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CCA Projects Success in 2009 Fourth Quarter Investor Call

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The Corrections Corporation of America (CCA) hosted its 2009 fourth quarter investor call last month.  Bob posted earlier that CCA's stock received a favorable outlook despite bad press.  According to company officials, this year's fourth quarter was marked by significant developments that will impact capacity.  Some of those developments include changes at Hutto, but others are continued federal agency demand as a result of immigration policy and state fiscal issues.

According to CCA officials, approximately 12,000 beds are in inventory or under development.  As a result, no new plans for speculative prisons were announced in August.  Rather, the prison profiteers seem to be working their relationships with state and federal agencies in an effort to generate new contracts. 

We have covered recent changes at the notorious T. Don Hutto prison, including the fact that the prison will now serve to detain women who are undergoing immigration proceedings.  Recently, Williamson County (where Hutto prison is located) cancelled the existing contract with CCA as they finalize negotiations with Immigration and Customs Enforcement (ICE) to house women in the prison. 

Despite changes at Hutto, CCA believes that continued demand from various federal agencies including ICE and the US Marshals Service (USMS) and the Federal Bureau of Prisons (BOP) will continue to provide the company with more than enough business including:

  • BOP currently operating at 137% of rated capacity.  BOP projects that between FY 2008 and FY 2011 its population will grow by 19,000 prisoners, with just over 12,000 new beds planned for development by 2012.  The President's FY 2010 budget requests $53.4 million to pay for 1,000 new contract beds.  According to CCA, BOP Director Harley Lappin supports contracting with private prisons to deal with overcrowding issues.
  • USMS received an 11.1% budget increase to cover additional costs associated with the it's growing detention system.
  • ICE's budget increased by 9% over FY 2009 levels, resulting in funding for 34,700 detention beds or an additional 1,300 beds.

CCA officials cited the policies of "287g Program" and "Secure Communities Initiative" as factors contributing to the need for additional detention bed space. 

Other contributing factors to CCA's bottom line include state budget conditions. According to CCA, state budget shortfalls will limit new public prison construction.  However, the company continues to cite projections in state prison populations as one of the most salient reasons for increased private prison demand. The company anticipates that a decline in public prison construction coupled with a projected increase of more than 90,000 prisoners over the next few years will lead to new state contracts.  Specifically, company officials determined that current state demand numbers about 10,000 new beds through 2012

A great deal of the CCA call was spin.  As a company trying to generate the best profits, CCA will continue to work their investors in an effort to improve revenue.  However, the call continues to emphasize significant problems relating to the issue of over-incarceration - the fact that this nation has 25% of the worlds prison population and uses incarceration as a social policy option.  Private prison companies have contributed to a growth in prison capacity at the federal, state and local level.  As such even when different approaches to crime control are under taken private prison profiteers have an incentive to fill available prison beds. 


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