The Cost Savings of Competition
Public-private partnerships create substantial cost savings and benefit those who pay the costs – taxpayers. Rising corrections spending has kept pace with exploding inmate populations. According to The Pew Center on the States’ “1 in 31: The Long Reach of American Corrections” report:
State correctional budgets spiked along with their offender populations in recent years. In FY2008, states are estimated to have spent more than $47 billion of general funds on corrections, a 20-year jump of 303 percent. Add in another $4 billion in state special funds and bonds, and about $900 million from the federal government, and total state spending for corrections is estimated to top $52 billion.
The report also itemizes government spending, highlighting just how much of the public’s limited resources growing corrections costs consume. Corrections spending has outpaced elementary and secondary education, transportation, higher education and public assistance, with an increase of 330 percent since 1986. But recent research also shows how government partnerships with companies can offset some of these sizeable expenditures – funds that could be spent on new schools, better roads and advances in technology for communities.
Correctional partnerships help governments contain costs. In systems with partnership prisons, taxpayers reap the economic returns, as in the Vanderbilt University research. Studying both public and partnership prisons during a period (1999-2004) when correctional partnerships grew from 13 to 34 states, researchers determined that “states that have some of their prisoners in privately owned or operated prisons experienced lower rates of growth in the cost of housing their public prisoners.”
Also among the Vanderbilt study’s key findings:
States that had inmates in partnership prisons experienced lower rates of growth in operating costs for housing public prisoners.
Between 1999 and 2004, the average cost of housing of prisoners in a public facility grew by about five percent in states without a partnership prison. States with some prisoners in partnership prisons had their average costs increase by less than two percent.
The greater the percentage of inmates in partnership prisons, the greater the cost savings for government. For example, states with less than 10 percent of prisoners in partnership correctional facilities experienced an average growth rate of almost two percent in the daily per inmate cost in public prisons, compared to a growth rate of 1.36 percent for states with 10-20 percent of inmates in partnership prisons and just .036 percent for those with more than 20 percent of inmates serving time in partnership correctional facilities.
According to the study, in 2004, states without partnership prisons spent an average of $493 million to fund corrections. Introducing correctional partnerships would enable those states to shave approximately $13-$15 million off the annual cost to operate public prisons. These are savings government could realize in addition to the 5-15 percent less they would spend by placing inmates in partnership correctional facilities. These are significant savings that translate directly to better value for taxpayers.
Other respected researchers have recently released similar findings about the value and savings of correctional partnerships. For example, in comparing corrections budgets between 46 states, the Rio Grande Foundation discovered that New Mexico – with 45 percent of its offenders in partnership correctional facilities in 2001 – saved more than $9,000 per inmate than in state systems that didn’t engage in public-private correctional partnerships. 
“States that made a greater investment in private prisons enjoyed far lower expenses per day per inmate than other states. … In the states with more private prisons, Department of Corrections costs increased an average of 38.12 percent, while the states that had neglected [partnership] opportunities saw their corrections budget soar an average of 50 percent.”
 Guppy, Paul. “Private Prisons and the Public Interest: Improving Quality and Reducing Cost through Competition,” Washington Policy Center, February 2003
 Blumstein, James F. and Mark A. Cohen. “Do Government Agencies Respond to Market Pressures? Evidence from Private Prisons,”Vanderbilt University, December 2007
 The Pew Center on the States. “One in 31: The Long Reach of American Corrections,” March 2009,
 Mitchell, Matthew. “The Pros of Privately Housed Cons: New Evidence on the Cost Savings of Private Prisons,” Rio Grande Foundation, March 2003