Florida Provides Lesson in How Not to Privatize State Prisons
by David M. Reutter
When Florida lawmakers used a backdoor approach to try to privatize almost 30 state detention facilities in 2011, they likely did not anticipate the outcome. By the time the political dust had settled, the union representing prison employees had successfully sued to stop the privatization plan, the state’s top two corrections officials had resigned, and an ethics complaint had been filed against the governor for accepting campaign donations from companies that stood to benefit from privatizing state prisons.
But first some background.
Private Prisons in the Sunshine State
Florida’s Department of Corrections – the third largest in the nation – has been in a constant mode of expansion since a federal court began overseeing the state’s prison system due to a 1972 class-action lawsuit that challenged overcrowding and conditions of confinement. A prison population boom in the 1980s and a court-ordered limitation on the number of prisoners the system could hold created a dilemma.
At first prison officials erected tents to house prisoners at night, tore them down in the morning, and then put the prisoners on buses and shipped them around the state while court monitors inspected the prisons. This attempt to hide the true population count ended only after U.S. Marshals stopped a convoy of prison buses one morning. With the Secretary of the Florida Department of Corrections (FDOC) being found in contempt, lawmakers passed legislation to provide a prison population relief valve by awarding good time credits known as gaintime.
However, several high-profile crimes sensationalized by the mainstream media gave state politicians an excuse to renew their tough-on-crime agenda. Sentencing laws were strengthened and funding was made available to build more facilities, resulting in Florida’s prison system exploding from just under 20,000 prisoners in 1980 to its current population of more than 101,000.
Operating prisons is expensive, though, and private prison firms stepped in with attractive claims of reduced costs. In 1993, Florida lawmakers decided to embark on an experiment in prison privatization. The authorizing legislation, Chapter 957, Florida Statutes, made a substantive change in existing law by putting prison management – traditionally a function of the state – in the hands of for-profit companies. In return for this paradigm shift, the law requires that private prisons provide at least a 7% savings compared to similar state facilities (though there is little evidence that such savings have actually been achieved).
Florida currently has seven privately-operated prisons which are run by three private prison firms. Four are managed by Corrections Corporation of America (CCA), while the GEO Group operates two and MTC operates one. Approximately 10% of the state’s prisoners are held in private prisons.
During his 2010 gubernatorial campaign, current Florida Governor Rick Scott promised to cut government waste, and the FDOC’s $2.2 billion budget became part of the conversation. Fearing that prison staff would lose their jobs under Scott’s proposed budget cuts, the Police Benevolent Association (PBA), the union that represented state prison employees at the time and a staunch opponent of prison privatization, vigorously campaigned against Scott. Governor Scott’s electoral victory signaled a loss of clout by the PBA in the court of public opinion.
Backdoor Budget Proviso
In 2011, the Florida legislature proceeded to slash spending across all state agencies. When it came to the FDOC’s budget the PBA played its usual card, arguing that closing prisons and laying off guards would constitute a threat to public safety. But citing the need to cut the state’s corrections expenditures, the Senate Budget Committee slipped a last-minute proviso into the state budget, Senate Bill No. 2000.
The proviso required the FDOC to privatize 29 prisons, work camps, work release centers and annexes housing 16,000 prisoners in 18 South Florida counties known as FDOC Region IV – an unprecedented private prison expansion that would result in the termination of around 3,800 state employees. The privatization plan was to go into effect by January 1, 2012.
The PBA challenged the law shortly after it became effective on July 1, 2011 by filing suit in state court. Leon County Circuit Court Judge Jackie L. Fulford heard the parties’ cross motions for summary judgment on September 29. The next day she entered an order that put the brakes on the prison privatization plan.
“Actions taken to date are declared illegal without authority in violation of law,” Judge Fulford wrote in an order that prevented the privatization effort from moving forward.
At the outset Judge Fulford made clear that “the issue before [the court] is not whether the prisons in Florida may be privatized. The answer to that question is yes.” Legislation already allows the FDOC to contract with private companies to operate and maintain prisons and supervise prisoners, the court noted.
However, “[u]nder existing substantive law, a specific legislative appropriation must be made for a proposed privatization contract after a decision to outsource is made and evaluated by FDOC for feasibility, cost effectiveness, and efficiency before FDOC proceeds with any outsourcing services,” Judge Fulford found. “If it is the will of the Legislature to itself initiate privatization of Florida prisons, as opposed to FDOC, the Legislature must do so by general law rather than ‘using the hidden recesses of the General Appropriations Act.’”
In other words, while state lawmakers could pass stand-alone legislation requiring the privatization of prisons in FDOC Region IV, they could not do so through a backdoor budget proviso. Better known as the single subject rule, Florida’s Constitution requires that legislation be limited to one subject. The court held that the proviso in the appropriations bill requiring privatization of all Region IV facilities had no relation to the FDOC’s budget – the subject of the bill – and thus was unconstitutional.
Moreover, a “rush to meet the deadlines in the proviso” resulted in the skirting of statutory protections. “As such, the Legislature bypassed the very safeguards it built into the process that FDOC is required to follow when FDOC initiates privatization pursuant to substantive law,” Judge Fulford concluded. See: Baiardi v. Tucker, Leon County Circuit Court (FL), Case No. 2011 CA 1838.
The court further found that the FDOC had not prepared any “cost comparison study, cost-benefit analysis, or business case analysis. It has not consulted the Auditor General. It did not include a business case analysis with the RFP [request for proposals].” Also, “it appears that the rush to meet the deadlines in the proviso has resulted in many shortcomings in the evaluation of whether privatization is in the best public interest as it relates to cost savings and effective service.”
Indeed, it was not until two weeks after the PBA filed suit on July 13, 2011 that legislative staff, along with Governor Scott’s office, contacted FDOC Secretary Edwin Buss to comply with the “spirit” of existing law related to the privatization of state prisons. It was then that Buss was asked to sign off on a four-page “business case” that had been written in his absence, which said performing due diligence was not applicable to seeking bids for privatizing prisons in Region IV.
Buss dutifully signed the document. “I wouldn’t say I approved it, but yes, I read it and signed on it,” he said.
“What they’re asking you to do, I guess after the fact, is to do a business case for what has already passed? Is that essentially what this is?” PBA attorney Kelly Overstreet Johnson asked Buss during a September 2011 deposition.
“Yes. I mean, I guess the way you framed it, yeah” he replied. He added that the FDOC had prepared business justifications for other outsourcing that had a “much more in depth” analysis.
Buss said the prison privatization plan was “the largest I’ve ever heard of for private business.” Considered an expert on correctional privatization for leading Indiana’s efforts to privatize its prison health care system when he served as that state’s DOC commissioner, Buss seemed surprised that he had not been consulted about the plan to privatize Region IV until after the appropriations bill with the proviso language was already signed into law.
Buss, who had been openly skeptical about the legislative effort to privatize the Region IV prisons, was forced to step down by the Scott administration on August 24, 2011. The governor’s office cited “differences in philosophy and management styles,” but it was widely recognized that Buss’ failure to embrace the privatization plan was the reason for his abrupt departure, just six months after he took office.
“My gut would tell me that of all the issues that have come up, privatizing prisons was the deciding factor” in Buss’ resignation, said state Senator Paula Dockery.
One of those other “issues” involved Buss being pressured by the governor’s office to discontinue a contract with consultant Elizabeth Gondles to oversee the FDOC’s privatization of prison health care services statewide. The bidding process for the $400 million health care contract was canceled due to concerns that Gondles had written the RFP requirements to benefit her husband, James Gondles, executive director of the American Correctional Association (ACA). Under the terms of the RFP, all prison health care contractors had to “maintain full accreditation” by the ACA.
Following his forced resignation, Buss was replaced as FDOC Secretary by Ken Tucker, the assistant commissioner of the Florida Dept. of Law Enforcement. “I think Ed Buss was an honorable guy and I think he walked into a buzz saw and it’s a shame,” said Matt Puckett, executive director of the PBA.
The state fought hard to prevent Buss from being deposed in the PBA’s lawsuit after he stepped down, with the Attorney General filing an unsuccessful appeal to the First District Court of Appeal. “It’s a common principle that high-ranking people in government don’t testify,” Governor Scott argued.
The appellate court disagreed and the PBA was allowed to take Buss’ deposition, in which he testified candidly about his lack of involvement in the proviso process and about the FDOC’s RFP for the prison privatization plan.
In the latter regard, in her September 30, 2011 ruling in favor of the PBA, Judge Fulford took issue with the request for proposals that the FDOC put out for privatization of Region IV prisons. The RFP sought only one contract for all 29 facilities and no other options were considered. That may increase “convenience and speed,” but there was no “demonstrated savings or benefit advantage” to that approach as required by law, the court wrote.
Professor Michael Hallett, chairman of the University of North Florida’s Criminology Department, warned that awarding such an expansive prison privatization contract to a single company might “render the state subject to captivity by giving only one corporation so much control over a significant portion of the state budget.”
State Senator Mike Fasano, who chairs a Senate Budget Subcommittee in charge of prison spending, applauded the court’s decision striking down the wholesale prison privatization plan. “This is a perfect example of why we should not be making major policy changes in provision language that did not go through substantive committees, debated, and taken testimony pro and con,” he stated.
“It didn’t go through the appropriate committee process. It wasn’t heard in criminal justice committee in the Senate. It wasn’t heard in my committee that oversees the Department of Corrections budget,” Fasano noted. “You would think that if we were doing such a major policy change, it would have gone through those two committees. It wasn’t a stand-alone bill and that’s what, if I’m not mistaken, the court has said, that it should have been a stand-alone bill because it’s a single subject issue.”
House Leader Ron Saunders opined that the proviso was used to provide political cover. “There are political reasons they’ve been doing this, because they don’t want to place some of their members in an awkward position,” he said. “This way, people can shrug and say, ‘I didn’t have any choice and I had to vote yes’” in order to pass the appropriations bill.
Following its court victory, the PBA was feeling strong again. “It shows the Legislature and Governor that we will not be pushed around,” wrote PBA president Jim Baiardi in a message to FDOC employees. “We struck a blow against the arrogance of the Legislature.”
Governor Scott also declared a victory of sorts. While saying he supported the prison privatization plan, Scott also viewed the court’s order as affirming the power of his office. “I should have the power to veto things that are major policy changes,” he said. “I got elected as governor to make decisions on behalf of all the citizens of the state and watch how all the money is spent.”
Then again, Scott didn’t veto the prison privatization proviso in the appropriations bill when it crossed his desk, though he could have done so.
Questionable Cost Savings
Senate Budget Committee Chairman J.D. Alexander responded to criticism about the failure to perform due diligence and follow proper legislative procedures regarding the prison privatization plan by saying his committee had received testimony that the plan would save around $22 million annually. That estimate was based on the minimum 7% cost savings required by statute for private prison contracts, though such savings have not been proven.
“Donna Arduin suggested, not just Region IV, but said there was significant savings between privatized corrections on a per-day basis in say, Texas and some other places, over what Florida was spending,” said Senator Alexander.
Arduin is a nationally-recognized government cost-cutter. She has been a budget advisor to governors in Michigan, New York and California, was the budget chief for former Florida Governor Jeb Bush, and served as a budget advisor to Scott’s campaign. In November 2010 she was named the head of Governor Scott’s team to draft his first state budget proposal.
Arduin’s consulting firm, Arduin, Laffer and Moore Econometrics, was retained by Florida’s Senate Budget Committee to look at all areas of government, including the state’s prison system. The “unit cost comparison” she presented was a compilation of data from efforts by Texas and other states to control rising prison costs. Her firm found that women, juveniles and elderly prisoners are more expensive to house, educate and rehabilitate. Private prison contractors have been able to incarcerate male prisoners at competitive rates in most cases, she said, but “It hasn’t been a total solution for any state.”
Interestingly, while working with Florida lawmakers in 2006, Arduin also served as a trustee of Correctional Properties Trust (CPT), a real estate investment trust that was established by Wackenhut Corrections – now GEO Group. CPT later became CentraCore Properties Trust, which was acquired by GEO Group in 2007. Further, Arduin’s one-time boyfriend, David Ericks, is the owner of Ericks Consultants – a lobbying firm that has represented GEO Group for over a decade. [See: PLN, March 2011, p.1].
GEO was confident that it could make the winning bid for the Region IV prisons, and the company dedicated a web page to that effort. “The state of Florida is considering the privatization of 29 [prisons] in South Florida, and GEO is excited for the opportunity to grow,” the website states. “Our World Headquarters in Boca Raton, Florida is located in the heart of Region IV facilities and is less than a two hour drive away from almost every facility in Region IV.”
Judge Fulford’s order derailing the state’s wholesale prison privatization plan deflated that cheery optimism, at least in the eyes of investors. Within three days after the court ruled in the PBA’s favor in its lawsuit challenging the appropriations bill proviso, GEO’s stock price fell 4.5% while CCA’s stock dropped 3.5%.
Despite being almost two decades into its prison privatization experiment, Florida has been unable to show that private prisons have been a solution to the state’s ever-expanding prison system. “Florida’s experience with privatized prisons raises serious questions about whether the taxpayers are getting their money’s worth,” concluded an April 2010 report by the Florida Center for Fiscal and Economic Policy (FCFEP), an independent research organization. [See: PLN, March 2011, p.36].
The FCFEP found there was no evidence that prison privatization had saved Florida taxpayers money, as required by law, because “the procedure to establish a 7% cost savings is flawed.” Additionally, there is virtually no difference in recidivism rates of prisoners released from private or public prisons, so savings have been elusive in that respect as well.
According to a December 2003 research study by the FDOC, the Florida Correctional Privatization Commission and the Florida State University School of Criminology and Criminal Justice, “in only one of thirty-six comparisons was there evidence that private prisons were more effective than public prisons in terms of reducing recidivism.” A 2008 study involving Oklahoma prisoners reached a similar conclusion, finding that recidivism rates for prisoners released from private prisons were actually higher in some cases. [See: PLN, Dec. 2009, p.11].
Further, the legislature’s attempt to privatize Region IV facilities would have incurred substantial administrative costs that lawmakers ignored. FDOC Chief Deputy Secretary Daniel Ronay had e-mailed the governor’s budget office in May 2011 to warn that layoffs of state prison employees in Region IV due to privatization would “cripple the agency” with $25 million in retirement, comp time and sick leave benefits that were not accounted for in the budget. “This amount was NOT taken into consideration by the legislature, even though they were made aware,” he wrote. The e-mail was uncovered by the PBA through a public records request filed with the FDOC.
Ronay resigned on October 5, 2011, two months after Buss was forced out. “I came to Florida committed to being a member of Governor Scott’s administration and assisting in leading the Florida Department of Corrections towards increased efficiency and success,” he wrote. “Circumstances are such that I am unable to continue in that role.” The FDOC declined to say whether Ronay was pressured to quit.
Politics as Usual
“We’re not going to file an appeal. It goes back to the Legislature. But let’s all remember what we’re doing here,” Governor Scott said during a press conference on October 31, 2011, the deadline to appeal the court’s decision in the PBA’s lawsuit.
Scott backed the plan to privatize prisons in Region IV but expressed concerns about the proviso process, noting that he would have had to veto a significant part of the state budget if he disagreed with certain proviso language. Asked about privatizing more FDOC facilities, he said, “It’s not going to happen if it doesn’t save money.”
State lawmakers, meanwhile, had other ideas. Just a few hours after Scott’s press conference, the Attorney General’s office, on behalf of the Florida legislature, appealed Judge Fulford’s order. Apparently, lawmakers believed that if they prevailed on appeal they could avoid the protracted political battle over prison privatization that would ensue if they followed the usual practice of introducing a new bill, debating the issue and pushing the legislation through the committee process.
“I don’t think we need to go pass a new bill or call a special session. I think we are going to win the case,” said Senate President Mike Haridopolos.
Following the filing of the appeal, the FDOC indicated it would proceed with the RFP for privatizing prisons in Region IV, but the PBA sought an emergency stay which was granted by Judge Fulford on November 4, 2011. “The Department of Corrections, its attorneys, agents and employees are directed to cease and desist all actions relating to the procurement process on the prison privatization RFP (request for proposals), and shall forthwith refrain from taking any further action inconsistent with this Court’s final judgment,” Judge Fulford wrote.
Due to the high stakes involved it’s unlikely that state lawmakers will actually pursue the appeal, and are instead using it for political saber-rattling. This is because the prison privatization proviso isn’t the only one the legislature has slipped into budget bills; in fact, the practice is fairly routine and has been used for decades. An adverse ruling by the Court of Appeal would make it difficult for lawmakers to use that backdoor method for legislation that is unlikely to pass on its own – which extends far beyond the Region IV privatization plan.
“The question is when does the proviso language become substantive?” asked attorney Barry Richard, who specializes in the Florida Constitution. “To the extent that the legislature wants to retain broader authority to control expenditures through proviso language, it may feel it doesn’t want to take the risk of getting more restrictive language” in an appellate decision.
Senator Haridopolos acknowledged that possibility but said he intended to continue to use proviso language. “That has been the consistent policy of how we have moved toward prison privatization,” he remarked.
After Judge Fulford ruled in its favor, the PBA said it was primed for a legislative battle since lawmakers could introduce a bill to privatize Region IV that might succeed where the proviso attempt failed. “We are planning to use our political clout like never before. Our lobby team is working, right now, to line up opposition to ANY attempt to put public safety in the hands of profiteers,” wrote PBA Senior Vice President Danny Witt in a newsletter to FDOC employees.
The way the prison privatization plan was pushed “was incredibly sneaky” added PBA executive director Matt Puckett. “If we had a fair fight, we think we can beat this thing on the merits.”
However, in November 2011, despite the PBA’s long-standing efforts to oppose privatization, which poses a threat to state employees’ jobs, FDOC workers voted to oust the PBA as their union and instead seek representation with the Teamsters.
“These are tough times and they wanted a tough union to represent them,” said Teamsters general president Jim Hoffa.
“Of course we are disappointed in the result but nevertheless plan to continue to fight for the rights of correctional professionals,” stated PBA president Baiardi.
While the Teamsters said they would work with the PBA to oppose prison privatization efforts, Teamsters vice president Ken Wood acknowledged that if the Region IV facilities were privatized they would try to unionize private prison staff – which would appear to be a conflict of interest.
Prior to representing FDOC employees, on September 12, 2011 the Teamsters filed an ethics complaint against Governor Scott. The complaint alleged that the prison privatization plan was tainted by almost $1 million in political contributions from CCA and GEO Group that went to Scott, state lawmakers and the Republican Party.
According to the Teamsters, during the last election cycle GEO and its executives gave $829,665 to political parties and candidates in Florida, while CCA donated $138,494. Additionally, both CCA and GEO made contributions to Governor Scott’s inaugural fund in the amounts of $5,000 and $25,000, respectively. GEO had also paid its team of Florida lobbyists between $220,000 and $360,000 to influence state officials, and the company reportedly said it would spend $3 million to compete for the Region IV private prison contract.
“The governor’s privatization scheme smacks of political payback, pure and simple,” said Wood.
“It all comes down to politics and the big donors,” noted Senator Fasano. “GEO and the other private companies that run prisons are very big donors to the party here in Florida and to the elected officials, both past and present.”
Although the Florida Commission on Ethics initially found that the Teamsters’ complaint was “legally sufficient” for an investigation into the state’s plan to privatize Region IV prisons, the complaint was dismissed in October 2011. The Commission held that pay-to-play politics are not equivalent to a “quid-pro-quo, criminal-bribery-like understanding allegation” necessary to allege an ethics violation, and that campaign contributions do not constitute improper influence.
And the Fight Goes On ...
Governor Scott released his proposed 2012 state budget on December 7, 2011. The budget requires the Department of Management Services to issue an RFP “for the management and operation of six state operated work release centers and three reentry centers (Baker, Gadsden, and Everglades) scheduled to come online in October 2012,” but there was no mention of privatizing Region IV facilities.
Again, however, Florida lawmakers had other ideas. On January 13, 2012 the Senate Rules Committee introduced two bills – SB 2038 and SB 2036. The former requires the privatization of all FDOC facilities in Region IV as originally specified in the budget bill proviso, with “actual cost savings to the state of at least 7 percent” and specified performance measures for the privatized prisons.
The companion bill, SB 2036, provides among other things that cost-benefit and business case analyses submitted by state agencies in support of their legislative budget requests will not apply “to the outsourcing or privatization of agency functions expressly required by the General Appropriation Act or any other law until the first legislative budget request submitted by the agency after the contract for the outsourcing and privatization has been executed.” That is, no cost-benefit or business case evaluations of such privatization contracts are required until after the contracts have been signed.
The bill further specifies that existing statutory requirements applicable to prison privatization contracts in 944.105, Florida Statutes shall “not apply to a contract for the outsourcing or privatization of the operation and maintenance of correctional facilities expressly directed to be outsourced or privatized by the General Appropriation Act or any other law.” Such existing requirements include “substantial savings,” “the same quality of services” from private prisons as that provided by the FDOC, certification of and use of force by private prison guards, and making escapes from privately-operated facilities a crime, among other provisions.
Taken together the two bills comprise a massive giveaway to the private prison industry. They concurrently mandate the privatization of 29 state correctional facilities, require a cost-benefit analysis and business case evaluation only after such prison privatization contracts are awarded, and simultaneously void the FDOC’s existing statutory requirements for those contracts.
Basically, the bills, which could have been drafted by CCA or GEO Group to the extent that they benefit private prison firms at the expense of Florida taxpayers, set the stage for another showdown between state lawmakers and privatization opponents. They also constitute a second bite at the private prison apple – even if the bills fail to pass, the legislature can still pursue its pending appeal of the PBA’s successful lawsuit.
Considering there is scant evidence that private prisons in Florida have saved the state money, and that prisoners re-leased from privately-operated facilities have the same or higher recidivism rates as those released from public prisons, the repeated efforts by the state legislature to privatize FDOC Region IV can best be explained as political payback for campaign contributions from private prison firms.
While companies like CCA and GEO Group will profit from expanded prison privatization contracts, and politicians will benefit from those companies’ continued lobbying efforts and financial largess, should the legislature prevail in its private prison plan the loser will be Florida’s taxpayers, as public funds will be diverted from the FDOC into the coffers of for-profit prison firms with no discernable benefit to the state.
As the battle to expand prison privatization in Florida continues, one expert has recommended that everyone slow down. “In what will be the largest correctional privatization contract in U.S. history, a more deliberate process would be prudent,” said Professor Hallett. “Assuming you accept the logic of market forces controlling costs, then why would you bias the process in favor of an already monopolized industry, which itself lowers cost efficiency and accountability?”
Dean Baker, co-director of the Center for Economic and Policy Research, suggested an answer. “Privatization just doesn’t work,” he stated. “It’s a way for politicians to throw business to their friends.” And in Florida, those friends apparently include private prison companies like GEO Group and CCA.
Sources: St. Petersburg Times, Miami Herald, Investor’s Business Daily, New York Times, Businessweek, Nashville Post, Palm Beach Post, Orlando Sentinel, Associated Press, www.flanews.com, Sun Sentinel, Florida PBA Corrections Review, www.tallahassee.com, Florida Tax Watch, Florida News Network, Tampa Tribune, www.dc.state.fl.us, www.browardbulldog.org, www.stateline.org, www.postonpolitics.com, www.dbapress.com, www.myfloridahouse.gov