PRISON STUDY FINDS PRIVATE PRISONS HELP STATES
HOLD DOWN CORRECTIONS EXPENDITURES
Corrections Budgets in States Without Private Prisons Grow Much Faster

I

n a study released in April 2003, two professors from

2. Utilizing Private Prisons Can Generate Significant
Budget Savings

graduate schools at Vanderbilt University analyzed
whether the use of private prisons by state correctional

In 2001, states without private prisons spent an

departments had any impact on the rate of growth in states’

average of $455 million in corrections expenditures.

public correction system operating budgets.

Introducing private prisons could save the “average”
state in that group $20 million for one year in public

The researchers concluded that between 1999 and 2001
– the years for which the most accurate data are available

prison operating costs alone. Additional savings would

– states that utilized private prisons had considerably more

be generated from lower operational costs in the

success in keeping public corrections spending under

private prisons themselves; according to numerous

control than states with no private prisons.

independent studies, the operating costs of private
prisons are, on average, 5 to 20% lower than at public
corrections facilities.

Among the study’s more important findings:
1.

Private Prisons Result in Slower Growth of
Corrections Expenditures
During the period 1999-2001, states that utilized
private prisons experienced lower growth in the cost
of housing their public prisoners compared to states
with no corrections privatization. For those states, the
growth in daily costs of housing prisoners in the public
corrections system was reduced by 8.9% or about
4.45% per year.
3.

Even Small Levels of Private Prison Use Can Have
a Large Impact on Correctional Expenditures
States with less than 5% of their prison population
under private management experienced a 12.5%
growth in public corrections expenditures compared
to an 18.9% increase in states with no private prisons.
States with even larger percentages (20% and above)
of prisons under private management generated even
greater savings, with per capita increases in public
prisons of only 5.9%.

The following table compares the growth of cost per prison in states that permit privately operated prisons versus those
that do not.
Growth in Per Diem Cost for Public Prisoners by Percent of Prisoners in Private Facilities
Percent Private Prisoners
I. Yes/No Private Prisoners*
No
Yes
p-value
II. By Percentage
None
< 5%
5% to < 10%
10% to < 20%
20% or higher
Total

1999 to 2001
Average Growth in Cost per Public Prisoner

Number of States

18.9%
10.8%
0.09

19
30

18.9%
12.5%
12.1%
9.7%
5.9%
14.0%

19
9
10
7
4
49

Note: Due to lack of data on Department of Corrections expenditures, Alaska was eliminated in the 1999-2001 comparison. Since Alaska
authorized privately held prisoners in 1999, a total of 30 states had privately held prisoners in 1999, while 20 did not.

A number of variables were assessed in the statistical

diem expenditures (net of private prisons); percentage of

study, including: the number and percentage of

prisons under court order; differences in the cost of living

prisoners in private facilities; overall state government

across states; percentage of prisoners held in maximum

expenditures per capita; Department of Corrections per

security facilities; and prison capacity utilization.

About the Researchers
James F. Blumstein is a Centennial Professor of Law, Vanderbilt Law School; Director, Health Policy Center, Vanderbilt Institute for
Public Policy Studies. B.A. (Economics), Yale College; M.A. (Economics), Yale University; LLB, Yale Law School. Institutional
affiliations for identification only.
Mark A. Cohen is a Professor of Management (Economics), Owen Graduate School of Management, Vanderbilt University;
Director, Vanderbilt Center for Environmental Management Studies; Leverhulme Visiting Professor and Visiting Professor of
Criminal Justice Economics, University of York (U.K.). B.S.F.S., Georgetown University; M.A. & Ph.D., Carnegie-Mellon
University. Institutional affiliations for identification only.
A complete copy of the study is available by contacting the Association of Private Correctional & Treatment Organizations – Andy
LeFevre, executive director, (703) 548-8532, www.apcto.org, or Corrections Corporation of America – Louise Green, vice president
marketing, (615) 263-3106, www.correctionscorp.com (press release section). These two organizations funded the study.