Growth Prospects For Private Prisons Called Good


The nation’s private prison companies look like solid investments for the next several years, says CNBC’s Moneycentral. The three big prison companies — Corrections Corp. of America, The Geo Group, and Cornell Cos. — were said to have decent growth prospects for several reasons. One is an increased in border patrols under the recent federal intelligence law. Another is that governments are hard up for cash. “Because of tight budgets, there has not been a lot of new prison construction,” says Irving Lingo, Corrections Corp. of America’s finance chief.

In the 2005 federal budget, Congress cut prison construction spending by 48 percent, says Patrick Swindle, an analyst who covers the sector for the brokerage Avondale Partners. Government prison systems turn to the private sector in part because costs are 10 percent or more lower. “Federal prisons are at 33 percent overcapacity, and more than half the states are at overcapacity,” says Swindle. “There is a scarcity of beds, and companies in the private prison space are being asked to meet the demand.” Demand should pick up for a demographic reason. The children of baby boomers, the so-called echo boom, are about to enter the 18- to 24-year old age group — the years when people commit the most crimes. The Federal Bureau of Prisons estimates it will have a 36,000 bed shortfall by 2010, partly due to this trend. It’s a big deal for the tiny private prison sector, which houses only around 7 percent of the 2.1 million people in prison in the United States. Two federal agencies in the Department of Homeland Security will need 76,000 new prison slots over the next five years..


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