Showing posts with label financial crisis. Show all posts
Showing posts with label financial crisis. Show all posts

Tuesday, March 12, 2013

More From Jerry: Federal Prison Oversight a Waste of Money?

Photo credit Randall Benton for the Sac Bee.
After Governor Brown's public comments about attorney's fees for inmate rights' litigators - on which we had plenty to say here and on The Recorder - he's back to it this morning. The Sac Bee reports:

"During the life of these lawsuits, the prison health care budget has gone from $700 million to $2 billion," Brown said in an interview with The Bee, his first on the issue since the state filed court documents in January seeking to regain control of its prisons. 

"That money is coming out of the university, it's coming out of child care. It's a situation you wouldn't dream anyone would want." 

The governor's comments came as lawyers prepare for a battle in Sacramento federal court later this month over whether the state is providing a constitutional level of mental health and medical care for inmates. Oral arguments are scheduled for March 27 on California's motion to terminate oversight of mental health care by U.S. District Judge Lawrence K. Karlton. 

Another motion by the state, also filed in January, seeks to vacate or modify an order by a specially convened three-judge court to reduce inmate population. Oral arguments on that motion have not yet been scheduled. 

Really, Jerry? Really? You reap what you sow. Why is the prison health care budget so costly? It's true that mistreating and ignoring people's medical plight is cheaper than actually treating them, but perhaps if treating them is so expensive then one should have considered whether so many of them should have been in prison in the first place. And whose fault is it that prison expenditures are higher than what we spend on education and child care? Complaining about this given that the government is the culprit is absurd, offensive, and inflammatory.

Thursday, February 21, 2013

Book Review: Prison Profiteers, Edited by Tara Herivel and Paul Wright

Many books and articles decrying mass imprisonment use the term "prison industrial complex", and many of us know that it refers to the financial aspects of incarcerating a population of immense scale. Many of us also know about the for profit business of private prisons and its many ills. But few are privy to the nitty gritty aspects of the prison industry.

The edited collection Prison Profiteers: Who Makes Money from Mass Incarceration fills this gap with a distressing collection of snapshots of the prison industry. Herivel and Wright did an excellent job of picking authors with intimate knowledge of the crevices of the financial machine behind mass incarceration, and the essays illuminate aspects that, even to those of us who study prisons, often remain unseen.

The essays in the first part of the book, The Political Economy of Prisons, provide a general background to prison finance, explicating (in Kevin Pranis' essay) the mechanism of bond finance and the collaboration between banks and local governments that leads to opaque, disturbing financial deals that remain hidden from, and thus uncriticized by, the public. Jennifer Gonnerman's discussion of "million dollar blocks," that is, neighborhood blocks the incarceration of whose residents costs the nation untold amounts of money, calls for a different distribution of funds - to invest them in the neighborhoods that yield prison population in the first place, rather than in the distant prison. The distance between prisons and the communities of origin of inmates is illuminated in Gary Hunter and Peter Wagner's discussion of the impact of prisons on the census, and the detrimental effect that a a large population of non-voting, non-deciding citizens has on the democratic process and on local government funding. Clayton Mosher et al provide data that refutes the assumption that cities that agree to build prisons in their midst fare better economically. And Paul Wright discusses the harm of glorifying prisons in popular culture.

The second part of the book, The Private Prison Industry, discusses a better known part of the problem - private prison companies. But the essays do a great job at exposing the mechanisms through which these companies make money and lobby for punitive legislation and policy. Having just read in the paper that a university stadium in Florida is destined to bear the name of a private prison company, GEO, these essays are even more poignant. Ian Urbina's essay on the prevalence of prison labor, and the multiple ways in which it destroys the larger labor market, is particularly notable.

The third part of the book, Making Out Like Bandits, is a series of ground-level exposes on different aspects of the for-profit industry: The deceitful marketing techniques of tasers (by Anne-Marie Cusac), the horrific abuse and neglectful safety measures taken by private prison transportation companies (by Alex Friedmann, the exorbitant prices of telephone calls and their detrimental ostracizing impact on inmates and their families (by Steven Jackson), the proliferation of high-tech gear and workshops for prison staff (by Jennifer Gonnerman), and the horrors of privatized prisons for youth (by Tara Herivel). But the most devastating essays are by Will Hylton and Paul von Zielbauer, which dissect the private health care providers. Here in CA, the standards exposed in Plata and Coleman might lead one to think that no one can provide worst health care than the states. These essays offer sobering evidence to the contrary, and the multiple examples of medical neglect and indifference are truly heartbreaking.

The collection does not offer high-level analysis of the meaning of the incarceration industry. For that, one must turn to the many big-picture works already out and available. Instead, it provides much-needed foci on the many aspects in which privatization permeates every possible aspect of incarceration. The essays are full of examples and written in an easy-to-read journalistic style. I highly recommend educating yourself not only about your tax money's role in this, but about the many businesses that benefit from this somber enterprise.

Monday, February 11, 2013

What's Cheaper: Litigating or Realigning?

Today brings with it an interesting financial gripe: Governor Brown's concern with the money made by private law firms representing inmates in prison conditions litigation. ABC News Report:

A tally by The Associated Press, compiled from three state agencies, shows California taxpayers have spent $182 million for inmates' attorneys and court-appointed authorities over the past 15 years. The payments cover a dozen lawsuits filed over the treatment of state prisoners, parolees and incarcerated juveniles, some of which have been settled.

The total exceeds $200 million when the state's own legal costs are added.

While the amounts are a blip on California's budget, they provide a continuous income stream for the private attorneys and experts involved in the ongoing litigation. And that is the point Brown is trying to make.

The AP sought the tally after the Democratic governor began using court filings and public appearances to call for an end to two major lawsuits that have forced the state to spend billions of dollars improving its medical and mental health care for prison inmates. Brown says the complaints are expensive, frivolous and motivated by attorneys' own financial interest.

"They don't want to go away," he said last month, standing behind a stack of court documents. "I mean, the name of the game here is, 'Come to Sacramento and get your little piece of the pie.'"
Brown says that, thanks to recent overhauls, California now offers inmates the best medical and mental health care of any prison system in the nation.

The response from Prison Law Office:

"It's ridiculous for the governor to merely characterize these cases as being about money, when in fact these cases have been the only impetus in the last 20 years for reducing the prison population and improving conditions," said Donald Specter, director of the nonprofit Prison Law Office in Berkeley, which has won several major cases against the state.

And from Rosen, Bien, Galvan and Grunfeld:

Michael Bien, the lead attorney representing the welfare of mentally ill inmates in one of the major class-action lawsuits, said Brown is wasting more of the state's money on a legal fight he has little hope of winning. Moreover, Bien said, inmates' attorneys expect the court battle will reveal additional lapses in inmate care that will cost the state even more money to fix.

"He's litigating with your money and my money," said Bien, of the San Francisco law firm Rosen Bien Galvan and Grunfeld, which is among the law firms that have been paid $19 million by the state in the inmate mental health lawsuit.

He said Brown and the state would be better off complying with a prison population cap supported by the U.S. Supreme Court and by working with Lopes to reduce inmate suicides and improve mental health treatment.

"It's a distraction from the primary issue here, which is, 'Why is the state still running unconstitutional prisons where prisoners are dying unnecessarily?'" Bien said. "The easiest way to stop this process is to fix the problem."

The Washington Post offers the breakdown on legal costs for Plata/Coleman, 1997-2012:


  • Inmates’ attorneys (lead firm, Prison Law Office, Berkeley), medical lawsuit: $8.3 million. 
  • Inmates’ attorneys (lead firm, Rosen Bien Galvan & Grunfeld, San Francisco), mental health lawsuit: $19 million. 
  • Court-appointed receiver’s attorneys and experts, medical lawsuit: $7 million. 
  •  Court-appointed special master and experts, mental health lawsuit: $48.4 million. 
  •  Private lawyers hired by the state, medical lawsuit: $14.3 million. 
  •  Private lawyers hired by the state, mental health lawsuit: $714,312. 
  •  Justice Department attorneys representing the state, medical lawsuit: $589,797. 
  •  Justice Department attorneys representing the state, mental health lawsuit: $3.5 million. 

Total legal costs for medical and mental health lawsuits: $101.8 million. 

Query: Wouldn't taxpayers--particularly the ones exposed to the medical horrors that prompted the Plata/Coleman litigation in the first place--have preferred to see the medical system fixed without any need for litigation?

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Props to Caitlin Henry for bringing this to my attention.

Sunday, February 10, 2013

Book Review: Golden Gulag by Ruth Wilson Gilmore

So many great books have come out in the 21st century examining the genesis of mass incarceration; we've discussed many of them here. While many of these books look at trends nationwide, or even in the industrialized West, it is no coincidence that they tend to focus on California. Not only does California have the largest prison population (in absolute numbers; we are not leading the gloomy per-capita parade), but it has pioneered many of the punitive legislation and policies later adopted by other states.

Which is partly why Ruth Wilson Gilmore's Golden Gulag provides a necessary local context to much of the conversation. Gilmore, a geographer, focuses on somewhat less analyzed aspects of mass incarceration in the Golden State: The economic and geographic conditions that have yielded massive prison construction.

After providing a dense and detailed introduction to the California political economy, Gilmore moves on to provide the central thesis of the book: California's prison boom is a "prison fix" to a problem of fourfold surplus: Capital, land, labor, and state capacity. Her discussion of the mechanism behind prison finance, done through bonds to avoid accountability to taxpayers, shows how supply and demand has worked to create a prison boom that empowered the California Department of Corrections and rendered its construction activities immune to public critique.

1982 is a key year for Gilmore's narrative. That year, the legislature approved facilities in Riverside, LA, and San Diego, as well as $495,000,000 in general obligation bonds to build new prisons, with the express goal to enhance public safety. In the same year, the legislature also reorganized CDC in a way that exempted its bidding and budgeting practices from the competitive process and instead allowed to assign work to outside consultants, to guarantee that construction occur quickly.

While prisons were initially funded by general obligation bonds, which are backed by the full faith and credit of the state, underwriters and legislators had to deal with "politically contradictory limit to taxpayers’ willingness to use their own money to defend against their own fears". Their solution was to use lease revenue bonds, usually issued by the Public Works Board for college and university facilities, as well as for veterans and farmers. LRBs carried more risk, as they were only backed by a moral obligation rather than a fiscally binding one, but the expense was offset by the fact that LRBs did not have to be placed before the voters in general elections, and could therefore be quickly organized and issued so prisons could be built close to the time they were bid on, to avoid cost hikes. As a result, in less than a decade, the state debt for prison construction expanded from $763 million to $4.9 billion, an increase from 3.8% to 16.6% of total state debt.

In the next section, Gilmore examines the economic, demographic and geographic push for partnerships between CDC and various central valley towns who wanted to revitalize their economy through the labor and land improvement that would result. As her case study, she looks at Corcoran, an agrarian town with a diverse population suffering a serious economic downturn, in part because of ten years of weather calamities. Most Corcoran residents were hopeful that a prison would put their real property to work and generate employment; their visit to Susanville impressed them with the potential of a prison to revitalized the city. Despite vocal objection, the prison was built, but the town's hopes were crushed. Employment and opportunities for locals did not improve, confirming general research that shows that, over time, prison towns compare unfavorably with depressed rural places that do not acquire prisons.

The last part of Gilmore's book looks at anti-prison activism originated by mothers. While it is an interesting account, it delves too much into the personal and would be better as a piece on its own, as it is rather disjointed from the grand narratives and analysis that precedes it.

I'm not sure I am entirely on board with Gilmore's interpretation of Marxist surplus theory, and I think it does not fare well in providing a full explanation of mass incarceration. But as a piece of the puzzle, the book offers an informative and important explanation of prison construction, one which is sorely needed as the mechanics of prison finance are cleverly hidden from state voters and taxpayers. Her tale of Corcoran is told from the perspective of someone who is not only well informed, but who cares deeply about these towns and their crushed hopes. It is certainly helpful to me as I try to understand and explain what happened after 2007 (when the book was published) and how the financial crisis impacted these developments.

Tuesday, November 13, 2012

Inside the Belly of the Beast: Correctional Corporation of America and the Recession

Much of what we've written about this year has to do with the scaling back of the punitive project because it has become financially unsustainable. We have come to call that process humonetarianism, and support it, with some reservations, as a practical platform for reform. But not all post-recession policymaking has been about reversing the punitive pendulum. Some of it is about increasing profits.

The main, but not by any means the only, beneficiary of these lean times, is Correctional Corporation of America, the largest non-governmental prison operator in the nation. Its shares are traded publicly, at $9 per share, and, while it is organized as a traditional for-profit corporation ("C-corporation") it is examining the possibility of reorganizing as a Real Estate Investment Trust, which will mean special tax considerations and high yields for investors.

CCA institutions - of which it operates 67 and owns 49 - are located in 20 states and in DC (6 of their institutions are, at this point, vacant). After an initial period of time, population in its private institutions averages 89%. A minimum occupancy is often, albeit not always, mentioned in its contracts with the states to whom it provides services. The business model is structured around the concept of a "per-diem", that is, the state pays a price per-inmate-per-bed-per-day. This is the average per-diem for all facilities (you'll note differences in price, which stem from the fact that CCA-owned and managed facilities imply facility costs that CCA needs to pay even if it stays vacant):




06/12 – 09/12
06/11 – 09/11
01/12 – 09/12
01/11 – 09/11
FY 2011
FY 2010
Combined Per Diem Averages, All Facilities
Revenue
$59.19
$58.62
$59.16
$58.76
$58.48
$58.36
Expenses
$41.34
$40.51
$41.83
$40.20
$40.15
$40.16
Operating Margin
$17.85 (30.2%)
$18.11 (30.9%)
$17.33
(29.3%)
$18.56
(31.6%)
$18.33 (31.3%)
$18.20 (31.2%)
Owned and Managed Facilities
Revenue
$67.25
$66.51
$67.22
$66.54
$66.68
$66.30
Expenses
$44.06
$42.83
$33.91
$42.50
$42.47
$42.48
Operating Margin
$23.19 (34.5%)
$23.68 (35.6%)
$22.77 (33.9%)
$24.04 (36.1%)
$24.21
(36.3%)
$23.82
(35.9%)
Managed Only Facilities
Revenue
$40.30
$40.70
$40.22
$40.93
$40.39
$39.60
Expenses
$34.98
$35.22
$35.66
$34.93
$35.05
$34.69
Operating Margin
$5.32 (13.2%)
$5.48 (13.5%)
$4.56 (11.3%)
$6.00 (14.7%)
$5.34 (13.2%)
$4.91
(12.4%)

Who are CCA's main customers? Well, the federal government, for one. Revenues from federal clients comprise 43% of CCA's total revenue for the years 2010 and 2011. But of the states that contract with CCA, California is a major contributor, providing CCA with 13% of its management revenue. 

How can that be, you might ask? After all, CCA does not have institutions in California, right? After all, CCPOA flexed its union muscles to drive CCA out of California. Well, that is true. California houses its inmates in institutions outside the state: La Palma and Red Rock in Arizona, Tallahatchie County in Mississippi, and North Fork in Oklahoma. Similarly, Hawai'ian inmates are housed in two CCA institutions: Red Rock and Saguaro, both in Arizona. Here's a promotional video in which CCA promotes Saguaro as an institution "uniquely fitted to Hawai'i inmates' needs". You will, of course, immediately note the savings pitch:





The story appears much less rosier in this newspaper article about how women inmates from Hawai'i fared at a CCA institution in Kentucky.

CCA is doing very well. As of the close of the market on Nov. 9, 2012, its stock was trading at $33.67 per share. With 100.05 million shares outstanding, the market cap sits at 3.37 billion dollars. It is considered slightly less risky than market, but riskier than industry average. CCA's CEO and Predisent, earned $3,696,789 in basic compensation. The salaries of other high-ranked corporate officers are also impressive, and have risen considerably between 2010 and 2011. Its income, as per the following table, has increased dramatically since 2001. 


FY ending Dec. 31
Net Income
No. facilities Owned and Managed
No. Managed Only
No. Leased to Third Party Operators
2011
$162,510
46
20
2

2010
$157,193
45
21
2
2009
$154,954
44
21
2
2008
$ 150,941
43
20
3
2007
$133,373


41
24
3
2006
$105,239
40
24
3
2005
$50,122
39
24
3
2004
$61,081
39
25
3
2003
$126,521
38
21
3
2002
($28,875)
37
23
3
2001
$5,670
36
28
3

Despite a slight decline in occupancy (from 95% occupancy in 2005 to 89% occupancy in 2012), the overall number of beds CCA has and leases to states has increased, which explains the increase in income. 

CCA procures political good will through extensive donations and lobbying. Between 2003 and 2012, it contributed $2,161, 004 to political campaigns and ballot measures. Like CCPOA, CCA donates to both Republican and Democrat candidates (albeit twice as much to the former than to the latter.) Its main arena of contribution is California. where among other propositions it supported 2008 Prop 6 (the policing and anti-gang measure that eventually failed to pass.) CCA also contributed to 239 different lobbyists between 2003 and 2011, for a grand total of $1,858, 094. The most lobbyists were active in California - 16 of them. 

Recently, in light of the need for California to comply with the Plata decision, CCA and the state of California modified their contractual agreement, with the state planning to return its inmates from out-of-state institutions. CCA's concern about this was explicitly discussed in their 10-Q for the third quarter of 2012, yielding the following gems:
It is unclear at this time how realignment or the five-year plan may impact the long-term utilization by the CDCR of our out of state beds. The return of the California inmates to the state of California would have a significant adverse impact on our financial position, results of operations, and cash flows. We housed approximately 8,700 inmates from the state of California as of September 30, 2012, compared with approximately 9,500 California inmates as of September 30, 2011. Approximately 12% and 13% of our management revenue for the nine months ended September 30, 2012 and 2011, respectively, was generated from the CDCR. (p.35)

And also,

“[W]e expect insufficient bed development by our partners to result in a return to the supply and demand imbalance that has benefited the private corrections industry.” (10-Q, p.30)

I expect these data provides some initial information on the main beneficiaries from the recession, and explains some of the incarceration trends we have seen since the financial crisis. More to come.


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Many thanks to Amanda Leaf for her valuable and meticulous research assistance.