The Real Cost of Prisons Weblog

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Thursday, 10/05/06

Prison company stock rises on Gov. Schwarzenegger's declaration Corrections Corp. of America could get more inmates thanks to Arnold

By GETAHN WARD
Staff Writer

Shares of Corrections Corporation of America shot up almost 10 percent earlier today after California¹s governor issued an emergency order to address prison overcrowding.

The declaration by Gov. Arnold Schwarzenegger could allow the state to transfer prisoners out of state without their consent, raising prospects for new business for private companies that house inmates.

³Basically, this is good for all of the private prison operators,² said Anton Hie, an analyst at Jefferies & Co. in Nashville.

At midday, CCA¹s stock was trading at $47.75 on the New York Stock Exchange.

Schwarzenegger¹s order is aimed at alleviating overcrowding of one of the nation¹s three largest prison systems by bypassing the regular procurement process to allow for contracts to temporarily house inmates out-of-state. Initially, California could send out 2,200 inmates ‹ 200 inmates by the end of this month and 400 a month thereafter ‹ and ship out a total of 5,000 over the next year. It would be the first time state officials would be sending any significant number of inmates out of state.

"Our prisons are now beyond maximum capacity and we must act immediately and aggressively to resolve this issue,² Schwarzenegger said in a statement Wednesday.

Nashville-based CCA has inventory that it has been showing California, though many of its ³several thousands² available beds are committed to existing customers, officials said.

³We¹re excited about the prospect of doing business with California, but we¹ve not executed an agreement at this time,² said Irving Lingo, the company¹s chief financial officer.

California has 172,000 state inmates, a population projected to grow to more than 193,000 by 2011. About 17,000 of the state¹s beds aren¹t up to standard, including some in areas such as hallways and converted gyms that weren¹t designed as living space.

In addition to CCA, California has indicated it is looking at inventory from private operators The Geo Group and Cornell Cos. The Geo Group shares were up $3.08 to $33.78 earlier today. Cornell shares were up $1.14 to $18.38.

Todd Van Fleet, an analyst at First Analysis in Chicago, expects California to send inmates to Arizona, Indiana, Oklahoma and Tennessee in the near-term. CCA is likely to receive inmates in all of those states except Indiana where GEO will likely be the beneficiary, he said.