Though state governments are no longer fueling a private prison boom, the industry's major companies are upbeat -- thanks in large measure to a surge of business from federal agencies seeking to house fast-rising numbers of criminals and detained immigrants.
Since 2000, the number of federal inmates in private facilities -- prisons and halfway houses -- has increased by two-thirds, to more than 24,000.
Thousands more detainees not convicted of crimes are confined in for-profit facilities, which hold roughly 14 percent of all federal prisoners, compared with less than 6 percent of state inmates.
Critics, including prisoners' rights groups and unionized corrections officers, contend the policy amounts to a federal bailout of an industry that would otherwise be struggling with a checkered record. The companies and the government say they provide a flexible, economical alternative to building federal prisons as get-tough policies boost demand for space in an overcrowded system.
"If the Bureau of Prisons is going to build capacity for themselves, they have to plan eight years in advance," said John Ferguson, chief executive of Corrections Corporation of America, the biggest company in the field. "It takes a lot longer in the public sector than private sector to get things done."
The industry expanded rapidly in the 1990s on the assumption that business in a tough-on-crime era would grow indefinitely. But escapes and violence at a few private prisons, along with questions about cost savings, tempered enthusiasm.
Saddled with thousands of empty beds, CCA teetered near bankruptcy before new federal contracts helped it rebound. Since 2000, the Nashville-based company has doubled its number of federal prisoners, to 18,200 -- 29 percent of its overall inmate population.
"The federal government smiled on them just in time," said Judith Greene, a New York-based prison-policy analyst.
Business appears certain to grow. Bureau of Prisons spokeswoman Traci Billingsley said the number of federal inmates is expected to rise from 185,000 to 226,000 by 2010, with private companies likely to be relied on for housing noncitizen immigrants convicted of federal crimes.
The number of people detained by U.S. immigration officials also is increasing rapidly -- up threefold in the past 10 years, to more than 21,000 at a given time. In December, Congress passed a terrorism-prevention bill calling for 40,000 additional beds by 2010 for immigrants awaiting deportation.
Many of the detainees are housed at facilities run by CCA and its main rival, Geo Group -- formerly Wackenhut. Both companies anticipate their detention business will grow.
"Those two are huge beneficiaries of overincarceration in the immigration system," said Lucas Guttentag of the American Civil Liberties Union's Immigrants Rights Project.
The private facilities are required to meet "rigorous federal standards," said Immigration and Customs Enforcement spokeswoman Jamie Zuieback. Yet critics insist privatization will lead to cost cutting and to accountability problems affecting detainees' welfare.
"They're putting in a system where it's easier to pass the buck," said lawyer Dan Kesselbrenner of the Boston-based National Immigration Project.
Rep. Ted Strickland (D-Ohio), a former prison psychologist, tried unsuccessfully to block privatization approval in Congress. "When the primary goal is profit, that can and probably does lead to a variety of abuse," Strickland said. "I don't see any end in sight."
On the state level, there is no comparable boom for private prisons, but neither is there the bust some industry critics anticipated. As of mid-2004, private prisons housed 74,285 state inmates, compared with 76,763 in mid-2001.
About 30 states use private prisons, notably in the South and West. Texas has the most inmates in private facilities -- more than 16,000; New Mexico has the highest portion of inmates in them -- 43 percent.
Most states' policies remain unchanged since the 1990s, and the bottom line is that overcrowding remains a stubborn problem.
Still, arguments persist over the pros and cons of private prisons, which pay lower average wages than government agencies. Whether this undermines performance is hotly debated, although federal researchers concluded in 2001 that high staff turnover did aggravate security problems at many private facilities.
Industry officials insist they have addressed such concerns.
"For those who think the public employee monopoly should be maintained, and sentencing advocates who believe we send too many people to prison, we're an easy target," said the CCA's Ferguson. "But if I'm chief executive of a state, I'd see a value to having competition in my prison system."
The industry's future is bright enough that Geo Group is buying rival Correctional Services Corp., but prospects hinge largely on incarceration trends. Many states have balked at funding new prisons and now face crowding problems they could ease by using private prisons or diverting some offenders to alternatives including drug-treatment programs.
"The drug war has been the main cause of profits for private prisons," said University of North Florida criminologist Michael Hallett. "We've gotten so extreme in overusing incarceration that we have for-profit industries with an interest in high crime rates."
Geoff Segal of the pro-privatization Reason Foundation predicted private companies will diversify their state business -- offering more health and rehabilitation programs, for example.
"States with private prisons aren't going to get rid of them," Segal said. "It's a tough sell for a state to say it's going to spend more money on corrections rather than on Medicaid."