Like other state governments, Oklahoma's is grappling with serious budgetary pressures. Among the many issues state lawmakers face is a staggering $16 billion in unfunded public-sector retiree benefits. To address these challenges, elected leaders should consider a time-tested and proven solution: contractor-operated prisons.
In a recent study on the issue, we examined government data from Oklahoma and nine other states, including often-overlooked unfunded retiree benefit information. Oklahoma has four such facilities that generate between 16.77 to 36.77 percent in long-term cost savings without sacrificing the quality of services offered. Long-run savings in other states we studied range from 12.46 to 58.37 percent.
Oklahoma first began using contractor-operated prisons in 1998 to ease overcrowding. Since then, instead of building new public facilities, Oklahoma has contracted with private prisons so that new prisons aren't needed. This is a significant money saver for the state.
In addition to the savings generated by the private facilities themselves, we also found that competition yields better performance for private and public facilities. As more contractors compete, both groups work to provide lower-cost, higher-quality service. For example, we found evidence that such competition has affected staffing patterns in Oklahoma public prisons, leading to advances such as the consolidation of some case manager roles and improved food services.
Critics of contractor-operated prisons argue that they generate savings at the expense of quality. Our research found no evidence of this. The private facilities generally met independent industry standards, such as those established by the American Correctional Association, and, in several cases, private facilities offered more rehabilitation programming than their public counterparts. For instance, one contract with a private prison operator in Oklahoma requires 80 percent of inmates be involved in education and job training programs, a rate the facility has consistently met.
Oklahoma's considerable savings from private prisons were achieved in part due to the older age of its public prisons, which added security problems and required higher staffing levels than the newer contractor-operated prisons. Additionally, there are the unfunded pension and retiree health care costs mentioned above, which private prisons address. Additional savings drivers include the greater productivity of private prisons and, possibly, the private prisons' greater purchasing power.
Contractor-operated prisons provide additional benefits to Oklahoma beyond savings. Although not included in the study's savings figures, private prisons contribute income and property taxes to states and local communities, while public facilities do not. These revenues can be used to reduce taxes or finance other public services. Additionally, private facilities provide an important relief valve for overcrowding, something Oklahoma has long taken advantage of, which promotes safer conditions and better inmate treatment.
With many difficult decisions on the horizon for state leaders in Oklahoma, it is important to consider all the opportunities for more efficient delivery of high-quality public services. Contractor-operated prisons — and the introduction of the managed competition model for corrections — are a proven solution that deserves a second look.
Hakim and Blackstone are professors of economics and members of the Center for Competitive Government at the Fox School of Business at Temple University. Hakim is the Center's director.