State weighs expansion even as costs run highThe Arizona Republic
by Bob Ortega - Aug. 7, 2011 12:00 AM
The private company that operates the Kingman prison publicly took full responsibility for last year's breakout, in which escapees were charged with the murder of an Oklahoma couple.
But behind the scenes, Management & Training Corp. clashed with the state over a litany of problems revealed after the escapes: How to improve lax security. Whether the state should pay the company for empty beds after the state, responding to the breakout, removed high-risk prisoners and quit sending new inmates there.
Since May, Arizona has paid more than $3 million to MTC for empty beds after the company threatened to sue the state, claiming it was entitled to nearly $10 million.
Now, as Arizona is about to contract for a massive expansion of private-prison beds in the state, critics say that the financial concessions with MTC raise questions about how well the state can hold private-prison operators accountable.
There are other questions, too.
The state, by law, may contract for private prisons only if they are less expensive or offer more for the money than government-run facilities. But basic operating-cost studies suggest that private prisons actually cost more per bed.
State law also requires Arizona's Department of Corrections to compile and analyze data from its contracts that could show how private and state prisons compare in security, safety and quality of their services. But The Arizona Republic has found the department never followed those requirements.
Without that information and analysis, neither the state nor taxpayers can know whether private prisons can provide better or equivalent services for less money, as state law requires.
Public hearings will be held over the next two weeks in five communities throughout the state. The state plans to award one or more contracts for 5,000 new private-prison beds in September.
Arizona's five existing contract prisons house roughly 6,100 inmates, 15 percent of the total state prison population of about 40,200.
But as the bidding process moves forward, the state's dealing with MTC over the Kingman prison offers a cautionary example.
After the July 30, 2010, escapes, the state pulled 238 high-risk prisoners and said it would stop sending prisoners to Kingman until MTC fixed faulty alarms, broken lights and other problems and retrained its corrections officers.
By contract, MTC was being paid $60.10 per inmate per day, with a guaranteed minimum occupancy of 97 percent. But Corrections Director Charles Ryan suspended that guarantee, saying that MTC was out of compliance with its contract and that until MTC fully addressed lax security, it would be paid only for the inmates it actually housed.
Over the eight months it took MTC to restore security to the Department of Corrections' satisfaction, the inmate count dropped from 3,353 to fewer than 1,900.
While state officials accused MTC of dragging its feet in fixing flaws at Kingman, the company filed a notice of claim in January, saying the state had no right to refuse to pay the guaranteed 97 percent and demanding millions of dollars to make up for what it had lost since the state stopped sending prisoners.
By March 21, when the two sides settled - and Corrections agreed that MTC had fixed its security problems - MTC's demand amounted to nearly $10 million. In exchange for MTC dropping its claim, Corrections agreed to begin paying MTC at the 97 percent rate on May 1, even though it would take until the end of August to send enough new inmates to refill the prison to that level.
"We believe it was a sound business decision in the interests of the department and of the state," said Ryan, who was advised by the state Attorney General's Office.
At the time, 71 percent of the prison's 3,400 beds were occupied. Corrections began sending inmates there again in late March. As of last week, Kingman was still more than 150 inmates short of the 97 percent occupancy and MTC had received a little more than $3 million in per diem payments for empty beds.
The Republic obtained information about this previously undisclosed agreement under the Arizona Public Records Law.
Critics see the back and forth as proof of how hard it is for the state to hold private-prison operators accountable.
"It's disgusting but not surprising," said Caroline Isaacs, a spokeswoman for the American Friends Service Committee, a Quaker group that has called for investigating private-prison companies' influence in state politics. "Arizona is strapped for cash, and we don't have the political will or the legal muscle to go up against a corporation like that, so they can operate with something close to impunity."
An MTC spokesman said that, in the long run, this arrangement will save the state many millions of dollars.
State officials say once the inmate count reaches 97 percent, it will pay MTC only $22 a day for each additional inmate. If the prison were completely full, the average per diem would drop to $58.96 from the current $60.10. MTC also said it has spent $839,863 on better security and other costs at Kingman related to the escape. According to state figures, the company lost about $12.8 million in unpaid per diem from the time of the escapes through April 30.
After the Kingman escapes, Arizona's on-site monitor at the prison - who has since been fired - admitted that in 14 months on the job he had never read the state's contract with MTC. He also failed to address a broken alarm system that a state internal review showed routinely gave 200 to 300 false alarms per shift and that MTC hadn't serviced for two years.
Legally, the state can cancel the contract of a company if it fails to meet its obligations. But Isaacs said that is an unrealistic option because the state has few options on where to send inmates.
"We're so desperate because of prison overcrowding. These companies have got the state over a barrel," she said. "When things go wrong, is Ryan really going to cancel the contract? Probably not, and they know that."
Ryan said the state did consider canceling the Kingman contract. But he said that when the state sent a "cure notice" in December giving MTC 90 days to fix the flaws or face termination, "we believe we fully got their attention."
He noted that short of canceling a contract, the state can and does use fines or withholds payments to enforce requirements such as maintaining adequate staffing levels. This year, through the end of June, the state has withheld about $844,000 from Kingman, $54,000 from Marana (also operated by MTC) and about $6,000 from Geo Group's Phoenix West and Florence West prisons for failing to fill vacant positions quickly enough.
Ryan said he is satisfied that the state has adequate leverage to keep private-prison operators responsive.
Tom Jones, a Florida attorney and former quality-assurance manager at Corrections Corp. of America, the largest private-prison operator in the country, said companies operate from minimums rather than maximums.
"If you leave a company to its own devices, the business will always do the least they have to do to get by," he said. "You have to start with well-trained, on-site contract monitors and a monitoring plan that isn't just a checklist but tells you what you do when there's something wrong with the picture."
That is particularly true for issues such as staffing levels, Jones said.
"In my experience, the staffing is something that even internally you have to keep a close eye on. There's a lot of room for them to save money by not staffing or half staffing."
Inadequate staffing can lead to security problems and make it harder to keep staff and inmates safe.
David Shapiro, an attorney for the American Civil Liberties Union's National Prison Project, says that, across the country, "there have been numerous cases where a state contract requires a certain staffing level and a private prison falls below that, but states are lax in enforcing contractual penalties."
While Arizona appears to be willing to impose penalties, Ryan says some of the biggest changes since the Kingman escapes have been in the improved monitoring of private contractors.
New rules require monitors to be deputy wardens who have run a prison unit. The state also changed its audit procedures. Monitors now are required to write monthly audits of each facility, and they audit staffing levels continuously, Ryan said.
Additionally, the state revised its original request for proposals for the 5,000 new private-prison beds.
The Corrections Department decided that when it awards new contracts, private prisons will have to provide additional security that includes perimeter fencing and alarm systems built to medium-security standards even at facilities meant to hold only minimum-security inmates.
The terms also specify state monitors must have unannounced access anytime to any part of the facility, to all inmates and to all records. And companies will be subject to a $25,000 fine for any violation that poses "a known and excessive risk" to public safety, to an inmate's health or safety, or that violates an inmate's civil rights.
These additional measures, Ryan said, are a direct result of Corrections reassessing its approach after the Kingman incident.
Corrections' budget for this fiscal year is $1.06 billion. But the department can't yet show whether private prisons offer a better deal than publicly run facilities. Do they offer more for the money? Are they safer? More efficient?
In theory, answering such questions should be easy.
Arizona statutes require Corrections to carry out a biannual performance study for every contract. The study analyzes costs, the security and safety of each prison, how inmates are managed and controlled, inmate discipline, programs, health and food services, staff training, administration and other factors and then compares those factors to state facilities.
Until now, Corrections hasn't followed the law. It has only conducted annual studies of overall operating costs. Ryan, who took over the department in 2009, said he is correcting this. The first of the more thorough comparisons will be completed in January.
The studies could show for the first time how private and state prisons measure up.
On a national level, independent cost studies have been inconclusive, finding little or no cost savings.
"There is nothing private agencies can do that governments can't do to cut costs or provide quality services," said Travis Pratt, a professor at Arizona State University's School of Criminology and Criminal Justice.
Apples-to-apples comparisons are difficult because private prisons tend not to serve medically needy, seriously mentally ill and higher-security inmates, all of whom cost more. And most states, including Arizona, keep some functions in state hands, such as transporting inmates, classifying inmates' security levels and computing their time served.
A recent study for the state of Utah found no cost savings in private prisons.
In Texas, a 2010 report by the Legislative Board found that private prisons in that state cost $6.65 a day less per bed than state prisons but noted the private-prison figure didn't include costs carried by the state, such as transporting and classifying inmates.
Arizona's Department of Corrections includes such factors in its annual cost comparisons.
For last fiscal year, its study found that, overall, private prison beds are pricier: They cost 3 cents a day less than state prisons for minimum-security inmates (at $46.56 a day) but $4.60 a day more for medium-security inmates (at $53.02 a day). Medium-security inmates make up 43 percent of the total in private prisons, according to the Corrections Department. There are no maximum- security inmates in the state's private prisons.
By state statute, Arizona is supposed to contract with private prisons only if they can offer their services for less than the state or offer better services for the same price. Gov. Jan Brewer and the leaders in the Legislature's Republican majority have pushed for privatization despite the findings of the state cost studies.
Some legislators argue that even if the operating costs are similar, the state benefits because when it contracts, Arizona doesn't have to come up with the money upfront to build a facility. Instead, the private contractor pays to build the prison and factors that cost into the per diem rate it charges the state.
Cost aside, it also is difficult to measure whether Arizona's private prisons are any more secure than state prisons. Escapes are relatively rare. Including the Kingman breakout, in the past 10 years there have been 25 incidents involving 28 inmates from public and private prisons. Of those, 17 escapees were minimum-security inmates who walked away from work crews outside prison walls; all but two were recaptured in short order.
Of escapees from inside prisons in the past decade, including Kingman, four came from
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