DALLAS — A Standard & Poor’s report released yesterday indicates that public-private partnerships, which recently have made headlines as an important new tool in financing transportation projects, could also prove beneficial to state and local governments as they work to identify revenue to finance jail and prison projects.
On Wednesday, officials from the Texas Department of Criminal Justice told the House Committee on Corrections that the state’s prison system is overcrowded and that the influx of new inmates is not likely to abate any time soon.
Thanks to a massive $1.7 billion general obligation bond program expended over the course of the 1990s to finance construction of new prisons, the Lone Star State boasts the largest number of prison beds in the U.S. However, the state’s 156,000-bed prison system reached capacity in 2005, spurring officials from the corrections system to suggest construction of as many as five new prisons might be necessary to meet the demands of Texas courts over the next six years.
The rate of incarceration in Texas — particularly from urban areas such as Houston, which has the highest rates in the state — is expected to continue to outpace the number of inmates leaving the system.
Because of limited facilities to hold some inmates separate from the general population, the department has set a policy of allowing itself to be no more than 97.5% at capacity.
To cover the shortfall of prison beds, prison officials last year asked lawmakers for an emergency appropriation of $40 million that would pay for the cost of housing state prisoners in county jails. Texas’ current biennial budget did not provide funding for this purpose.
At the time, though, prison officials warned that housing inmates in local lockups would be a temporary fix. If the rate of incarceration continues to escalate, the corrections department would likely have to ask for more bonding capacity.
In 2001, the department had proposed a $775 million general obligation bond program to add more than 14,000 additional beds to the Texas prison system. However, by the middle of that year’s legislative session, the prison population had decreased enough that the department opted to back off its request.
Nonetheless, Gov. Rick Perry wanted the Legislature to approve debt or cash funding for $95 million of new prison facilities that would house 1,000 inmates under maximum security and 800 geriatric prisoners in space that would accommodate their special needs. Perry wanted those facilities ready to house inmates by this year.
Now, the system is releasing about 30% of prisoners on early parole compared to 17% just seven years ago. State parole officials say that nonviolent offenders who aren't likely to commit crimes again are the main group of parolees.
However, the parole board’s efforts to alleviate overcrowding currently are proving insufficient. Currently, one of every seven Texans is either locked up in a state prison or county jail or under some type of court supervision.
According to the Standard & Poor’s report released yesterday, in addition to holding the largest number of prisoners in its state system, Texas also holds the largest number of inmates in private lockups of any state — 17,000 people.
“Given these demand statistics, it is not surprising growth has occurred in privately operated facilities. Federal and state budget constraints have forced lawmakers to seek alternative ways to meet the challenges of a growing inmate population,” stated the report, written by analysts James Breeding and Richard Marino.
In Texas, many of the inmates held in private detention centers are federal prisoners awaiting trial or deportation and under the jurisdiction of the U.S. Marshals Service, the Bureau of Immigration, or Customs Enforcement.
That could change, though, if state officials opt to adopt new public-private tools already in use by the Texas Department of Transportation. In 2005, TxDOT signed an agreement with the Spanish firm Cintra Concesiones de Infraestructuras de Transporte and San Antonio-based Zachry Construction Corp. that allows the consortium to build a $6 billion, 316-mile toll road from San Antonio to north of Dallas.
Colorado officials have utilized public-private partnerships for years. According to Gary Golder, director of prisons for the state, private facilities can be ready for operations much more quickly than state-built lockups.
“Private companies don’t have the drawn-out bidding processes that governments must adhere to,” he said “They can be up and ready in a much shorter period of time, and if you need the beds immediately, sooner is better than later.”
The Standard & Poor’s report stated that while the majority of inmates nationwide remain in government-owned and operated facilities, the use of private operators is becoming more widespread.
“The construction of private prisons or the turning over of existing facilities to private companies to manage, however, has curtailed new government-constructed jails at federal, state, and local levels,” the report stated.
In addition, according to the report, the National Association of State Budget Officer’s 2004 state expenditure report indicated that corrections was the third largest category of capital spending for all states, behind only transportation and higher education.
For states trying to play catch-up for capital facilities following the budget crunch of the early 2000s, the fast turnaround and the reduction of capital financing pressures offered by a private partnership could prove attractive.
“For state partnerships with private prison operators, the state typically operates the facility and makes lease payments equal to the debt service on the bonds, subject to annual appropriation by the state Legislature,” the Standard & Poor’s report said.
The lease structure minimizes construction costs to the state while permitting financing at the state’s cost of capital.
