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Corrections Corporation of America: The Dismantling of a National Disgrace
Exploding corrections budgets have forced states to enact bi-partisan criminal justice reforms to reduce their prison populations. The US prison population peaked in 2009. Since then, states across the country have closed prisons due to excess capacity and generational low crime rates. Faced with empty beds, demand concerns, and a bleak outlook, this report details why we expect Corrections Corporation of America’s earnings to get smacked under the weight of current and future contract losses.
Corrections Corporation of America
Release Date: 9 July 2013
Summary (see PDF for full report)
In the last few decades, the United States has witnessed an explosion in the number of people behind bars. This move towards mass incarceration is an anomaly that began in the 1980s, prompted by the War on Drugs and a slew of tough-on-crime laws which were adopted nationwide.
Over that period, the national prison population grew so quickly that federal and state governments simply ran out of space for offenders. As a result, government agencies began contracting with newly-established private prison operators to handle the overflow.
Having seen mass incarceration as an opportunity for profit,1 the private prison industry grew rapidly, in lock-step with the US prison population, to the multi-billion dollar industry it is today. And leading this industry is Corrections Corporation of America (“CCA”), a publically-traded prison operator with a history of horrendous prison conditions and human rights abuses.
In the process of building the largest prison system in the world, state budgets have exploded into an unmitigated disaster as correctional spending has become the fastest growing area of expenditure, behind Medicaid. As a result, all stripes of government have been forced to undertake sweeping reforms to reduce their prison populations and cut their corrections spending.
The US prison population peaked in 2009. Since then, states have embraced a cascade of criminal justice reforms designed to reduce incarceration rates and dismantle 30 years of over-criminalization and draconian sentences, which were once popular, but now only seen as a burden on taxpayers. Most incredible of all is that these reforms have been the result of bipartisan action. Where historically the ills of mass incarceration were a liberal issue, conservatives are joining the fight on financial concerns.
The damage these reforms are causing CCA is obvious. For example, CCA has halted a major construction project, is experiencing a glut of empty beds, and is expected to report its first-ever annual revenue decline this year. In fact, a number of CCA’s customers are terminating some or all of their contracts with the Company. Notably, California which represents 12.2% of CCA’s revenue base is expected to cancel all its contracts with the Company in the next few years.
With the US prison population declining and CCA no longer expanding organically, Management is swinging for the fences with a new growth strategy of acquiring and managing public facilities. In doing so, CCA is touting the supposed cost-savings of privatization. So far, not a single state has taken CCA up on its offer – no doubt because multiple independent and government studies have concluded that private prisons are no more cost-effective than state prisons. For example, in 2010, the Auditor General of Arizona issued a report slamming private prisons as costing as much as 16% more than state facilities.
CCA converted to a REIT this year, and as a result, its share price exploded upwards. But what may be lost on shareholders is that CCA operated as a REIT once before in the late 1990s. Its first foray into the REIT world ended in near bankruptcy. Today, CCA is facing revenue contraction, dwindling demand, and a bleak outlook. From here the road is a short one to earnings issues and dividend cuts.
You should have expected us
anon.analytics [at] neomailbox.net
Twitter: @anonanalytics
http://anonanalytics.blogspot.com/
"The oldest and largest for-prison company is not what it would have you believe, at least according to Anonymous. A faction of the hacktivist group released this report this morning concluding that the publicly traded prison operator Corrections Corporation of America (CCA) is not an efficient, profitable free-market solution -- but a bad investment for shareholders." -- ACLU
http://www.aclu.org/blog/prisoners-rights-criminal-law-reform/anonymous-exposes-uss-biggest-private-prison-company-bad
Release Date: 9 July 2013
Summary (see PDF for full report)
In the last few decades, the United States has witnessed an explosion in the number of people behind bars. This move towards mass incarceration is an anomaly that began in the 1980s, prompted by the War on Drugs and a slew of tough-on-crime laws which were adopted nationwide.
Over that period, the national prison population grew so quickly that federal and state governments simply ran out of space for offenders. As a result, government agencies began contracting with newly-established private prison operators to handle the overflow.
Having seen mass incarceration as an opportunity for profit,1 the private prison industry grew rapidly, in lock-step with the US prison population, to the multi-billion dollar industry it is today. And leading this industry is Corrections Corporation of America (“CCA”), a publically-traded prison operator with a history of horrendous prison conditions and human rights abuses.
In the process of building the largest prison system in the world, state budgets have exploded into an unmitigated disaster as correctional spending has become the fastest growing area of expenditure, behind Medicaid. As a result, all stripes of government have been forced to undertake sweeping reforms to reduce their prison populations and cut their corrections spending.
The US prison population peaked in 2009. Since then, states have embraced a cascade of criminal justice reforms designed to reduce incarceration rates and dismantle 30 years of over-criminalization and draconian sentences, which were once popular, but now only seen as a burden on taxpayers. Most incredible of all is that these reforms have been the result of bipartisan action. Where historically the ills of mass incarceration were a liberal issue, conservatives are joining the fight on financial concerns.
The damage these reforms are causing CCA is obvious. For example, CCA has halted a major construction project, is experiencing a glut of empty beds, and is expected to report its first-ever annual revenue decline this year. In fact, a number of CCA’s customers are terminating some or all of their contracts with the Company. Notably, California which represents 12.2% of CCA’s revenue base is expected to cancel all its contracts with the Company in the next few years.
With the US prison population declining and CCA no longer expanding organically, Management is swinging for the fences with a new growth strategy of acquiring and managing public facilities. In doing so, CCA is touting the supposed cost-savings of privatization. So far, not a single state has taken CCA up on its offer – no doubt because multiple independent and government studies have concluded that private prisons are no more cost-effective than state prisons. For example, in 2010, the Auditor General of Arizona issued a report slamming private prisons as costing as much as 16% more than state facilities.
CCA converted to a REIT this year, and as a result, its share price exploded upwards. But what may be lost on shareholders is that CCA operated as a REIT once before in the late 1990s. Its first foray into the REIT world ended in near bankruptcy. Today, CCA is facing revenue contraction, dwindling demand, and a bleak outlook. From here the road is a short one to earnings issues and dividend cuts.
You should have expected us
anon.analytics [at] neomailbox.net
Twitter: @anonanalytics
http://anonanalytics.blogspot.com/
"The oldest and largest for-prison company is not what it would have you believe, at least according to Anonymous. A faction of the hacktivist group released this report this morning concluding that the publicly traded prison operator Corrections Corporation of America (CCA) is not an efficient, profitable free-market solution -- but a bad investment for shareholders." -- ACLU
http://www.aclu.org/blog/prisoners-rights-criminal-law-reform/anonymous-exposes-uss-biggest-private-prison-company-bad
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A response from CCA
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