Bloomberg News

California Wins Two More Years to Cut Inmate Population

February 10, 2014

Governor Jerry Brown won a two-year extension from federal judges to reduce California’s prison population by 5,000 without moving any inmates to other states, sending prison company shares down.

The decision is a victory for Brown, who had sought more time to achieve the cuts through programs to curb recidivism and offer treatment and job training. The ruling sent shares of private prison companies down as it prevents the state from sending more inmates to facilities outside California.

In September, the California legislature approved a plan to spend $1.1 billion to rent prison cells owned by Corrections Corp. of America and Geo Group Inc. (GEO:US) to temporarily meet an earlier Dec. 31 deadline. Shares of Nashville, Tennessee-based Corrections Corp. (CXW:US) fell as much as 7.7 percent today, while Boca Raton, Florida-based Geo dropped as much as 5.5 percent.

“The state of California has long been a pretty significant potential growth opportunity for the industry,” analyst Kevin Campbell, managing director covering the correctional services industry at Avondale Partners LLC in Nashville, said today in a phone interview. “Because of the overcrowded nature of the facilities, there was the possibility that the state would need to use more private-prison beds in order to meet the population cap that the courts had implemented.”

Nonviolent Offenders

California must hasten the release of certain nonviolent offenders, create a new process to enable more prisoners to be eligible for parole and answer to a court-appointed compliance officer while working under the new Feb. 28, 2016, deadline, a panel of three federal judges ruled today in San Francisco.

State officials had said that if the inmate population cuts were required immediately, corrections officials would send thousands of prisoners to out-of-state facilities to achieve compliance, according to the ruling.

The judges called out-of-state inmate transfers “neither durable nor desirable.”

The state can’t increase the current population of 8,900 inmates housed in out-of-state facilities and the compliance officer can release prisoners if the state fails to meet reduction deadlines set for this June, February 2015 and February 2016, the judges ruled.

‘Durable Solution’

“While we are reluctant to extend the deadline for two more years, we also acknowledge that defendants have agreed that, with such an extension, they will implement measures that should result in a durable solution to prison overcrowding in California,” the judges said today.

California officials were also ordered to explore ways to reduce the number of inmates housed outside of California “to the extent feasible.” Inmates who are at least 60 years old and have served 25 years of their sentence must be referred to the parole board to determine whether they can be released, the judges said.

A prisoner lawsuit led federal judges to seize control of the prison health system in 2006 based on a determination that inmate care was so bad it amounted to cruel and unusual punishment in violation of the U.S. Constitution. The state had been ordered to reduce the inmate population by the end of 2013.

“It is encouraging that the three-judge court has agreed to a two-year extension,” Brown said today in a statement. “The state now has the time and resources necessary to help inmates become productive members of society and make our communities safer.”

Donald Specter, an attorney representing inmates, didn’t immediately respond to a voice-mail message seeking comment on today’s ruling.

Curbing Recidivism

The reduction plan proposed by Brown, a Democrat, called for measures aimed at curbing recidivism, easing parole and diverting felons to treatment and jobs programs, according to court filings. Attorneys representing prisoners sought a court order directing the cuts to be completed by May, while Brown proposed a 2016 deadline.

California’s prison system, which operated at 200 percent of designed capacity for more than a decade, was at 141 percent as of Jan. 22 with 121,591 inmates, according to a Corrections and Rehabilitation Department report. The state had been ordered to reduce the number of prisoners to 138 percent of design capacity -- about 112,000 in current facilities -- by the end of last year. The judges granted extensions to that deadline.

Corrections Corp., the largest private prison company, closed at $31.67, a drop of 3.7 percent, and Geo closed at $30.94, a decline of 5.2 percent, in New York Stock Exchange trading.

The case is Plata v. Brown, 01-cv-01351, U.S. District Court, Northern District of California (San Francisco).

To contact the reporter on this story: Karen Gullo in federal court in San Francisco at kgullo@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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Companies Mentioned

  • GEO
    (Geo Group Inc/The)
    • $37.04 USD
    • 0.29
    • 0.78%
  • CXW
    (Corrections Corp of America)
    • $35.11 USD
    • 0.11
    • 0.31%
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