So how do private prisons make money? Before a private prison contractor takes over a prison or detention center, the government controls the prison. The government is responsible for supplying all of the prison facility’s needs. This includes staffing, administration, maintenance, cleaning services, etc. The money used for those services comes from taxpayers. Let’s say a new prison opens up and it can hold up to 200 inmates. The government will begin hiring staff and spending money on maintaining the facility. If the government was only able to fill half of the facility with inmates, they lose money because the government spent money to keep the entire facility running, yet only half of it is used. At this point, the government can decide to cut costs by downsizing its staff and cutting prison services OR they can rely on law enforcement to send them more inmates.
This is how private prisons make money. A private contracting company or corporation will offer to take over a prison that the government is currently running. The corporation will assess the prison’s needs and how much it costs to keep it running. The corporation will then offer the government a deal. Their deal states the corp will run the prison for less than the government spends on it, on one condition: the government must keep the occupancy rate to near capacity.
Private prisons located in Arizona, Louisiana, Oklahoma and Virginia are a few that have contracts that require 80%-100% occupancy of their prisons from private corporations and prison contractors. If the government fails to meet their lockup quota, they have to pay the corporation for every single unused bed, as the corp is a set amount paid per inmate with most contracts. LCS, Corrections Corporation of America, and The GEO Group are some of the largest prison contractors, owning prisons across the nation.
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