Public Schoolteachers' Pensions Are Partially Funded by Private Prisons

Photo via Flickr user Rennett Stowe.

Public schools and prisons are becoming increasingly linked – police officers are now a constant presence in many schools, which has led to students getting hassled and arrested by cops for what could be described as normal kid stuff, including performing science experiments on school grounds. There’s even a name for this phenomenon: the school-to-prison pipeline, which takes kids, mostly minority students who live in poverty, out of the classroom and into the legal system, shuffling them into the prison-industrial complex before they’re old enough to vote.

But there’s another, less obvious way schools are tied to prisons. Retirement funds for public school teachers (as well as other government employees) in several states have a combined $90 million (£58.7 million) invested in Corrections Corporation of America (CCA) and GEO Group, the largest private prison companies in the world. Though individual teachers didn’t decide to make their pensions partially connected to America’s gigantic, often abusive incarceration industry – many of them aren’t aware of all the investments made on their behalf – they are indirectly profiting from mass incarceration, thanks to choices made by their money managers who run public employees’ massive pension funds.

That $90 million figure is an estimate based on publicly-available NASDAQ data for public employee pension funds. Most of the money comes from three big states: California, New York and Texas. Texas, through its Permanent School Fund and state employee retirement system, has about $13 million (£8.5 million) invested in CCA and GEO. California and New York, through their retirement funds for public school teachers and other state employees (which includes non-teacher school employees, like janitors and principals), each have about $30 million (£19.6 million) tied to private prisons.

These investments in the incarceration industry are piddling in comparison to these funds’ overall portfolios – the teacher retirement funds for California (CalSTRS) and New York (NYSTRS) are worth $167 billion (£109 billion) and $96 billion (£62.7 billion), respectively – but they qualify as major shareholders in CCA and GEO Group.

If corporations are people, GEO Group shouldn’t be allowed within 100 feet of a child. In 2000, the company (then known as Wackenhut Corrections Corporation), was indicted by the Department of Justice for running a juvenile detention centre in Jena, Louisiana, where boys were routinely beaten by guards. One kid, who had to wear a colostomy bag because of a gunshot wound, was beaten by a guard for not tucking in his shirt, which he couldn’t do because the bag was in the way.

It didn’t end there. In 2012, GEO was indicted again, this time for running a juvenile prison in Walnut Grove, Mississippi, where kids were frequently raped, beaten and denied medical attention. The seediest detail might have been that Grady Sims, the 61-year-old warden who was also the former mayor of the town, took a young female inmate to a nearby motel and had sex with her, then later tried to get the girl to lie about it to investigators. He eventually got the sexual-assault charge dismissed and pled guilty to witness tampering. He was sentenced to a whopping six months of house arrest.

Despite this track record, the government is still handing over kids to GEO Group through Abraxas, the private prison conglomerate’s juvenile-detention arm. In addition to running prisons for kids, this subsidiary takes kids who have been expelled from public school and puts them in “alternative” schools, which are supposed to be designed for kids who have behavioural problems, but in many cases are home for teens who have been victimised by a system that overreacts when kids act up.

Several teachers I spoke to about their pensions being invested in companies that engage in such morally questionable practices.

“Why?” said Darleen Guien, a retired adult ESL teacher who worked for several years in the LA Unified School District. “[The private prison investment] is just a fraction of the fund. Why do they need that?”

Guien said that due to the size of the teachers’ retirement fund, she assumed it would have a few ethically questionable investments, such as Walmart, but she was disappointed to find out it was making money from private prisons.

“Teachers provide a public service,” she said. “It’s troubling to know that they’re investing in things that are so much against the values many of us have.”

She also felt that teachers have no control over how their retirement fund is invested. “It’s not like we’re shareholders in a company and we vote,” she said. “I don’t think we have any say in anything. All we can do is maybe write a letter.”

Joe Martinez is a principal at Villacorta Elementary in South San Jose Hills, California. Although he wouldn’t comment on the private-prison investments in particular, he seemed to agree with Guien’s sentiments about there not being much that teachers can do about what provides the money for their pensions.

“More transparency could be a start, but even if teachers were given all the information about the investments, I don’t think there’s really much of a way for their voices to be heard, or even if it would make a difference,” he said.

I asked him if it really mattered in the end. After all, private prisons might be despicable entities, but they’re not illegal. In fact, they’re often very profitable companies and hence worth investing in from a purely capitalistic perspective. Is it OK to invest in ethically problematic companies if the profits go to teachers?

“I don’t think there necessarily has to be a choice,” he replied. “The people who control these funds, which are basically a lot of other people’s money, could just be more conscious of what they’re investing in.”

When I reached out to spokespeople for the teacher-retirement funds of New York and California, both emphasised that the job of these funds is to make money so teachers can enjoy their golden years, and when you manage funds as vast as theirs, you might get into some ethically questionable territory. They also said that the private-prison investments are likely tied to index funds, which means they are part of mutual funds that mimic the ebb and flow of the market as a whole. In other words, no one is really deciding to invest in prisons, they just aren’t deciding not to invest in prisons.

However, a line can be drawn. John Cardello of the NYSTRS said they don’t invest in hedge funds. Everything else is OK, though. “I can’t think of anything else that we consciously stay away from,” Cardello said.

But CalSTRS, which is nearly twice as big as their New York counterpart, has made headlines for distancing itself from controversial corporations. In 2009, they stopped investing in tobacco companies, and shortly after the Newtown massacre, they announced they would divest from gun companies that make assault weapons considered illegal in California.

"There’s a moral component to our investing,” said Ricardo Duran, a spokesman for CalSTRS. He explained that the fund has 21 risk factors that go into deciding what to invest in. Those factors include respect for human rights, civil liberties and political rights. It also includes racial discrimination.

By those standards, however, how are private prisons not unethical investments? Hopefully, these publicly financed funds will review what they’re making money off of soon and stop investing in companies that profit from America’s worst social problems.

Follow Ray on Twitter: @RayDowns

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