In the 1990s, states couldn't build prisons fast enough. To keep up with the ever-increasing number of prisoners, many states turned to private prison companies like Wackenhut Corrections, Corrections Corporation of America, and Cornell Corrections. But the prison-building boom of the 1990s has now evolved into a pattern where private, for-profit, prisons search for new ways to fill their existing beds.
In 1994, 40 states were under court order to ease overcrowding. In fact, the overcrowding problem got so bad that 30,000 prisoners were released that year without spending a day in jail. The problem turned into profits for Wackenhut, who embarked on a six-year prison-building spree.
In the second half of 2000, state prison populations fell by over 6,200 _ the first drop since 1972. Now, many states are facing a surplus of prison beds after embarking on massive prison-building programs, and Wackenhut has had to rethink its business strategy to cope with this change in circumstances.
In Florida, where Wackenhut has two privately run prisons, authorities report that the state prisons are running at only 81 percent capacity, while Wackenhut's two Florida prisons are 95 percent filled. Wackenhut's situation in Florida appears stable, especially since Gov. Jeb Bush wants to "save money" by filling the privately managed prisons. The state "has been specifically pumping inmates into our facilities" to save money, said Mark Hodges, director of the Florida commission that oversees private prisons.
But in other states, companies like Wackenhut have had to diversify, including turning to the federal government for business and looking into managing other types of facilities. The number of prisoners entering the federal prison system last year grew by 9.4 percent over 1999, according to the U.S. Department of Justice. To handle the growth, the government has proposed building three 1,500-bed prisons. Wackenhut is competing for those contracts.
Wackenhut has also begun to manage health service, psychiatric care, and sexual offender facilities in order to offset the decline in prison business.
Despite the decline in the number of prisoners, running private prisons apparently continues to be a profitable venture. Wackenhut projects revenues of $541 million in 2001, with $40 million to $50 million of that coming from its non-prison facilities. In the third quarter of 2001, Wackenhut _ which is publicly traded on the NYSE at a current share price of $15.50 _reported a profit of $5.8 million, compared with $2.4 million for the same period a year ago. These profits are based on third-quarter 2001 revenues of $142.2 million that is nearly a 5 percent increase from 2000.
Analyst Jim McDonald of First Analysis Securities in Chicago sees the three big private prison companies shifting their emphasis from state to federal prison management for at least the next two years.
"The companies are just following the opportunity," McDonald said.
Source: The Palm Beach (Fl.) Post
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