Bloomberg News

California Lawmakers Approve Brown Plan to Lease Prison Cells

September 12, 2013

California Governor Jerry Brown won approval of his plan to spend more than $1 billion to rent thousands of prison cells owned by Corrections Corp. of America (CXW:US) prison and Geo Group Inc. (GEO:US) to temporarily meet a federal court deadline to reduce overcrowding.

The legislation, approved yesterday by both chambers of the legislature, calls for $315 million in the fiscal year that ends June 30 and about $415 million for each of the following two years to lease a Corrections Corp. prison in the Mojave Desert, ship inmates to commercial lockups out of state, and rent beds at public and private jails in California.

California faces a Dec. 31 deadline to remove about 10,000 inmates from state penitentiaries to reduce their population to 137.5 percent of designed capacity. Last month, the U.S. Supreme Court rejected Brown’s plea for a postponement. The plan avoids the possibility of releasing thousands of felons.

“This bill is a compromise,” Senate Republican leader Bob Huff of Diamond Bar said yesterday prior to the vote. “It’s not perfect.”

Passage came after Brown reached a deal with fellow Democrats in the Senate. Under it, the state would again ask the court for more time to meet the order. Any money saved would pay for expanding mental-health and drug rehabilitation programs to help keep ex-convicts from returning, while preparing to move inmates into private prisons and other facilities if the court refuses.

Over Capacity

California’s prison system, which operated at 200 percent of designed capacity for more than a decade, was at 143.8 percent as of Sept. 4, with 123,777 inmates, according to a Corrections and Rehabilitation Department report.

Federal judges seized control of the prison health system in 2006, saying inmate care was so bad it amounted to cruel and unusual punishment and violated the U.S. Constitution. That led to the order to reduce inmate numbers.

With the money, California would put 1,000 inmates, with state guards, in Nashville-based Corrections Corp.’s 2,300-bed prison in the Mojave Desert. The company currently rents some of the space to the U.S. Marshals Service and U.S. Immigration and Customs Enforcement.

California would shelve plans to bring back about 4,000 of the almost 9,000 inmates held in out-of-state Corrections Corp. prisons and instead ship out as many as 5,800 more. The state currently pays Corrections Corp. about $64.50 a day per inmate.

The state also would lease as many as 1,225 beds in two of Boca Raton, Florida-based Geo’s facilities in California that were shuttered when the state canceled earlier contracts.

Corrections Corp. closed yesterday at $33.72 in New York, up 2 percent, the most since Aug. 20. The stock has gained 11 percent in the past year. Geo fell 0.3 percent to $31.92. The shares are up 33 percent in the past 12 months.

To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net


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Companies Mentioned

  • CXW
    (Corrections Corp of America)
    • $33.01 USD
    • 0.03
    • 0.09%
  • GEO
    (Geo Group Inc/The)
    • $34.85 USD
    • -0.05
    • -0.14%
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