With the nation's incarceration rate steadily declining, small towns that bet big on prisons are finding themselves in a financial jam.

Over the last 30 years, Texas built over 90 prisons, quintupling the number of detention centers in the state and earning the title of highest state incarceration rate in the process.

As much as Texas ended up an outlier, it was by no means alone. All across the U.S. during the 1970s, '80s and early '90s, depressed villages and hamlets in need of an industry, from the Mississippi Delta to the Appalachian Coal Belt, signed up to build oversized detention facilities on the outskirts of town, surrounded by barbed wire and klieg lights, in the hopes of bolstering the local economy with taxes, jobs and associated retail.

But ever since the nation’s crime rate began leveling off in the late 1990s, with the total state prison population decreasing for the first time in 40 years, there haven’t been enough inmates to populate these new-found penitentiaries.

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The trade-off of becoming known as a "prison town" and being associated with incarceration was worthwhile for a municipality in financial straits. And states in need of a place to put their growing inmate populations during the height of the War on Drugs were willing to pay good money for it.

This is where publicly-traded, private prison companies such as Corrections Corporation of America and GEO, formerly known as Wackenhut, – what Eric Schlosser dubbed the "prison industrial complex" – stepped in. They offered cheaper and more efficient prison management than state-run systems because they could use non-union employees at lower wages with less training.

They weren’t limited by government restrictions on bond procurement and review, so they could erect new penitentiaries in half the time the state could. They also worked to push for mandatory minimum sentencing, "three strikes" and "truth in sentencing" rules, and stricter immigration laws that would encourage a rising prison population through lobbying firms, interest groups, and political contributions via political action committees.

Although prison labor is generally banned at the federal level from competing with the private sector, the Prison Industries Act authored by Texas State Representative Ray Allen in 1993 changed all of that at the state level. It expanded the number of trades that Texas prisoners could be legally employed in. This, in turn, generated profits that could be paid back to the state and the management corporation.

In the end, what the prisoner earns may be less than a dollar an hour, but the state could break even while simultaneously solving their prisoner placement dilemma, bragging about job creation, and helping to save small town America.

The template of the Prison Industries Act has since been duplicated in 30 different states and helped usher in the private prison boom. According to numbers from the Sentencing Project, since 2003, Vermont went from housing 0 percent to 25 percent of their prisoners in private facilities. Gary Johnson ran for Governor of New Mexico on a platform of privatizing every prison in the state as a way to save money, eventually moving 44 percent of the prison population to private facilities. States such as Arizona, Florida, and Indiana all doubled their private prison populations. Idaho quadrupled theirs.

But much like the real estate market crash of the last ten years, the belief that the incarceration market was recession-proof and could only rise is being proved wrong. Declining crime rates are leaving more prisons empty. There isn't enough crime to keep the prison industry afloat as it currently stands.

To save money, more states are moving their prisoners back to state-run facilities when space is available. Without prisoners, the private companies managing the facilities are leaving. And the small towns who bet on an ever-growing incarceration rate are left further in debt with few sources of capital.

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Littlefield, Texas, may be the best example of this exodus. In July of 2011, the town auctioned off the recently-built Bill Clayton Detention Center for half the price it paid for the initial construction rather than risk defaulting on their loan. They also raised property taxes, increased utility fees across the board, and laid off city employees while their bond rating collapsed.

Other towns such as Walsenburg, Colorado, McFarland, California, Baldwin, Michigan, and Boydton, Virginia, have suffered similar fates. Without prisoners, they’re left with empty, foreboding complexes that cost the town millions to build only a few years prior.

Hardin, Montana, had a poverty rate at double the national average when it was convinced to build the state-of-the-art Two Rivers Detention Facility. It was sold as a guaranteed investment, but no inmates have ever slept in the prison and the state has not seen any revenue.

The town offered to take in hardened criminals from other states, particularly sex offenders, and even lobbied to be the next Guantanamo Bay, to no avail. The ex-steel town of Youngstown, Ohio, was set to be the private prison capitol of the U.S. even while the main CCA-managed facility was rife with violence, chaos and prisoner escapes, but it has been vacated since the state moved all its prisoners to other locations.

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Declaring that "an incarceration program is not an employment program,” New York Governor Andrew Cuomo recently signed a bill to shut down seven prisons in the state . California has begun shutting down various youth detention facilities due to a lack of juvenile crime. Texas is hard-pressed to keep detention centers in Abilene and Fort Worth full. Florida recently spent over $100 million for three prison complexes in Okeechobee, Indiantown, and Hardee in anticipation of the rise of “superpredators” that never appeared. The state, which has the third largest incarceration rate in the country, is now set to close seven state prisons and four work camps. They’re also looking to privatize the state-owned prisons to help pay off the debt incurred from the construction of the now unneeded facilities.

At the same time, the appeal of private prisons as an oasis of efficiency, organization, and job creation is waning. U.S. Bureau of Justice Statistics found that the cost-savings promised by private prisons “have simply not materialized” while certain states have seen cost overruns into the hundreds of millions.

Without state oversight, improper and inadequate treatments have led to numerous incidents of violence and occasional deaths in understaffed and underfunded private prison medical facilities.

The profit motive involved in running a "dungeon for dollars” has led to accusations that prisoners are intentionally being incarcerated longer under trumped-up charges. The best example of this is the recent “Kids for Cash” scandal, where two Wilkes-Barre, Pennsylvania, judges were found guilty of accepting bribes in exchange for sending more juvenile defendants to local, privately-run facilities, independent of their guilt, innocence, or severity of the crime. 

A prison in Chino, California. Photo credit: Reuters

Such lapses have only exacerbated states' move away from private prisons. Various states also placed bans on exporting prisoners to other states to preserve their own in-state prison commodities. Others, like Oregon and California, banned the practice to prevent further exploitation of prisoners by states with looser regulations and to bring prisoners closer to their families and legal counsel.

Still, the decline in prison population has not been enough to completely halt the growth of the private prison industry. Some states are banking on laws similar to that of Arizona's SB-1070 (Support Our Law Enforcement and Safe Neighborhoods Act) – which would allow police to lock up anybody without proof of immigration status – to boost the population of immigrant detention centers.

Other towns in states where the bubble has yet to burst are still debating construction contracts on new buildings. The city-owned, but privately managed prison in Adelanto, California, was sold off to pay for budget shortfalls as inmates were moved to county facilities, but the town is now looking to build a new facility even as the old one sits vacant.

The City Commission of Waurika, Oklahoma, recently voted to proceed with the establishment of a new private prison. When the mayor dissented, the response from the committee was desperate. “With the little bit of business we have in Waurika, I don’t understand how the head of this city can turn down any jobs," the committee wrote. "We won’t get anything else to come here except something like this.”

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