We sought to determine if the Mississippi Department of Corrections (MDOC or the Agency) is using effective cost-containment strategies to reduce or limit growth of its expenditures. We specifically sought answers to the following questions:

• Does the present method of determining daily incarceration costs provide suitable information to attain real cost savings from private correctional firms?
• Has MDOC negotiated with private correctional firms to receive the lowest and best contract price?
• What treatment is given to private prison telephone commission revenues when negotiating with private correctional firms?
• What significant cost-containment strategies could be initiated at MDOC and, specifically, the Mississippi State Penitentiary at Parchman (MSP)?

We sought to compare incarceration costs among facilities operated by MDOC, as well as compare MDOC costs to the State’s private-operated prisons, county-operated regional prisons and prisons operated by other states. We specifically sought answers to the following questions:

• What factors account for the apparent inconsistencies in costs at various MDOC locations?
• Are MDOC’s inmate education and training programs provided efficiently and effectively?
• What effects do staffing patterns and employee classification have on MDOC costs compared to private prisons?
• How does MDOC’s cost of farm operations compare to similar prison farms?
• How do MDOC’s per day prisoner costs compare to other states, Mississippi county-operated regional prisons and private-operated prisons?

We found that the present method of determining daily incarceration costs does not provide suitable information to attain real cost savings from private correctional firms. We also found that the cost-finding and contracting procedures did not help MDOC negotiate with the private correctional firms to receive the lowest and best contract price.

We identified cost-containment strategies that, if implemented, could save millions of dollars each year.

We found that direct facility expenditures, salary levels and staff tenure account for the cost differences among individual prison units. We also found that MDOC salaries and tenure cause the state’s cost per inmate day to be higher than the county-operated and the private-operated prisons in Mississippi. These factors also contribute to higher cost of MDOC’s inmate adult basic education and vocational education programs than similar programs provided by the private-operated prisons.

We found that the row crop yields for fiscal years 1998 and 1999 were significantly lower than the state-wide average yields for those periods. Had the agriculture enterprise obtained the average state-wide row crop yields, operating losses for 1998 and 1999 would have been turned into operating profits.

The Legislature mandated by statute that private prison contracts must save a minimum of 10% on "at least the same level and quality of service offered by the DOC". The Mississippi Joint Legislative Performance Evaluation and Expenditure Committee (PEER) determines the State’s cost per inmate day for various custody levels. MDOC negotiates the private prison contracts.

MDOC has contracted for private operation of three special-needs prisons. The State does not have any publicly managed prisons that exactly compare to these private prisons. In the absence of cost data, MDOC provided PEER several significant operating assumptions to establish the State’s comparative per inmate costs for the three facilities. Neither MDOC’s cost accounting system nor PEER research could support or refute the assumptions. Our analysis of the assumptions does not support their validity. Estimated additional costs resulting from daily costs based on the assumptions compared to our analysis total $2.3 million annually, $11.5 million over a 5 year period and $46 million over a 20 year period.

PEER provided inmate costs to MDOC categorized by housing, education, food, farming, medical, parole board, administration and debt service. Certain of these services, such as medical, education, farming and parole board, are not provided by the private operators or they are provided at a reduced level from MDOC provided inmate services. With one exception, MDOC did not make adjustments to PEER’s inmate costs to reflect the State’s cost for comparable services. Consequently, MDOC entered contracts for the three special-needs prisons for payments to the private operators that would not provide the 10% cost savings. Estimated costs resulting from payments to contractors for dissimilar services amount to $760,000 annually, $3.8 million over a 5 year period and $15.2 million over a 20 year period. There are other dissimilar services for which we did not attempt to analyze the cost.

Private prison telephone commissions are appropriately not subject to negotiation with the private operators. MDOC’s Deputy Commissioner of Administration and Finance settles the revenue according to statute, which is 50% to MSP’s farming operation, 25% to the Inmate Welfare Fund and 25% to the State’s Telecommunications Fund. Proceeds received in the Inmate Welfare Fund are used to provide various goods and services to inmates in both MDOC and private-operated prisons.

What significant cost-containment strategies could be initiated at MDOC and specifically at the Mississippi State Penitentiary?

Guard salaries at MDOC’s three facilities average $2.22, $.62 and $.48 at MSP, Central Mississippi Correctional Facility (CMCF) and South Mississippi Correction Institution (SMCI), respectively, more per inmate day than guard salaries at the three surveyed private-operated prisons. MDOC’s multi-job classification pay scales result in an estimated $4.5 million higher annual operating cost than privately operated prisons.

Immediate adjustments to the pay scales are probably impractical. The most practical means of achieving cost savings in this area would be through privatization of selected MDOC units or locations.

Filling 175 empty MDOC beds with inmates that are presently housed in the private-operated prisons would save about $1.6 million each year.

Better cost accounting and cost analysis techniques at MDOC could save the State an inestimable amount of money annually.

Farm land-use plans should be coordinated with the movement of MSP to a maximum security prison.

Upgrading MDOC’s inmate tracking system has the potential for large annual savings. A study of the savings potential from upgrading the present system is needed.

MDOC’s financial and cost accounting systems identify direct facility expenditures for each prison. The direct salaries and benefits of staff, such as guards, are also identified with the related housing units in which they work. The number of guards working in the various units is primarily based on the custody level of inmates assigned to each unit. Therefore, the number of staff assigned to the units and the amounts of their compensation primarily explain inconsistencies in various housing unit costs. Less significant factors include direct prison administration and inmate support services.

MDOC offers voluntary inmate adult basic education and vocational education programs at its three facilities. While MDOC’s instructors are certified teachers, the number of certificates issued to students compared to the number issued by the surveyed private-operated prisons does not appear to support better performance than the non-certified instructors used by the private prisons. MDOC’s average cost per certificate is substantially higher than the cost of the private prisons because of employing certified instructors and a higher teacher-student ratio.

The vocational education programs offered by MDOC appear to be a higher quality and more beneficial to the student-inmates when released from prison than the programs offered by the private prisons.

The average daily cost per inmate is determined primarily by direct personnel costs of correctional officers. In 1999, nearly 56% of all direct housing costs were direct personnel costs.

Tenure plays a major role in per day cost for the much older MSP than CMCF and SMCI. MSP employees have about twice as much tenure as the other two facilities. MSP salaries and tenure add about $2.22 to the daily incarceration cost, while the amounts are $.62 and $.48 per day for CMCF and SMCI. The overall average is $1.41 for all locations.

Average salaries for the five classes of non-supervisory correctional officers at MSP, CMCF and SMCI were $23,060, $20,965 and $21,002, respectively. Comparative salaries for the single class of non-supervisory officers at the private-operated prisons and the county-operated prisons were $17,137 and $17,700, respectively. Employee benefits for MDOC correctional officers add about $800 of additional cost to the annual payroll, compared to the private prisons.

The farm program was created to provide exercise and activity for minimum and medium security inmates on a voluntary basis. In 1999, row crop yields ranged below state-wide averages from 52% less for soybeans to 17% less for wheat. These results were attained while using more than 700,000 no-cost hours of inmate labor.

Had row crop yields equaled the state-wide averages, operating losses of $500,000 in both 1998 and 1999 would have been turned into operating profits of about $20,000 and $50,000, respectively, for the two years.

Within MDOC’s three prisons are approximately 45 inmate housing areas, each with its own specific mission. Cost comparisons among facilities, if used alone without consideration of factors such as type and age of facility, type, sex and special needs of prisoners and mission of prison, do not provide policymakers, the media or the public with an adequate understanding of daily inmate incarceration costs.

With these variables in mind, MDOC’s overall per day inmate operating cost for 1999 was $39.88, compared to $19.72 and $26.03 for surveyed county-operated and private-operated prisons, respectively.

Annual savings are possible for MDOC in the following areas:

Strategy	Estimated Annual Savings
Renegotiate contracts for special needs prisons on the basis of actual cost data.	$ 2,300,000
Adjust private prison contracts to the same level and quality of service offered by MDOC.	760,000
Privatization of selected MDOC units or locations or restructure of correctional officer pay scales.	4,500,000
Utilize empty beds at MDOC.	1,600,000
Eliminate farming losses.	500,000
Total estimated annual savings	$ 9,660,000

1. MDOC should have a planning and research department that can perform cost analyses to assist management, not only to contain the Agency’s total incarceration costs, but also to help negotiate real cost savings in contracts with private correctional firms.

2. MDOC should require potential private contractors to provide cost data by fixed and variable categories to serve as the basis for negotiating per diem rates.

3. MDOC should develop cost data by fixed and variable categories that can be applied to different sizes of prisons. They should also develop models of optimum staffing levels that can be applied to different facilities according to size. All major factors that affect cost should be based on factual data that can be supported.

4. PEER and MDOC should coordinate their cost-finding activities and establish procedures that MDOC can follow to establish and adjust, as needed, the State’s comparable cost of services.

5. If the Legislature and MDOC choose to provide additional special-needs prisons, they should consider having MDOC build and operate them if the process of cost-finding is not improved to a sufficient level.

6. MDOC should implement procedures to analyze and make adjustments, where necessary, to the State’s cost established by PEER. The contracted per diems should be based on the same level and quality of services dictated by law, with due consideration to variable or incremental costs where applicable.

7. MDOC should study the advantages and disadvantages of privatizing selected MDOC units or locations versus restructure of correctional officer pay scales.

8. MDOC should continue to seek funding for computer software for a comprehensive inmate tracking system. An in-depth analysis of MDOC’s needs and the investment payback period should be prepared to show how the State could experience cost savings to recover the purchase price of the software.

9. MDOC should consider the evolving mission of MSP, as it makes long-term plans for the farming operations.

10. MDOC should develop and continually use analytical review techniques to set objectives and measure results. More detailed information about the various components of costs of operations should be available to management.

11. The cost-finding process would be more accurate and useful if MDOC’s financial and cost accounting system identified direct housing unit expenditures, such as commodities and contracted services to applicable housing units. We suggest that MDOC management consider if the present systems could be designed accordingly without expending a significant amount of money.

12. MDOC management should establish measurable objectives to access the efficiency and effectiveness of the inmate education and training function as they relate to the specific program goals.

13. The education and training department should design its information system to produce data for policymakers to assess whether objectives are met.

14. Management should evaluate whether eliminating a number of positions that lead to inefficient class size could make more efficient use of adult basic education instructors.

15. Management should evaluate if instructor positions should be reallocated from MSP to CMCF and SMCI based on a larger population of inmates who appear to have a need and likely use of the adult basic education and vocational education programs.

16. Management should review the different vocational education courses offered at the private prisons for quality and effectiveness. The inputs and outcomes should be similar to MDOC’s.

17. Management should review its policy of employing only certified instructors to lead the adult basic education and vocational education courses. If management decides to continue to employ certified teachers, an assessment should be made of the benefits of requiring certified instructors at the private prisons.

18. Management should establish measurable objectives to assess performance of the agriculture enterprise.

19. Management should develop a short-term plan to at least reach a financial break-even point in the farming operations. If row crop operations cannot break-even or produce an operating profit, management should consider terminating row crop operations and reallocate resources to the less costly food crops.

PEER Home Page Download the full report in PDF(925 K)