Money/Financial Interests

Texas 2011 budget plan includes private prison cuts at TDCJ

With the new year comes the newly proposed Texas budget plans. While seemingly no department or sector was spared from the widespread cuts, we were surprised to hear that private prison cutbacks were on the table in this tough-on-crime state:

In public safety and corrections programs, the budget report recommends shutting down a unit in Sugar Land, three Texas Youth Commission lockups and 2,000 private prison beds, a move that could close at least two additional lockups. About 1,562 prison jobs were also chopped.

Probation programs would see funding cut by 20 percent, parole supervision would be cut by almost 9 percent, and the agency's construction and maintenance funding could be cut by 83 percent, along with 90 jobs. The Victims Services Division would be eliminated. (Kate Alexander, Austin American-Statesman, "Spartan budget plan calls for broad cuts," January 19, 2011).

When browsing around the actual budget plan document itself, the Legislative Budget Board looks to other states that, in an attempt to balance the state budget, have also cut private prison contracts:

Other states, including New York, Colorado, North Carolina, and Kansas, closed units with excess capacity, left correctional positions vacant, reduced correctional staffing levels, reclassified facilities and ofenders, and terminated contracts for private facility operations. In most cases, decisions on prison closures, reclassifications, and changes in staffing levels necessary to achieve the desired level of savings were made by the chief executive leadership of the states’ Department of Corrections under direction by the Legislature or governor. North Carolina and Kansas both experienced savings of approximately $23 million from the realignment decisions, while New York’s changes resulted in savings of $8.4 million per year. (page 337)

We will continue to monitor the 2012-2013 budget plans while trying to find more specific information regarding which private prison contracts (if any) are on the chopping block.


More problems for CEC in central Texas

Amid the recent news that CEC dropped it's contract with Falls County, the company also has concerns with the Jack Harwell Detention Center in Waco -- about a 45 minute drive from the Falls County facility -- creating more suspicion that CEC is not performing well in Texas. Since CEC is not a publicly-traded company, I was unable to find any SEC filings that could confirm these suspicions. However, the company has made significant spending cuts in Texas, suggesting a financial lagging.

According to Grits for Breakfast, the Jack Harwell facility in Waco is still failing to raise enough revenue to pay for itself:

"'McLennan County extended Tuesday an agreement to keep its downtown jail closed for another six months, but the arrangement will yield a substantially lower financial reimbursement than the original deal.' 'Lower' is relative, though. The county was supposed to receive $240,000 over the last six months and got nothing. Now they're supposed to receive $60K from the contract over the next six months, but could easily again wind up with nothing.

Regular readers will recall that McLennan County (Waco is the county seat) used the county's credit to issue bonds to build a large detention center, one not needed for their own purposes but built as a speculative venture to house inmates on contract, partnering with private prison company CEC to manage the facility. But the contracts never came, so McLennan actually closed their perfectly good, already-paid-for jail in order to move all the inmates into a pay per head contract facility, just so there'd be some revenue to pay the bonds. I found this mind-bogglingly irresponsible - a veritable doomsday deal, it's been called - but for several years before the recent economic bust the practice was all the rage.

Regrettably, the private prison company appears to hold all the cards in the negotiations and is threatening to walk away from the deal entirely, leaving county taxpayers holding the bag." 

The escape plan for CEC is similar in both Waco and Marlin. In both cities, CEC has no consequences for failure as the company can get up and leave, footing the bill of the jail to the county's taxpayers, all the while keeping the money they earned from facility they didn't have to pay for. Even if the jail operates at a loss, CEC can cut their losses and walk away whereas McLennan County will still owe the $49 million on the bonds. As stated by Grits:

Without the public really understanding the magnitude of what was happening, commissioners bet the economic farm on this deal. Said one commissioner, "What people have to understand is that so goes that jail, so goes McLennan County." Readers may recall that County Judge Jim Lewis claimed earlier this year that CEC, not the county, was on the hook to pay off the jail bonds. Now it's clear to everyone this was a pure corporate subsidy: The company profits if it succeeds, but if it fails they walk away and taxpayers must pony up for the debt or default and ruin the county's bond rating. 

While this situation appears as the story of a company taking advantage of a Texas County, it is also the story of a Texas County allowing it to happen. The best advice that any Texas County commissioners can receive is (1) to seriously question the need for a new jail or prison in the first place, rather than speculatively building one and hoping for a profit, and (2) if a jail or prison is absolutely necessary, manage the county budget in such a way that private prison companies need not get involved in the first place in order to avoid these types of financial meltdowns.

CEC drops the Falls County jail contract

Last week, Community Education Centers (CEC) decided to not renew their contract to manage the Falls County Detention Center in Marlin, TX. According to the Marlin Democrat:

"CEC has chosen not to renew the contract with Falls County and the detention center will come under the direction of Falls County, sometime in April. CEC, which has personnel in many jail facilities in many towns, has moved inmates to other facilities at a lower cost and couldn’t afford to pay the inmate cost at the Falls County facility...

...[County Judge Steven] Sharp said that at the last meeting of the Commissioner’s Court, “We are working on creating a budget so we can provide all services at the jail as well as amending the Sheriff’s budget to cover such expenses. We won’t loose [sic] all the outside inmates and will still be able to provide services for the local ones. One good thing to come out of this is that we keep all the profits and not have to pay private contractors." Jail capacity is 94 – 95 inmates.

Originally, the plan projected that it would take 20 years to pay for the construction of the $3.5 million structure with funds from housing prisoners to defray that cost, but the county was paying thousands of dollars each month to CEC, therefore making no profit. The county has eight more years to repay the cost of building." ("CEC does not renew contract for jail services," Marlin Democrat, January 18, 2011.)

Without a renewal of the CEC contract, it looks like Falls County is going to provide the same services for holding out-of-county inmates as CEC was contracted to do, except now the county will not pay a company to perform a function that Falls County could have performed itself. This realignment begs the question: if the county can and will continue profiting from holding outside inmates, why did the county sign a contract with CEC in the first place?

CEC's Dickens County Jail contract expires, inmates sent to Lubbock

On Friday, Community Education Centers (CEC) decided to let their contract with the Dickens County Jail expire. All the inmates from that facility were transferred to the Lubbock County Detention Center. The US Marshals will pay the city of Lubbock a $40 per diem rate, and $10 per hour for guards, but the jail's Chief Deputy said they would negotiate for a higher rate in order to recover the cost of Lubbock's sending to Dickens in the first place. Now that Lubbock has a new and larger jail, they want their inmates back:

As of Friday the Lubbock County Detention Center hold [sic] 105 inmates with more on the way. Chief Deputy Downes said all the federal inmates should be transferred by the end of next week.  "The Lubbock County taxpayers are seeing some return on what they spent on this facility," said Chief Deputy Downes.

But for Dickens County, a community of 2,700, having the federal inmates transferred has led to all 489 beds empty and more than120 jobs lost.

This comes after the privately owned company that operated the Dickens County Jail did not renew their three year contract and is in the process of transitioning the operation of the jail back to Dickens[.]

"We've been working diligently for the last 8 months to ensure this day would never come. Unfortunately it has," said Lesa Arnold, Dickens County Judge.

The Dickens County Judge said possible loss of the jail is not an effect of less inmates. It's also due to the economy and location.

"I think a lot of it had to do with geography. It was just closer for the U.S. Marshals to the court system in Lubbock," said Judge Arnold.

The Dickens County Judge will find out Monday if another private company will operate their jail. (Christie Post, "Lubbock County Detention Center offsets cost by receiving federal inmates from Dickens County," 10 December, 2010, KCBD.)

Check back here after next Monday for any news regarding if another private company will take over Dickens.

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