Economics of Jailing for Profit and Budgets

Jailing for Profit: When Budgets Depend on Locking People Up

– by Nazish Dholakia

Vera Institute

Across the country, more than 1,300 counties have expanded existing jails or built new ones over the last 20 years, increasing the nation’s capacity to lock people up in jails by almost 40 percent. One of the drivers of this growth is the prospective revenue that local jails can receive from neighboring counties, state corrections departments, and federal agencies, including Immigration and Customs Enforcement (ICE) and the United States Marshals Service (USMS), which all rent county jail beds.

This practice allows these departments and agencies to lock up more and more people, unconstrained by the capacity of their own facilities. For example, the mass detention and deportation plan advanced by President-elect Trump rely, in part, on utilizing the beds available in local jails, supplemented by temporary and private facilities, to detain many more immigrants.

Further, these rental arrangements can incentivize local officials to build newer, bigger jails based on perceived economic benefits and ignoring any local criminal legal system-related needs. Counties can become reliant on this revenue, Subsequently, the county becomes further entrenched in the system of mass incarceration. This practice ties communities’ fates to future incarceration, and it can saddle counties with fixed expenses for decades if revenue doesn’t meet projections.

What happens when a county’s budget is reliant on putting people in jail?

On any given day, more than 1.8 million people are incarcerated in U.S. prisons and jails. That includes an approximate 660,000 people held in more than 3,000 local jails scattered across the country. Although comprehensive data is lacking (particularly for ICE), it is clear that a significant number of people in these jails are held there for state or federal agencies. In 2019, local jails held about 117,100 people (16 percent of the incarcerated population) on behalf of federal, state, and tribal authorities, according to the Bureau of Justice Statistics.

Counties enter into arrangements with various entities, offering them jail bed space in exchange for a per diem (per day) payment, which varies by contract. For example, in 2023, the per diem rate negotiated between Daviess County, Kentucky, and the USMS increased from $55 to $70 per person per day.

You could look at this as a solution to a logistical problem. State and federal agencies could justify using bed space that county jails can offer for transfers or other logistical needs. Federal agencies now use local jails to hold more people. Utilization of Jails by USMS is increasingly to detain people facing federal criminal charges and also by ICE to detain people facing civil immigration proceedings. ICE can also piggyback on all contracts between USMS and local governments, in addition to having its own direct contracts with them. Local jails comprise the most common type of facility in ICE’s detention network.

The number of people detained in local jails under USMS contracts increased from 3,000 in 1984 to 30,000 in 2018. That year, USMS paid local jails $1 billion to hold pretrial detainees, while ICE paid an estimated $340 million to local jails to detain immigrants.

This is problematic because, as the Prison Policy Initiative writes, “the systematic renting of jail cells to other jurisdictions, while also building ever-larger facilities in order to cash in on that market—changes the policy priorities of jail officials. It leaves them little incentive to welcome or implement reforms” to reduce jail populations. For example, in Kentucky county jails receive per diem payments from the state to hold people convicted of low-level Class D felonies. There is evidence that local judges and prosecutors pursued increasing numbers of low-level Class D convictions. The agreement may be one possible reason for this, potentially leading system actors to pursue these convictions and keep more people in jail just so county jails could collect revenue from the state.

A not-always-prudent venture

Counties that build larger jails, lured by the prospective additional revenue, are embarking on an expensive and risky endeavor. They spend millions to build and operate jails based on the promise of future revenue, but these plans can backfire—particularly when counties underestimate the costs of building, maintaining, and operating a larger jail. When that happens, even shutting down a section of a jail will not eliminate all operational costs, such as staffing.

McHenry County, Illinois, is one cautionary example. Seeking per diem payments from the USMS and ICE, the county built a bigger jail but never realized its revenue projections.

“Knowing what we know now, we shouldn’t have gotten into this jail bed-rental program,” one county board member said in 2014.

“Beyond the obvious harms of incarceration, the potential for revenue is no reason to expend valuable resources on building or expanding jails,” said Jennifer Peirce, associate director of research for Vera’s Beyond Jails initiative. “And while it may look prudent based on the jail’s current operating expenses, it may not end up that way. What if you don’t fill 100 percent of your rental allocation? What if your costs go up and the contract is locked in? Any time any of these variables change, so do the risks.”

Such was the case in Kentucky, where counties spent more than $402 million to incarcerate people in local jails in 2019. Revenue from per diem payments, primarily from the state’s department of corrections (DOC), did not offset the financial cost of operating those jails. In 2023, four counties sued the Kentucky DOC, claiming that it wasn’t paying counties enough to incarcerate people for the state.

And some counties, having created “extra” beds that were intended to generate revenue, have instead used this additional capacity to lock up increasing numbers of local residents. Johnston County, North Carolina, and Grayson County, Kentucky, both expanded their jails to hold people for federal authorities. When their local jail populations increased and, as a result, they could not hold as many people for federal agencies, both counties decided yet again to increase their jail capacity. As Jack Norton, Lydia Pelot-Hobbs, and Judah Schept wrote for The Baffler, “When they build it, they fill it, and counties across the country have been building bigger jails and planning for a future of more criminalization, detention, and incarceration.”

The social costs of keeping people in jail

The federal budget for fiscal year 2024 included an excessive $3.4 billion for ICE detention. This spending is as wasteful and unnecessary as it is cruel and inhumane. Research shows that detention does not deter migration, and it is not necessary to ensure people appear in court—claims frequently used to justify the expansion of detention. Most immigrants who are not detained do show up for immigration court hearings. Further, jail rental contracts can be inefficient and expensive for federal agencies. ICE, for example, has spent millions of dollars on empty beds because some federal detention contracts include  guaranteed minimum payment provisions.

The practice of holding people in local jails is also costly and wasteful for local governments. Instead of investing in communities’ needs—such as schools, health care, and transportation, county officials spend on jails and pursue financial benefits that are socially costly to these same communities. In a self-fulfilling cycle, research shows that incarceration impoverishes communities, destroys health, increases housing instability, and separates families. It is therefore not surprising that incarceration does little to decrease rearrest rates. Such may even increase them. And, as was the case in McHenry County, Illinois, presumed financial gains may never actually come to fruition.

Opposing the harms of immigration detention, advocates have successfully persuaded jurisdictions to end contracts with ICE, and some states have enacted legislation that prohibits local jurisdictions from contracting with ICE for bed space. But this doesn’t go far enough because ICE can still rely on USMS contracts with counties.

Instead of prioritizing more incarceration, local authorities should be investing in policy changes to reduce jail populations over time. Decision-makers need to stop spending money on building bigger and bigger jails, which hinges our communities’ futures on the cruel—and socially and fiscally costly—system of mass incarceration.