Tax Payers Underwrite Private Prisons

25th October 2001

WASHINGTON, DC (October 22, 2001) -- The nation's state and county governments, reeling from budget problems brought on by a weakening economy and the war on terrorism, have been spending large sums of taxpayer money providing economic development subsidies to private prisons. This is the conclusion of a study released today by Good Jobs First, a national research center tracking state and local economic development practices.

The report -- entitled "Jail Breaks: Economic Development Subsidies Given to Private Prisons" -- is the first such analysis ever performed on private prisons.

The study finds that 73% of the big privately-built and operated prisons have received subsidies such as tax-advantaged financing, property tax reductions or other tax cuts, infrastructure assistance and training grants/tax credits. The study covers 60 prisons with 500 beds or more each. These prisons, located in 19 states, comprise half the private-prison market.

Specifically, the study finds that: 

• At least 44, or 73%, of the facilities received one or more development subsidy. The actual rate is very likely higher, but cannot be determined because state corporate income tax credits are not disclosed.

• A total of $628 million in tax-free bonds and other government-issued securities were used to finance 37% of the prisons studied.

• 38% received property tax abatements or other tax reductions.

• 23% received infrastructure subsidies such as water, sewer or utility hook-ups, access roads and/or other publicly-paid improvements.

• Facilities operated by the two largest private prison companies, Corrections Corporation of America and Wackenhut Corrections Corporation, were extensively subsidized.

• Not one of the dozens of economic development officials interviewed -- covering 83% of the facilities, often with multiple sources -- could cite any formal economic impact study or cost-benefit analysis related to the prisons.

"We are surprised to find subsidies so prevalent," said Philip Mattera, primary author of the study. "We also wonder why they are necessary, given that governments are also paying the prison companies to operate the facilities."

"We are struck by the uneven quality of information available from local development officials," said Mafruza Khan, co-author. "Many officials did not know all of the taxpayer investments that had been made in local facilities. And despite granting hundreds of millions of dollars in subsidies, not one public official could cite a cost-benefit analysis or impact study on their facility."

"Whatever the perceived development or contracting benefits of private prisons, they must now be balanced with a full accounting of their costs," said Greg LeRoy, director of Good Jobs First. "These massive taxpayer investments should be held to the same standards as any other economic development expenditures."

The full report is available at Good Jobs First's Website