For the first time since 1972, the number of prisoners held in state jails declined in the second half of 2000, according to a report by the U.S. Department of Justice’s Bureau of Justice Statistics. In absolute numbers, the population declined by 6,200 inmates during the six-month period.

For the entire year, however, the number of state and federal prisoners put together climbed by 1.3%.

The rate of growth has been coming down steadily since 1994, when it peaked at 8.4%. For 1999, the rate of growth was 3.4%. At the time, that number also had the distinction of being the lowest rate since 1994.

For Nashville-based Corrections Corporation of America (CXW), this decline means that the overall market for its services isn’t growing as fast as it was from 1990 to 1994.

"The industry can still flourish because of the growth in the number of federal prisoners," said Steve Owen, spokesperson for CCA.

"Also, state correction facilities continue to over-rely on county and local jails to house their inmates. Alabama, for example, is under a judicial order to build facilities to make the state system more self-reliant. They have filed a request for a 500 bed facility."

"The rate of growth may be slowing down," continued Mr. Owen, "but the industry still faces a shortage of facilities. Many jurisdictions have been operating at overcapacity for decades."

The DOJ study notes that the notion of "capacity" is a little difficult to pin down. There are different yardsticks to use for determining a prison's capacity: an outside rating agency's assessment, the staffing and program level, and the architect's original design. The rating will fluctuate up to 15%.

If you take the highest of the three capacity numbers, the nation's prisons are collectively operating at 100% of capacity. If you take the lowest of the three numbers, the nation's prisons are currently 15% over capacity.

But, there are differences from state to state. California, for example, is 85% over capacity. Unfortunately for CCA, California has largely banned the idea of for-profit prisons. The federal government, the third largest prison system in the country, is 31% over its limit.

Furthermore, the survey noted that facilities cannot ideally operate at 100% of capacity, since some reserves must be made for repairs, disruptive prisoners, and emergencies.

And finally, CCA will manage prisons that the individual jurisdictions have already built. As Owen notes: "Only 6% of all prisoners are held in private prisons, so opportunity still exists in the for-profit prison industry."

In another problem facing private prisons, the Arizona Daily Star reported last week that Hawaii corrections officers had audited the Florence Arizona CCA-owned facility in April. Hawaii has about 550 inmates in the facility.

They found numerous causes for concern: two inmates died, six were assaulted, a riot left one prison official with six stitches, and a gang called the United Samoan Organization had effective control over the prison.

Specifically, the auditors found that male inmates were having sex with female Immigration and Naturalization Service inmates, gang members were using drugs and making an alcoholic drink in five-gallon buckets, prisoners were wandering around the facility so that officials couldn’t find them, and one officer brought marijuana into the facility that he traded for protection from the gang.

"These charges are specific to April and before, Mr. Owen said. "CCA has taken steps to remedy the situation, including replacing the warden. Hawaiian officials have re-audited the prison, and they are very pleased with what we did and how quickly we did it."

Asked further about the controversial practice of housing prisoners from one state in another jurisdiction, Owen said, "There are indications that the Arizona Department of Justice will introduce legislation in next session to forbid the practice, but so far, we haven’t yet received any formal notification of this."

CCA shares rose 43 cents Monday to $14.45 on light trading volume.