% for emergency/
temporary beds

December 2016

June 2013

I n th e p u b lic i n t e r e st

Have
Contract?

Expiration
Date
(if known)

Occupancy Guarantee?

May 2015
2007
June 2016
Current

July 2014

TX

Current

August 2013

Henderson, TX

TX

Current

August 2013

Bridgeport, TX

TX

Current

August 2013

CCA

Dallas, TX

TX

Current

August 2013

CCA

Mineral Wells, TX

TX

Current

August 2013

Willacy County State Jail

CCA

Raymondville, TX

TX

Current

August 2013

Cleveland Correctional Center

GEO

Cleveland, TX

TX

Current

January 2014

Lockhart Work Program Facility

GEO

Lockhart, TX

TX

2005

January 2013

Lindsey State Jail

CCA

Jacksboro, TX

TX

Current

August 2013

Billy Moore Correctional Center

MTC

Overton, TX

TX

Current

Bridgeport Correctional Center

MTC

Bridgeport, TX

TX

Current

Diboll Correctional Center

MTC

Diboll, TX

TX

2008

East Texas Treatment Facility

MTC

Henderson, TX

TX

2005

Kyle Correctional Center

MTC

Kyle, TX

TX

Current

Sanders Estes Unit

MTC

Venus, TX

TX

2009

South Texas Intermediate
Sanction Facility

MTC

Houston, TX

TX

Current

West Texas Intermediate
Sanction Facility

MTC

Brownfield, TX

TX

Current

Lawrenceville Correctional Center

GEO

Lawrenceville, VA

VA

Current

Lee Adjustment Center

CCA

Beattyville, KY

VT

Current

Section 6.1 — 90%

Original contract, Article.6.1.c —1495 out of 1500
beds, 95%
June 2013

Acknowledgements
In the Public Interest would like to thank Mike Brickner, Jane Carter, Alex Friedmann, Caroline Issacs, Justin Jones,
Kerry Korpi, Bob Libal, and Kymberlie Quong Charles for their thoughtful and thorough comments and edits.
We would also like to thank Open Society Foundations and The Public Welfare Foundation for their generous
support of this report.
Design and layout by Terry Lutz.
Any errors or omissions in this report are the sole responsibility of In the Public Interest.

	www.InThePublicInterest.org
1825 K St. NW, Suite 210
Washington, DC 20006
202-739-1160

	facebook.com/InThePublicInterest
	@PubInterest

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