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N.H. officials mull private prison bids

Last modified: 4/8/2012 12:00:00 AM
With four companies interested in the job, state officials are again deciding whether putting the state's prisons in private hands is a way to cut corrections costs. The idea may have more political support now than it did last time, in 2004, but serious doubts about cost savings and inmate security are as strong as ever.

"I don't think anything has changed," said Diana Lacey, president of the state employees union, which fought privatization eight years ago and opposes it now. "In fact, if anything, what we have seen is the for-profit industry grow and gain influence with state and federal legislators."

Three of the four companies that recently submitted bids to take over the state's prisons have two or more lobbyists in the state. And their 2011 profit margins - one bidder saw a $167 million profit, the other a $77 million profit - illustrates Lacey's main concern about privatization.

A private company, Lacey said, needs to keep inmate beds full and security, salary and program costs down to make money. Meanwhile, the state's goal is to rehabilitate inmates and keep them out of prison. "Those are totally conflicting viewpoints," she said.

Still, privatizing prisons is a conversation state leaders say is worth having, even if the state ultimately decides to retain management of its prisons and inmates.

"The governor thinks we need to look at different options, including various forms of public/private partnerships to ensure we can meet the future needs of our corrections system," Gov. John Lynch's spokesman, Colin Manning, wrote in an email. "The responses to these (requests for bids) will provide important information about the feasibility of various alternatives and how they compare to our current model."

Under orders from Lynch and the Legislature, the state Department of Corrections recently asked companies to submit bids if they were interested in building and running prisons for the state. The directive was part of last year's budget discussions, during which the state Department of Corrections saw its 2011 budget of $106 million cut by about $4 million this year and next.

The challenge for corrections officials is finding those savings now because its plan for lowering costs - reducing recidivism and responding differently to parole infractions - is a long-term remedy, not an immediate one.

The state's prison population climbed 31 percent between 2000 and 2010 despite a stable crime rate, according to state officials. Half of that increase was attributed to inmates who leave prison only to return for a parole violation or a new offense.

"The trend is positive," said corrections spokesman Jeff Lyons, citing the population drop the prison has seen each of the last 13 months. "But we won't have any hard numbers until 2013 or 2014. People want something right away, but you can't really (assess efforts to curb recidivism) right away."

 Four in the running

It was a similar budget crunch in 2004 that convinced then-Gov. Craig Benson the state could save $19 million a year by sending 1,000 inmates out of state. Four of the state's five executive councilors opposed the notion, and it was dropped after a legislative committee concluded the real savings would be $300,000 a year at best.

Sending inmates out of state, an idea raised again during last year's budget talks, remains on the table, as does the possibility that the state will build or renovate its own prisons and run them itself, said Michael Connor of the state Department of Administrative Services, which is overseeing the corrections bids.

But this time, the state is more seriously considering handing off corrections to a private for-profit corporation. Earlier this year, the state sought bids on three construction possibilities: a 1,500-bed prison for men; a 200-bed prison for women; and a hybrid prison with separate bed space for men and women.

The bidders had the choice of building and running the new prisons; renovating the existing Concord prison and running that; or building new prisons the state would run. Four companies responded with bids that are so detailed they fill a 12-by-12-foot office at the Department of Administrative Services, Connor said.

Three of the companies have been building and managing prisons for nearly 25 years, and, among them, manage most of the private prisons in the country: Corrections Corp. of America, the GEO Group and Management & Training Corp.

The fourth bidder, NH Hunt Justice Group, is a new player - sort of.

The newly formed limited liability company is a partnership between the Hunt Companies and LaSalle Corrections, both of Texas, and several engineering and architect firms. The Hunt Companies has built and managed military housing, commercial buildings and other real estate ventures but not prisons. That's where La Salle Corrections, a smaller industry player with just 12 prisons in two states, comes in.

A quick Google search of the four bidders and their detention centers turns up stories that privatization critics fear most: inmate escapes, sexual assaults by guards and citations of subpar prison conditions.

In 2009, a guard working at a prison run by GEO Group was charged with helping three inmates - two of whom were serving time for manslaughter - escape. This year, GEO Group and Corrections Corporation of America were fined $1.6 million for violating their contracts with the state of New Mexico, according to news reports.

GEO was understaffing its prisons in New Mexico, and Corrections Corp. of America was holding inmates in prison past their release dates, according to the accounts.

Management & Training Corp. made headlines in 2010 when three inmates escaped an Arizona prison it was managing and killed a couple in their camping trailer. The victims' families cited lax security in their lawsuit against the company. In 2011, federal officials charged one of Management & Training's guards with sexually assaulting a detainee.

Even LaSalle Corrections, with its 12 prisons and jails, has made headlines.

Last month, an inmate at one of its Texas jails chiseled his way to freedom. Texas inspectors cited security "deficiencies." In 2009, state inspectors cited the jail for not providing a mental health patient with her medications.

But New Hampshire's Department of Corrections has made its own headlines.

Former prison guard Douglas Tower pleaded guilty in 2008 to raping three female inmates to avoid trial on charges of sexually assaulting eight others. The state paid $1.85 million to settle a related civil suit against Tower.

In 2003, three inmates, one of them a convicted killer, escaped from the Concord prison. Budget cuts had forced the prison to leave vacant 70 corrections officers' jobs at the time, and prison officials cited the reduced staffing as a reason for the security breach.

And last week, an inmate paroled in Concord by accident robbed a store at knifepoint, wrestled a woman's purse from her outside Walmart and tried to steal a car before being returned to the prison, the police allege.

"Do we have incidents?" said Issa Arnitas, a spokesman for Management & Training Corp. "Yes. Have there been incidents at other facilities run by public entities? Yes."

 Lengthy review ahead

None of the companies would comment on their interest in New Hampshire or the bids they submitted. The New Hampshire Business Review reported Friday that Management & Training Corp. has purchased a option to buy 25 acres off Hackett Hill in Manchester for either a men's prison or the hybrid prison. The company would purchase the surrounding 75 acres, too, but conserve it, according to the article.

With the bids sealed to the public, Connor provided only scant details last week.

All four companies expressed interest in the men's prison and the hybrid prison. Some said they'd like to build and run the prison; some said they'd rather just build. But none submitted a bid to build just a women's prison, Connor said.

Now a group that includes members from the governor's office as well as the corrections and administrative services departments will review those bids. Connor said that review will take three to four months. Lynch will make the final decision, Connor said.

"We've got extensive work to do," he said. The assessment will include figuring out how much it would cost the state to do all the scenarios the private companies bid on. Lyons declined to comment on his department's position on privatization, but Corrections Commissioner William Wrenn has previously questioned the amount of savings the state would actually realize if it handed the job to someone else.

Meanwhile, a separate legislative committee is also evaluating the state's corrections options. In an interim report written in December, before the state had received any bids, the committee found that while some studies show a savings with privatizing corrections, "most show little difference."

The simplest way to compare the state against private prison companies is to compare price tags. Until the bids are made public, all that is known is what the state spends per inmate.

There are about 2,500 inmates in the state prisons now, 157 of them women. It costs about $34,000 annually to incarcerate each one. In addition, according to the committee, the state spends $15,000 annually on each of the nearly 300 inmates at halfway houses.

One of the biggest expenses is housing and treating the nearly 60 people at the prison's psychiatric unit; each patient there costs the state $140,000 a year. The approximately 13,600 parolees are a bargain by comparison: They each cost the state $700 a year.

But state officials have been cautioned to look not only beyond the numbers but behind them too.

 'Proceed with caution'

Alan Linder and Elliott Berry, attorneys with New Hampshire Legal Assistance, met with the legislative committee studying privatization and brought with them a binder full of warnings about cost comparisons.

They told the committee that studies have shown that privatizing corrections saves a state about 1 to 2 percent at best, not the 5 to 20 percent that's often predicted.

Often, bids don't factor in hidden costs like inmate transportation, building overhead, medical expenses and the amount the state will spend monitoring the private company for contract compliance.

For example, it's cheaper to incarcerate minimum-security inmates than it is medium-security prisoners, but that distinction isn't always highlighted in bids presented by private companies. Linder and Berry found that private companies often accept only healthy, young and low-risk inmates, leaving the state to incarcerate the more costly prisoners. Some companies also cap what they'll spend on an inmate in their contract with the state, and if an inmate's medical ailments go over the cap, the state must pick up the tab. And if an inmate files a lawsuit against the company, the state may also be liable.

At the end of their presentation, Linder and Berry urged the committee to "proceed with caution."

Lacey, the union president, said wages concern her too. She's worried that private companies will pay minimum wage and provide no health benefits or only minimal insurance coverage. That would have "collateral" costs on the state that wouldn't show up in a contract comparison.

"We have now what is a middle-class wage (for corrections staff)," Lacey said. "It has health care they can take care of their family with. It has a retirement plan with a pension. In the private sector, there are very low wages. We are talking about hundreds and hundreds of workers who will . . . need health care assistance, food stamp assistance, housing assistance."

Management & Training Corp. was the only company of the four bidders to agree to an interview. Arnitas, the spokesman, said his company offers a 401(k) package for retirement but not a pension. Its wages, however, mirror what's paid in the community, he said.

He also said corrections officers are sent through the same training required now by the state. And the company's prisons meet security standards set by the state.

 Where the money is made

The private prison companies are finding profits where states struggle with deficits.

Last month, Zacks Investment Research, a Chicago-based company that advises investors, said it liked the market returns it was seeing from the for-profit prison industry.

"One of the reasons for (Corrections Corporation of America's) advantage in this economy and its 500% growth since the late 90's is that they are able to acquire prisons at a (very) good price from cash-strapped states who can't manage their budgets and keep their prison systems in the black," wrote Jared Levy.

Where do the savings come from?

Arnitas said the company finds it savings by eliminating pensions and by simplifying the construction process. Unlike the state, a private company does not have to seek approval for the contracts it signs with building subcontractors.

"There's less red tape," he said.

Daron Hall, the sheriff in Nashville, Tenn., has seen both sides of prison management. He worked for Corrections Corporation of America in the 1990s as a program director. Now, in addition to serving as sheriff, he is president of the American Correctional Association, which accredits prison and jails.

In that position, he still finds himself evaluating both privately and publicly run prisons. Concerns about cost comparison are valid, he said.

"I've seen so many different attempts to compare the two that I don't know if there is a simple way to evaluate one versus the other," he said. Tennessee tried to make a comparison 20 years ago by having two prisons: one built and run privately, the other publicly.

"After three years, they evaluated them," Hall said. "What happened was that the inmates weren't the same. They were higher (risk) in one and lower in the other."

There are advantages to going with private companies, Hall said. They are often able to experiment with programming and treatment in a way a state can't. If a warden in a private prison hears about a new program working in another state, he or she needs only the company's permission to try it.

In government, permission would take longer, if it came at all, Hall said. "From the government side, I think we are tied a little tighter than we should be, and it's hard to get political support to try some things."

The most important thing a state can do when it explores privatizing corrections is to write a really specific and comprehensive contract.

"Make sure it says exactly what is expected of the provider," Hall said. "Give them certain dates for meeting standards." Some contracts dictate pay increases. Some require specific treatment and educational opportunities.

In New Hampshire, the courts have set standards for the treatment of inmates, especially those with disabilities. A private provider would have to meet those standards, but it's not enough to assume they will, Hall said.

"I think privatization works, but not in all cases," he said. "If the government just says, 'Take my prisons and run them the best you can,' it deserves what it gets."

(Annmarie Timmins can be reached at 369-3323 or atimmins@cmonitor.com.)


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