Cornell Companies, Inc. (CRN)

The only reason that I am writing this is to dispute the fact asserted by below. Specifically, prisons are being operated above capacity, which points to a supply and demand problem. There was a recent federal lawsuit in California highlighting this fact that ordered an injunction that prison overcrowding be addressed here. Federal prisons run at 125% of capacity.

The cost advantage in California is that private companies charge around $60 per head per day, while the California Corrections must spend around $100 per head per day.

Moreover, there are not really that many potheads in prison. While there may be a good number of prisoners whose root cause is drug abuse, their convictions are not usually for possession but rather for property crimes that were committed to support their addictions. And its meth, heroine, and crack - not pot.

Finally, these same property crimes will likely rise if the unemployment picture does not improve.

The US has overbuilt its prisons even more than housing. Prison Contracts tend to run 20 years, renewable every 5. Cash strapped governments will revisit "three strikes" laws, and the potheads will be freed. Alternative sentencing to incarceration will be used. The contracts require the states to pay on a minimum number of beds. That number is lower than current use rates of 90-95%, allowing for short term losses in income. As the contracts come up for renewal, expect that minimum number to decline behind popular support for saving money.