Cell-Out Arizona Exclusive: Documents Show Arizona Officials Knew Private Prisons Weren’t Saving Money

by cell-out-arizona on Jul. 24, 2012

Documents recently obtained by the American Friends Service Committee (AFSC) show that the state of Arizona deliberately circumvented and ultimately repealed a state law requiring private for-profit prison corporations to demonstrate cost savings in their bids on new prison contracts. These records reveal that the state was aware that existing private prison contracts were not saving the state money–despite state laws requiring private prison contractors to deliver such savings.

One such statute, ARS 41-1609.01 (G), previously stated:

“A proposal shall not be accepted unless the proposal offers cost savings to this state. Cost savings shall be determined based upon the standard cost comparison model for privatization established by the Director.”

In response to a public records request, the Arizona Department of Corrections (ADC) has confirmed that the “standard cost comparison model” referred to in the statute is the Department of Corrections Operating Per Capita Cost Report (Per Capita Cost Report).

For the past six years, these reports have consistently found that private prisons are not saving the state money, and in many cases, the private beds cost more than equivalent public beds. In fact, an AFSC analysis of ADC Per Capita Cost Reports revealed that between 2008-2010, Arizona overpaid for its private prison beds by $10 million.

Therefore, it would be impossible for a for-profit prison corporation to claim that its proposed prison would save the state money using this data as the basis of the assessment. But instead of holding the for-profit prison corporations accountable or changing course, the Arizona State Legislature simply began circumventing the law.

The two most recent private prison contracts that have been awarded in Arizona— 1,000 additional beds at Geo Group-operated Central Arizona Correctional Facility (in 2003), and 2,000 additional beds at Management and Training Corporation (MTC)-operated Kingman Cerbat Unit (in 2007)—were deliberately exempted from the both the cost savings and quality review requirements.

The Department of Corrections itself provides the evidence:

“Laws 2003, 2nd Special Session, Chapter 5, Section 15, which authorized the one thousand beds awarded to Central Arizona Correctional Facility (GEO), stated that “Notwithstanding section 41-1609.01, subsections G and K and section 41- 1609.02, subsection B, Arizona Revised Statutes, the director of the department of corrections shall negotiate contracts or amendments to existing contracts for the construction of a total of 1,000 new private prison beds not previously authorized by the legislature, as soon as practicable…”

Similarly, Laws 2007, 1st Regular Session, Chapter 261, Section 8, which authorized the two thousand private beds awarded by contract to ASP-Kingman (MTC) – Cerbat Unit, stated that “…notwithstanding section 41-1609.01, subsections G and K and section 41-1609.02, subsection B, Arizona Revised Statutes, the department of administration shall reissue the revised request for proposals to contract for two thousand private prison beds.”

That one quaint little word, “notwithstanding,” means that the state legislature gave a green light to new private prison contracts without any accountability or expectation that they save money, run safe prisons, or provide a quality of service to the taxpayers footing the bill.

Rather than having to go to the trouble of inserting this exemption into the authorization language of future for-profit prison contracts, the state legislature recently decided to eliminate the cost savings requirement law altogether.

In the 2012 legislative session, the Criminal Justice Budget Reconciliation Act (CJBRA) repealed the sentence in the statute referring to the standard cost comparison model.

But they didn’t stop there. The bill also repealed a requirement for the state to conduct a quality comparison assessment of public and private prisons.

This statute was the basis of a 2011 lawsuit filed by AFSC seeking to halt the award of a contract for 5,000 new for-profit private prison beds. AFSC argued that the statute had been on the books since the late 1980’s, but that the statutorily-required assessment had never been completed. While the lawsuit was dismissed on a technical issue of ‘standing,’ the Department of Corrections was compelled to release the first-ever Biennial Comparison Review and cancel the 5,000-bed procurement.

Such a significant concession was deeply embarrassing for the Governor and the Department of Corrections. The negative press generated by the lawsuit, on top of the scandal generated by the escapes from the Kingman private prison in 2010, amounted to a public relations nightmare. And the delays and eventual cancellation of the RFP had to be infuriating for the prison corporations, who are investing serious money in their bids for a contract in Arizona. The removal of the statute was not only necessary to prevent such hiccups in the future, it was also a demonstration of the power of these corporations and state government actors. The message: We’re not just above the law, we make the law.

In repealing these requirements, the state legislature has all but admitted that it simply does not care if private prisons are safe, saving money, or providing a quality service. This has only added to the growing pile of evidence that elected officials in Arizona are beholden to the for-profit prison industry. Over the past few years, it has been widely reported that for-profit prison corporations like Corrections Corporation of America (CCA), GEO Group, and Management and Training Corporation (MTC) pour millions of dollars into lobbying and campaign contributions annually in order to secure contracts at the state and federal level.

Several of the key players in the Arizona budget process have accepted contributions from lobbyists, political action committees (PACs) and other individuals/entities associated with for-profit prison corporations. For example:

•Governor Brewer’s campaign manager and top advisor, Chuck Coughlin. Coughlin runs Highground Consulting, which lobbies for CCA in Arizona. •Paul Senseman, a CCA lobbyist, is also the “spokesman” for Brewer’s PAC •John Kavanagh, Chair of the House Appropriations Committee, has accepted numerous campaign contributions from lobbyists associated with the for-profit prison industry. Kavanagh was instrumental in the passage of the 2012 CJBRA. •House Speaker Andy Tobin has raked in thousands of dollars from lobbyists and others associated with three of the for-profit prison corporations currently bidding on contracts in Arizona. This includes donations from the CEO’s of both GEO Group and GEO Care, as well as the MTC PAC. Suspecting that the “invisible hand of the market” was behind the effort to remove the cost and quality assessment requirements, muckraking journalist extraordinaire, Beau Hodai, sent a public records request to Kavanagh’s office seeking documents related to the drafting and passage of the budget bill. [Mr. Hodai, you may recall, was responsible for first revealing the links between CCA and the Governor’s office in relationship to SB1070 for In These Times.]

In response, Hodai received a two-paragraph letter, denying access to records relating to the bill and invoking “legislative privilege.” Because, after all, what good will it do to remove all accountability from the for-profit prison industry if snooping reporters can uncover records relating to influence working behind the scenes through public records law?

The timing of the repeal coincides with plans to award a new contract for 1,000 more for-profit prison beds. The contract for these beds is expected to be signed by September 1, 2012. Funding for the beds was approved in the same budget that removed the accountability provisions. Many have questioned the wisdom of building prisons we don’t need (the state’s prison population is decreasing) and can’t afford. After all, the state is barely beginning to come back from a crippling budget deficit. And where was Arizona supposed to find the funds for a massive prison expansion, anyway?

Soon after the budget passed, the answer was revealed: The legislature planned to pay for new prison beds by sweeping $50 million from a housing trust containing money from a settlement the federal government negotiated with big banks in the wake of the mortgage crisis. The monetary aid was intended for states to assist people impacted by foreclosures. So, essentially the legislature planned to pay for overpriced prisons we don’t need by stealing the money from victims of the housing crisis. Classy.

On May 24, 2012, The Arizona Center for Law in the Public Interest and the William E Morris Institute for Justice filed a lawsuit on behalf of distressed homeowners to prevent the transfer.

So, to recap, private prisons are a waste of money and everybody knows it. But because the corporations pour millions into lobbying and campaign donations, Arizona politicians have adjusted state law to “look the other way”– thus paving the way for future contracts unencumbered by pesky accountability measures and ensuring that the state budget will continue to bleed millions into corrections at the expense of education, health care and social services.

Tune in next week for Part Deux, in which we reveal that the per diem rates for the state’s three oldest private prisons have increased an average of 14 % over 5 years and were recently renegotiated to guarantee 100% occupancy.