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28.6 million man-days—and growing!

Between 1970 and 2005, the number of people incarcerated in the United States grew by 700%. Today, the United States incarcerates approximately 2.3 million people. According to the Congressional Research Service, the United States has only 5% of the world’s population but a full 25% of its prisoners.

—“Banking on Bondage:
Private Prisons and Mass Incarceration
,”
ACLU, November 2011

Always controversial, for-profit prisons were initially hailed by political conservatives as a cost-effective way to relieve the overcrowded penal system. And for a while private prisons relieved some pressure and initially turned a nice profit for such companies as Prison Realty Trust and Wackenhut Corrections Corp. Indeed, Wackenhut did too well for some. Its South Florida facility was publicly criticized for treating inmates as if they were on vacation, giving them access to televisions and gyms.

But today, the industry is in a rut, and its prospects have been severely trimmed. Overbuilding and ill-fated financial schemes have hammered stock prices. States, once eager to outsource their inmates, are backing out of private prison contracts. News of escapes and violence at private prisons adds to a climate of distrust. Execs at the for-profit prisons insist the concept still works. But the spate of bad news has given longtime critics such as Middle Tennessee State University criminologist Frank Lee a new platform. “Private prisons don’t work,” he says.

—Charles H. Haddad, “Private Prisons Don’t Work,”
Bloomberg Businessweek, September 11, 2000

Record 2010 Financial Results

CCA’s record revenues of $1.7 billion benefited from an increase in compensated man-days which generated revenue from federal and local customers. Our average compensated man-days rose 3.2% to 28.6 million in 2010 from 27.7 million in 2009 and reflected an increase in demand for beds from the US Marshals Service, the Bureau of Prisons, along with the states of California, Georgia and Florida. Our revenue from Federal customers rose 9.4% to $717.8 million and accounted for 43% of management revenues for 2010. Management revenue from state customers was $838.5 million in 2010 and represented 50% of management revenues. Net income was a record $157.2 million in 2010. Net income per diluted share rose 5.3% to $1.39 compared with 2009. The growth in our earnings benefited from our higher revenue base and an increase in our facility operating margin to 31.2% in 2010. We have invested a significant amount of resources in improving our operating efficiency that includes new prison designs that are more cost-effective to operate, cost-saving strategies from a company-wide initiative to improve operating efficiencies and best practices that we developed from our broad experience in the industry.

Corrections Corporation of America,
2010 Annual Letter to Shareholders

Our growth is generally dependent upon our ability to obtain new contracts to develop and manage new correctional and detention facilities. This possible growth depends on a number of factors we cannot control, including crime rates and sentencing patterns in various jurisdictions and acceptance of privatization. The demand for our facilities and services could be adversely affected by the relaxation of enforcement 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. For instance, any changes with respect to drugs and controlled substances or illegal immigration could affect the number of persons arrested, convicted, and sentenced, thereby potentially reducing demand for correctional facilities to house them.

Corrections Corporation of America,
2010 Annual Report on Form 10-K

While private prison companies deny taking steps to affirmatively support legislation that promotes mass incarceration, and although CCA left ALEC in 2010, according to a recent news report, “for the past two decades, a CCA executive has been a member of the council’s [task force that] produced more than 85 model bills and resolutions that required tougher criminal sentencing, expanded immigration enforcement and promoted prison privatization … CCA’s senior director of business development was the private-sector chair of the task force in the mid- to late 90s when it produced a series of model bills promoting tough-on-crime measures that would send more people to prison for a longer time.

—“Banking on Bondage

The number of immigrants detained annually has nearly doubled, to 390,000 since immigration enforcement was transferred to the newly formed Department of Homeland Security in 2003, creating a huge market for private prison operators, who house almost 50 percent of all federally detained immigrants compared with just 6 percent of state prisoners and 16 percent of federal prisoners.

—Rania Khalek, “The Shocking Ways the Corporate Prison Industry Games the System

Recently, ALEC leaders have been involved with discriminatory immigration laws that carry potential benefits for private prisons. On April 23, 2010, Arizona Governor Jan Brewer signed into law Senate Bill 1070, a statute that requires police officers in Arizona to ask people for their papers during law enforcement stops based only on an undefined “reasonable suspicion” that they are in the country unlawfully. Senate Bill 1070, and similar “copycat” laws since enacted in several other states, have the potential to further increase the number of immigrants detained, thereby adding to pressure to build more immigration detention centers. Russell Pearce, currently President of the Arizona State Senate and a member of ALEC’s Public Safety and Elections Task Force, was a sponsor and moving force behind the Arizona bill, and he presented the idea for the law at an ALEC meeting. According to a report by National Public Radio (which is disputed by Pearce and CCA), the private prison industry engaged in a “quiet, behind-the-scenes effort to help draft and pass Arizona Senate Bill 1070.”

—“Banking on Bondage

I think it’s clear that with the events of September 11 there’s a heightened focus on detention, both on the borders and within the US. More people are gonna get caught. So I would say the events of September 11, um, let me back up. The federal business is the best business for us. It’s the most consistent business for us, and the events of September 11 is increasing that level of business.

—Steve Logan, CEO of Cornell Corrections,
during a conference call with investors
two months after 9/11

We believe the outlook for CCA and the private corrections industry remain very positive. Public prisons are overcrowded and increases in the US inmate population are expected to outpace the addition of new prison beds. Historically, the US inmate population has also accelerated in post-recession years, particularly at the state level. Demand for new prison beds from the federal sector remains strong. The Federal Bureau of Prisons is operating at about 138% of its rated capacity and its inmate population is expected to grow. The US Marshals Service also expects meaningful growth in the coming years.

We expect the shortage of new prison beds coming on-line to be further constricted by government budget constraints in funding new capacity. No states during Fiscal Year 2010/2011 allocated funds for new prison construction.

Corrections Corporation of America,
2010 Annual Letter to Shareholders

  1. Jack    Feb 16, 04:50 PM    #

    We also have one of if not the best and most advanced law enforcement services. This is going to lead to more arrests. We also can afford to house more criminals than other countries I would imagine and what might land you in prison in the us, assault, duis, etc. wont land you in prison in other countries. Shear resources is the reason.


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