* Florida-based GEO Group sees privatization windfall
* Up to $400 million in annual revenues up for grabs
* Plan driven by "politics and big donors" - senator
By Tom Brown
MIAMI, May 12 Florida has opened the doors to
one of the biggest prison privatization programs in U.S.
history, as the cash-strapped state looks to cut the cost of
keeping more than 100,000 people behind bars.
The privatization plan, touted by the industry as "an
important milestone" for the private prison business, was
approved by the Republican-dominated Florida legislature as
part of a budget deal hammered out last week.
Private prison operators have already made big inroads in
states like Texas and New Mexico. But Florida has the third
largest state prison system in the United States, and no other
state has sought to privatize so many lock-ups at any one
The move has drawn sharp criticism from law enforcement
groups and even some leading Republicans, who say it endangers
public safety in a state still trying to shake off a history of
prison abuse and corruption, as depicted in the popular 1967
Hollywood film "Cool Hand Luke" set in Florida starring Paul
Others say private prisons don't have incentives to
rehabilitate inmates and are focused instead on profits.
The plan has not yet been signed into law by Republican
Governor Rick Scott, who took office in January after
campaigning on a pledge to fight record-high unemployment.
But few doubt that Scott, who puts a premium on
cost-cutting and close ties with the business community, will
endorse the initiative even though it could lead to layoffs and
sharply reduced wages and benefits for 4,500 prison guards.
Critics condemn the privatization move as an example of the
corrosive effect of corporate money in politics.
Coupled with other austerity measures introduced under the
leadership of the Tea Party-backed Scott, it could hurt
Republicans in the run-up to next year's election in the
pivotal battleground state.
"For the first time in my life I'm thinking about switching
parties," said Jim Baiardi, a 45-year-old prison guard and
life-long Republican who heads the correctional officers
chapter of the Florida Police Benevolent Association.
The privatization plan is "not for the benefit of the
state, it's for the benefit of the corporations," Baiardi
Under the plan, the state is required to privatize all of
the prisons in South Florida, which is home to about one-fifth
of the statewide inmate population of 101,000.
That includes at least 16 prisons along with numerous
annexes, juvenile correction facilities, road camps and
so-called work-release centers across an 18-county region.
"It's unprecedented in the United States," said Florida
Senator Mike Fasano, a Republican who heads the Senate budget
committee with oversight of prisons.
He said he tried to block the privatization plan but failed
due to lobbying by politically powerful companies led by GEO
Group (GEO.N), the Boca Raton-based firm that is the
second-largest U.S. private prison operator.
"I'm a conservative Republican that believes in privatizing
certain parts of government services but we should never
privatize public safety," Fasano told Reuters.
The privatization plan requires companies to operate
prisons for at least 7 percent less money that it takes to run
state-run facilities, but Fasano said that promises it would
reduce up to $40 million annually were unconvincing and
"It all comes down to politics and the big donors. 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," he said.
GEO Group declined requests to comment. But top executives
talked excitedly about the privatization deal in a recent
earnings call with industry analysts.
"This is a very important milestone for our industries and
we hope that additional opportunities such as this will develop
at the state level in the coming years," said John Hurley, who
heads the corrections division of GEO Group, formerly known as
Wackenhut Corrections Corp.
George Zoley, the GEO Group's chief executive, called the
Florida deal "one of the largest opportunities that we've ever
seen in the history of our industry," suggesting it could add
"several hundreds of millions" to the group's annual revenues.
Kevin Campbell, an analyst who follows private prison
companies for Avondale Partners, said the Florida deal looked
set to add anywhere from $300 million to $400 million in
revenues to private operators. This is based on the assumption
that they will be taking over the care of between 17,000 and
20,000 prisoners in South Florida, including their healthcare.
He added it was "the most ambitious" prison privatization
to date, in terms of number of inmates being "outsourced."
"HISTORY OF FAILURE"
The state government has not yet said how contracts will be
awarded. But the business may be broken up into multiple bids
and the process is expected to get under way soon since the
budget calls for it to be locked into place by Jan. 1.
Campbell said GEO Group was probably better positioned than
Corrections Corporation of America (CXW.N), its larger rival,
to benefit from the plan. "I think really why GEO has an
advantage, more than anything, is they provide the full scope
of services the state is looking to outsource here," he said.
The U.S. prison population dwarfs that of other nations,
including Russia and China. The private prison business is
expected to grow barring dramatic changes in crime and
But some analysts see inherent problems in a free market
approach to prisons in the world's No. 1 incarcerator.
"The history of private prisons really is a history of
failure," said David Shapiro, a Washington-based lawyer with
the ACLU National Prison Project.
"The problem with private prisons is they just don't have
incentives to rehabilitate," he added. "The more crime there
is, and the longer sentences are, the more business private
James McDonough, a former secretary of the Florida
Department of Corrections, agreed that private prisons were
problematic if the only clear incentive was to cut costs.
"I feel there are some things that the government has the
obligation to run itself. And one of those, my own view, is the
supervision, the housing, the caring for inmates that the state
in fact has imprisoned. You don't contract that out." he said.
(Editing by Pascal Fletcher and Philip Barbara)