Florida Provides Lesson in How Not to Privatize State Prisons by David Reutter

Posted: May 25, 2013 in News and politics

When Florida lawmakers used a backdoor approach to try to privatize almost 30
state detention facilities in 2011, they likely did not anticipate the outcome.
By the time the political dust had settled, the union representing prison
employees had successfully sued to stop the privatization plan, the state’s top
two corrections officials had resigned, and an ethics complaint had been filed
against the governor for accepting campaign donations from companies that stood
to benefit from privatizing state prisons.

But first some
background.

Private Prisons in the Sunshine State

Florida’s
Department of Corrections – the third largest in the nation – has been in a
constant mode of expansion since a federal court began overseeing the state’s
prison system due to a 1972 class-action lawsuit that challenged overcrowding
and conditions of confinement. A prison population boom in the 1980s and a
court-ordered limitation on the number of prisoners the system could hold
created a dilemma.

At first prison officials erected tents to house
prisoners at night, tore them down in the morning, and then put the prisoners on
buses and shipped them around the state while court monitors inspected the
prisons. This attempt to hide the true population count ended only after U.S.
Marshals stopped a convoy of prison buses one morning. With the Secretary of the
Florida Department of Corrections (FDOC) being found in contempt, lawmakers
passed legislation to provide a prison population relief valve by awarding good
time credits known as gaintime.

However, several high-profile crimes
sensationalized by the mainstream media gave state politicians an excuse to
renew their tough-on-crime agenda. Sentencing laws were strengthened and funding
was made available to build more facilities, resulting in Florida’s prison
system exploding from just under 20,000 prisoners in 1980 to its current
population of more than 101,000.

Operating prisons is expensive, though,
and private prison firms stepped in with attractive claims of reduced costs. In
1993, Florida lawmakers decided to embark on an experiment in prison
privatization. The authorizing legislation, Chapter 957, Florida Statutes, made
a substantive change in existing law by putting prison management –
traditionally a function of the state – in the hands of for-profit companies. In
return for this paradigm shift, the law requires that private prisons provide at
least a 7% savings compared to similar state facilities (though there is little
evidence that such savings have actually been achieved).

Florida
currently has seven privately-operated prisons which are run by three private
prison firms. Four are managed by Corrections Corporation of America (CCA),
while the GEO Group operates two and MTC operates one. Approximately 10% of the
state’s prisoners are held in private prisons.

During his 2010
gubernatorial campaign, current Florida Governor Rick Scott promised to cut
government waste, and the FDOC’s $2.2 billion budget became part of the
conversation. Fearing that prison staff would lose their jobs under Scott’s
proposed budget cuts, the Police Benevolent Association (PBA), the union that
represented state prison employees at the time and a staunch opponent of prison
privatization, vigorously campaigned against Scott. Governor Scott’s electoral
victory signaled a loss of clout by the PBA in the court of public
opinion.

Backdoor Budget Proviso

In 2011, the Florida legislature
proceeded to slash spending across all state agencies. When it came to the
FDOC’s budget the PBA played its usual card, arguing that closing prisons and
laying off guards would constitute a threat to public safety. But citing the
need to cut the state’s corrections expenditures, the Senate Budget Committee
slipped a last-minute proviso into the state budget, Senate Bill No. 2000.

The proviso required the FDOC to privatize 29 prisons, work camps, work
release centers and annexes housing 16,000 prisoners in 18 South Florida
counties known as FDOC Region IV – an unprecedented private prison expansion
that would result in the termination of around 3,800 state employees. The
privatization plan was to go into effect by January 1, 2012.

The PBA
challenged the law shortly after it became effective on July 1, 2011 by filing
suit in state court. Leon County Circuit Court Judge Jackie L. Fulford heard the
parties’ cross motions for summary judgment on September 29. The next day she
entered an order that put the brakes on the prison privatization
plan.

“Actions taken to date are declared illegal without authority in
violation of law,” Judge Fulford wrote in an order that prevented the
privatization effort from moving forward.

At the outset Judge Fulford
made clear that “the issue before [the court] is not whether the prisons in
Florida may be privatized. The answer to that question is yes.” Legislation
already allows the FDOC to contract with private companies to operate and
maintain prisons and supervise prisoners, the court noted.

However,
“[u]nder existing substantive law, a specific legislative appropriation must be
made for a proposed privatization contract after a decision to outsource is made
and evaluated by FDOC for feasibility, cost effectiveness, and efficiency before
FDOC proceeds with any outsourcing services,” Judge Fulford found. “If it is the
will of the Legislature to itself initiate privatization of Florida prisons, as
opposed to FDOC, the Legislature must do so by general law rather than ‘using
the hidden recesses of the General Appropriations Act.’”

In other words,
while state lawmakers could pass stand-alone legislation requiring the
privatization of prisons in FDOC Region IV, they could not do so through a
backdoor budget proviso. Better known as the single subject rule, Florida’s
Constitution requires that legislation be limited to one subject. The court held
that the proviso in the appropriations bill requiring privatization of all
Region IV facilities had no relation to the FDOC’s budget – the subject of the
bill – and thus was unconstitutional.

Moreover, a “rush to meet the
deadlines in the proviso” resulted in the skirting of statutory protections. “As
such, the Legislature bypassed the very safeguards it built into the process
that FDOC is required to follow when FDOC initiates privatization pursuant to
substantive law,” Judge Fulford concluded. See: Baiardi v. Tucker, Leon County
Circuit Court (FL), Case No. 2011 CA 1838.

Political Fallout

The
court further found that the FDOC had not prepared any “cost comparison study,
cost-benefit analysis, or business case analysis. It has not consulted the
Auditor General. It did not include a business case analysis with the RFP
[request for proposals].” Also, “it appears that the rush to meet the deadlines
in the proviso has resulted in many shortcomings in the evaluation of whether
privatization is in the best public interest as it relates to cost savings and
effective service.”

Indeed, it was not until two weeks after the PBA
filed suit on July 13, 2011 that legislative staff, along with Governor Scott’s
office, contacted FDOC Secretary Edwin Buss to comply with the “spirit” of
existing law related to the privatization of state prisons. It was then that
Buss was asked to sign off on a four-page “business case” that had been written
in his absence, which said performing due diligence was not applicable to
seeking bids for privatizing prisons in Region IV.

Buss dutifully signed
the document. “I wouldn’t say I approved it, but yes, I read it and signed on
it,” he said.

“What they’re asking you to do, I guess after the fact, is
to do a business case for what has already passed? Is that essentially what this
is?” PBA attorney Kelly Overstreet Johnson asked Buss during a September 2011
deposition.

“Yes. I mean, I guess the way you framed it, yeah” he
replied. He added that the FDOC had prepared business justifications for other
outsourcing that had a “much more in depth” analysis.

Buss said the
prison privatization plan was “the largest I’ve ever heard of for private
business.” Considered an expert on correctional privatization for leading
Indiana’s efforts to privatize its prison health care system when he served as
that state’s DOC commissioner, Buss seemed surprised that he had not been
consulted about the plan to privatize Region IV until after the appropriations
bill with the proviso language was already signed into law.

Buss, who had
been openly skeptical about the legislative effort to privatize the Region IV
prisons, was forced to step down by the Scott administration on August 24, 2011.
The governor’s office cited “differences in philosophy and management styles,”
but it was widely recognized that Buss’ failure to embrace the privatization
plan was the reason for his abrupt departure, just six months after he took
office.

“My gut would tell me that of all the issues that have come up,
privatizing prisons was the deciding factor” in Buss’ resignation, said state
Senator Paula Dockery.

One of those other “issues” involved Buss being
pressured by the governor’s office to discontinue a contract with consultant
Elizabeth Gondles to oversee the FDOC’s privatization of prison health care
services statewide. The bidding process for the $400 million health care
contract was canceled due to concerns that Gondles had written the RFP
requirements to benefit her husband, James Gondles, executive director of the
American Correctional Association (ACA). Under the terms of the RFP, all prison
health care contractors had to “maintain full accreditation” by the
ACA.

Following his forced resignation, Buss was replaced as FDOC
Secretary by Ken Tucker, the assistant commissioner of the Florida Dept. of Law
Enforcement. “I think Ed Buss was an honorable guy and I think he walked into a
buzz saw and it’s a shame,” said Matt Puckett, executive director of the
PBA.

The state fought hard to prevent Buss from being deposed in the
PBA’s lawsuit after he stepped down, with the Attorney General filing an
unsuccessful appeal to the First District Court of Appeal. “It’s a common
principle that high-ranking people in government don’t testify,” Governor Scott
argued.

The appellate court disagreed and the PBA was allowed to take
Buss’ deposition, in which he testified candidly about his lack of involvement
in the proviso process and about the FDOC’s RFP for the prison privatization
plan.

In the latter regard, in her September 30, 2011 ruling in favor of
the PBA, Judge Fulford took issue with the request for proposals that the FDOC
put out for privatization of Region IV prisons. The RFP sought only one contract
for all 29 facilities and no other options were considered. That may increase
“convenience and speed,” but there was no “demonstrated savings or benefit
advantage” to that approach as required by law, the court
wrote.

Professor Michael Hallett, chairman of the University of North
Florida’s Criminology Department, warned that awarding such an expansive prison
privatization contract to a single company might “render[] the state subject to
captivity by giving only one corporation so much control over a significant
portion of the state budget.”

State Senator Mike Fasano, who chairs a
Senate Budget Subcommittee in charge of prison spending, applauded the court’s
decision striking down the wholesale prison privatization plan. “This is a
perfect example of why we should not be making major policy changes in provision
language that did not go through substantive committees, debated, and taken
testimony pro and con,” he stated.

“It didn’t go through the appropriate
committee process. It wasn’t heard in criminal justice committee in the Senate.
It wasn’t heard in my committee that oversees the Department of Corrections
budget,” Fasano noted. “You would think that if we were doing such a major
policy change, it would have gone through those two committees. It wasn’t a
stand-alone bill and that’s what, if I’m not mistaken, the court has said, that
it should have been a stand-alone bill because it’s a single subject
issue.”

House Leader Ron Saunders opined that the proviso was used to
provide political cover. “There are political reasons they’ve been doing this,
because they don’t want to place some of their members in an awkward position,”
he said. “This way, people can shrug and say, ‘I didn’t have any choice and I
had to vote yes’” in order to pass the appropriations bill.

Following its
court victory, the PBA was feeling strong again. “It shows the Legislature and
Governor that we will not be pushed around,” wrote PBA president Jim Baiardi in
a message to FDOC employees. “We struck a blow against the arrogance of the
Legislature.”

Governor Scott also declared a victory of sorts. While
saying he supported the prison privatization plan, Scott also viewed the court’s
order as affirming the power of his office. “I should have the power to veto
things that are major policy changes,” he said. “I got elected as governor to
make decisions on behalf of all the citizens of the state and watch how all the
money is spent.”

Then again, Scott didn’t veto the prison privatization
proviso in the appropriations bill when it crossed his desk, though he could
have done so.

Questionable Cost Savings

Senate Budget Committee
Chairman J.D. Alexander responded to criticism about the failure to perform due
diligence and follow proper legislative procedures regarding the prison
privatization plan by saying his committee had received testimony that the plan
would save around $22 million annually. That estimate was based on the minimum
7% cost savings required by statute for private prison contracts, though such
savings have not been proven.

“Donna Arduin suggested, not just Region
IV, but said there was significant savings between privatized corrections on a
per-day basis in say, Texas and some other places, over what Florida was
spending,” said Senator Alexander.

Arduin is a nationally-recognized
government cost-cutter. She has been a budget advisor to governors in Michigan,
New York and California, was the budget chief for former Florida Governor Jeb
Bush, and served as a budget advisor to Scott’s campaign. In November 2010 she
was named the head of Governor Scott’s team to draft his first state budget
proposal.

Arduin’s consulting firm, Arduin, Laffer and Moore
Econometrics, was retained by Florida’s Senate Budget Committee to look at all
areas of government, including the state’s prison system. The “unit cost
comparison” she presented was a compilation of data from efforts by Texas and
other states to control rising prison costs. Her firm found that women,
juveniles and elderly prisoners are more expensive to house, educate and
rehabilitate. Private prison contractors have been able to incarcerate male
prisoners at competitive rates in most cases, she said, but “It hasn’t been a
total solution for any state.”

Interestingly, while working with Florida
lawmakers in 2006, Arduin also served as a trustee of Correctional Properties
Trust (CPT), a real estate investment trust that was established by Wackenhut
Corrections – now GEO Group. CPT later became CentraCore Properties Trust, which
was acquired by GEO Group in 2007. Further, Arduin’s one-time boyfriend, David
Ericks, is the owner of Ericks Consultants – a lobbying firm that has
represented GEO Group for over a decade. [See: PLN, March 2011, p.1].

GEO
was confident that it could make the winning bid for the Region IV prisons, and
the company dedicated a web page to that effort. “The state of Florida is
considering the privatization of 29 [prisons] in South Florida, and GEO is
excited for the opportunity to grow,” the website states. “Our World
Headquarters in Boca Raton, Florida is located in the heart of Region IV
facilities and is less than a two hour drive away from almost every facility in
Region IV.”

Judge Fulford’s order derailing the state’s wholesale prison
privatization plan deflated that cheery optimism, at least in the eyes of
investors. Within three days after the court ruled in the PBA’s favor in its
lawsuit challenging the appropriations bill proviso, GEO’s stock price fell 4.5%
while CCA’s stock dropped 3.5%.

Despite being almost two decades into its
prison privatization experiment, Florida has been unable to show that private
prisons have been a solution to the state’s ever-expanding prison system.
“Florida’s experience with privatized prisons raises serious questions about
whether the taxpayers are getting their money’s worth,” concluded an April 2010
report by the Florida Center for Fiscal and Economic Policy (FCFEP), an
independent research organization. [See: PLN, March 2011, p.36].

The
FCFEP found there was no evidence that prison privatization had saved Florida
taxpayers money, as required by law, because “the procedure to establish a 7%
cost savings is flawed.” Additionally, there is virtually no difference in
recidivism rates of prisoners released from private or public prisons, so
savings have been elusive in that respect as well.

According to a
December 2003 research study by the FDOC, the Florida Correctional Privatization
Commission and the Florida State University School of Criminology and Criminal
Justice, “in only one of thirty-six comparisons was there evidence that private
prisons were more effective than public prisons in terms of reducing
recidivism.” A 2008 study involving Oklahoma prisoners reached a similar
conclusion, finding that recidivism rates for prisoners released from private
prisons were actually higher in some cases. [See: PLN, Dec. 2009,
p.11].

Further, the legislature’s attempt to privatize Region IV
facilities would have incurred substantial administrative costs that lawmakers
ignored. FDOC Chief Deputy Secretary Daniel Ronay had e-mailed the governor’s
budget office in May 2011 to warn that layoffs of state prison employees in
Region IV due to privatization would “cripple the agency” with $25 million in
retirement, comp time and sick leave benefits that were not accounted for in the
budget. “This amount was NOT taken into consideration by the legislature, even
though they were made aware,” he wrote. The e-mail was uncovered by the PBA
through a public records request filed with the FDOC.

Ronay resigned on
October 5, 2011, two months after Buss was forced out. “I came to Florida
committed to being a member of Governor Scott’s administration and assisting in
leading the Florida Department of Corrections towards increased efficiency and
success,” he wrote. “Circumstances are such that I am unable to continue in that
role.” The FDOC declined to say whether Ronay was pressured to
quit.

Politics as Usual

“We’re not going to file an appeal. It
goes back to the Legislature. But let’s all remember what we’re doing here,”
Governor Scott said during a press conference on October 31, 2011, the deadline
to appeal the court’s decision in the PBA’s lawsuit.

Scott backed the
plan to privatize prisons in Region IV but expressed concerns about the proviso
process, noting that he would have had to veto a significant part of the state
budget if he disagreed with certain proviso language. Asked about privatizing
more FDOC facilities, he said, “It’s not going to happen if it doesn’t save
money.”

State lawmakers, meanwhile, had other ideas. Just a few hours
after Scott’s press conference, the Attorney General’s office, on behalf of the
Florida legislature, appealed Judge Fulford’s order. Apparently, lawmakers
believed that if they prevailed on appeal they could avoid the protracted
political battle over prison privatization that would ensue if they followed the
usual practice of introducing a new bill, debating the issue and pushing the
legislation through the committee process.

“I don’t think we need to go
pass a new bill or call a special session. I think we are going to win the
case,” said Senate President Mike Haridopolos.

Following the filing of
the appeal, the FDOC indicated it would proceed with the RFP for privatizing
prisons in Region IV, but the PBA sought an emergency stay which was granted by
Judge Fulford on November 4, 2011. “The Department of Corrections, its
attorneys, agents and employees are directed to cease and desist all actions
relating to the procurement process on the prison privatization RFP (request for
proposals), and shall forthwith refrain from taking any further action
inconsistent with this Court’s final judgment,” Judge Fulford wrote.

Due
to the high stakes involved it’s unlikely that state lawmakers will actually
pursue the appeal, and are instead using it for political saber-rattling. This
is because the prison privatization proviso isn’t the only one the legislature
has slipped into budget bills; in fact, the practice is fairly routine and has
been used for decades. An adverse ruling by the Court of Appeal would make it
difficult for lawmakers to use that backdoor method for legislation that is
unlikely to pass on its own – which extends far beyond the Region IV
privatization plan.

“The question is when does the proviso language
become substantive?” asked attorney Barry Richard, who specializes in the
Florida Constitution. “To the extent that the legislature wants to retain
broader authority to control expenditures through proviso language, it may feel
it doesn’t want to take the risk of getting more restrictive language” in an
appellate decision.

Senator Haridopolos acknowledged that possibility but
said he intended to continue to use proviso language. “That has been the
consistent policy of how we have moved toward prison privatization,” he
remarked.

After Judge Fulford ruled in its favor, the PBA said it was
primed for a legislative battle since lawmakers could introduce a bill to
privatize Region IV that might succeed where the proviso attempt failed. “We are
planning to use our political clout like never before. Our lobby team is
working, right now, to line up opposition to ANY attempt to put public safety in
the hands of profiteers,” wrote PBA Senior Vice President Danny Witt in a
newsletter to FDOC employees.

The way the prison privatization plan was
pushed “was incredibly sneaky” added PBA executive director Matt Puckett. “If we
had a fair fight, we think we can beat this thing on the merits.”

However, in November 2011, despite the PBA’s long-standing efforts to
oppose privatization, which poses a threat to state employees’ jobs, FDOC
workers voted to oust the PBA as their union and instead seek representation
with the Teamsters.

“These are tough times and they wanted a tough union
to represent them,” said Teamsters general president Jim Hoffa.

“Of
course we are disappointed in the result but nevertheless plan to continue to
fight for the rights of correctional professionals,” stated PBA president
Baiardi.

While the Teamsters said they would work with the PBA to oppose
prison privatization efforts, Teamsters vice president Ken Wood acknowledged
that if the Region IV facilities were privatized they would try to unionize
private prison staff – which would appear to be a conflict of
interest.

Prior to representing FDOC employees, on September 12, 2011 the
Teamsters filed an ethics complaint against Governor Scott. The complaint
alleged that the prison privatization plan was tainted by almost $1 million in
political contributions from CCA and GEO Group that went to Scott, state
lawmakers and the Republican Party.

According to the Teamsters, during
the last election cycle GEO and its executives gave $829,665 to political
parties and candidates in Florida, while CCA donated $138,494. Additionally,
both CCA and GEO made contributions to Governor Scott’s inaugural fund in the
amounts of $5,000 and $25,000, respectively. GEO had also paid its team of
Florida lobbyists between $220,000 and $360,000 to influence state officials,
and the company reportedly said it would spend $3 million to compete for the
Region IV private prison contract.

“The governor’s privatization scheme
smacks of political payback, pure and simple,” said Wood.

“It all comes
down to politics and the big donors,” noted Senator Fasano. “GEO and the other
private companies that run prisons are very big donors to the party here in
Florida and to the elected officials, both past and present.”

Although
the Florida Commission on Ethics initially found that the Teamsters’ complaint
was “legally sufficient” for an investigation into the state’s plan to privatize
Region IV prisons, the complaint was dismissed in October 2011. The Commission
held that pay-to-play politics are not equivalent to a “quid-pro-quo,
criminal-bribery-like understanding allegation” necessary to allege an ethics
violation, and that campaign contributions do not constitute improper
influence.

And the Fight Goes On …

Governor Scott released his
proposed 2012 state budget on December 7, 2011. The budget requires the
Department of Management Services to issue an RFP “for the management and
operation of six state operated work release centers and three reentry centers
(Baker, Gadsden, and Everglades) scheduled to come online in October 2012,” but
there was no mention of privatizing Region IV facilities.

Again, however,
Florida lawmakers had other ideas. On January 13, 2012 the Senate Rules
Committee introduced two bills – SB 2038 and SB 2036. The former requires the
privatization of all FDOC facilities in Region IV as originally specified in the
budget bill proviso, with “actual cost savings to the state of at least 7
percent” and specified performance measures for the privatized
prisons.

The companion bill, SB 2036, provides among other things that
cost-benefit and business case analyses submitted by state agencies in support
of their legislative budget requests will not apply “to the outsourcing or
privatization of agency functions expressly required by the General
Appropriation Act or any other law until the first legislative budget request
submitted by the agency after the contract for the outsourcing and privatization
has been executed.” That is, no cost-benefit or business case evaluations of
such privatization contracts are required until after the contracts have been
signed.
The bill further specifies that existing statutory requirements
applicable to prison privatization contracts in 944.105, Florida Statutes shall
“not apply to a contract for the outsourcing or privatization of the operation
and maintenance of correctional facilities expressly directed to be outsourced
or privatized by the General Appropriation Act or any other law.” Such existing
requirements include “substantial savings,” “the same quality of services” from
private prisons as that provided by the FDOC, certification of and use of force
by private prison guards, and making escapes from privately-operated facilities
a crime, among other provisions.

Taken together the two bills comprise a
massive giveaway to the private prison industry. They concurrently mandate the
privatization of 29 state correctional facilities, require a cost-benefit
analysis and business case evaluation only after such prison privatization
contracts are awarded, and simultaneously void the FDOC’s existing statutory
requirements for those contracts.

Basically, the bills, which could have
been drafted by CCA or GEO Group to the extent that they benefit private prison
firms at the expense of Florida taxpayers, set the stage for another showdown
between state lawmakers and privatization opponents. They also constitute a
second bite at the private prison apple – even if the bills fail to pass, the
legislature can still pursue its pending appeal of the PBA’s successful
lawsuit.

Considering there is scant evidence that private prisons in
Florida have saved the state money, and that prisoners re-leased from
privately-operated facilities have the same or higher recidivism rates as those
released from public prisons, the repeated efforts by the state legislature to
privatize FDOC Region IV can best be explained as political payback for campaign
contributions from private prison firms.

While companies like CCA and
GEO Group will profit from expanded prison privatization contracts, and
politicians will benefit from those companies’ continued lobbying efforts and
financial largess, should the legislature prevail in its private prison plan the
loser will be Florida’s taxpayers, as public funds will be diverted from the
FDOC into the coffers of for-profit prison firms with no discernable benefit to
the state.

As the battle to expand prison privatization in Florida
continues, one expert has recommended that everyone slow down. “In what will be
the largest correctional privatization contract in U.S. history, a more
deliberate process would be prudent,” said Professor Hallett. “Assuming you
accept the logic of market forces controlling costs, then why would you bias the
process in favor of an already monopolized industry, which itself lowers cost
efficiency and accountability?”

Dean Baker, co-director of the Center for
Economic and Policy Research, suggested an answer. “Privatization just doesn’t
work,” he stated. “It’s a way for politicians to throw business to their
friends.” And in Florida, those friends apparently include private prison
companies like GEO Group and CCA.

Sources: St. Petersburg Times, Miami
Herald, Investor’s Business Daily, New York Times, Businessweek, Nashville Post,
Palm Beach Post, Orlando Sentinel, Associated Press, http://www.flanews.com, Sun
Sentinel, Florida PBA Corrections Review, http://www.tallahassee.com, Florida Tax
Watch, Florida News Network, Tampa Tribune, http://www.dc.state.fl.us,
http://www.browardbulldog.org, http://www.stateline.org, http://www.postonpolitics.com,
http://www.dbapress.com, http://www.myfloridahouse.gov

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