1) The best web site I could locate was at: http://www.azleg.gov/FormatDocument.asp?inDoc=/iminute/House/03+02+HOUSE+SEL+COM+ON+GOVT+OPS+PERF+AND+WASTE.DOC.htm
This is the minutes of a meeting between a prison contractors and the state of Arizona, and provides more details on how salaries are calculated than any other sites I found.

2) The demand for correctional officers is determined by the crime rate. However, because they are public employees, correctional officers wages are complicated by politics. If the state legislature has other priorities, their pay may not be sufficient to keep the jobs filled. Note in the meeting, one person says "because of the large number of federal inmates, federal wage laws apply to CCA employees, and those wages are far above state employee wages."

The supply of correctional officers will depend on the availability of other jobs. Correctional officer jobs are not highly thought of. Most people would prefer other work. If the workers have other more appealing options, they must be enticed with things like benefits packages and free training. Correctional officers do make more than minimum wage, so minimum wage workers will be tempted to take the training if it is free.

3) Generally the pay rate for any profession is determined by supply and demand. For example if not enough correctional officers are available for $12 an hour, the pay rate will increase. For this reason, you will likely not find a formula for how this wage is calculated. Any such formula would likely yield a wage too high or too low. The market is too complicated to be calculated. For state employees, however, some calculations need to be made because their salaries are part of the government's budgetary process. In the web site, there are mentions of raises. Such wages will be based on the historical wage. Correctional officers aren't likely to get a 15% pay increase in one year. Also notice that since this meeting is with prison contractors, things are complicated by the contract negotiations. The money for the contract will go to the contracting company, who then distributes it to their employees. An interesting comment given by one of the contractors: "if they could hire a person they do, and if not, the vacancy savings goes toward offsetting the cost of overtime and geographic and retention stipends." So, when the company is short-staffed, they use overtime to make up the extra manpower needed.

4) The supply of correctional officers can be influenced by making training programs available free of charge. This is the single most important factor to bringing in workers. Many people are faced with finding a job and having no experience. They will be drawn to this opportunity. However, free training programs will cost the state money. Politics comes into play, and politicians may have other priorities; there is only so much money to go around. So we see an ongoing shortage of correctional officers. The situation is quite dire in Arizona. You can read about it here:
http://www.tucsonweekly.com/gbase/currents/Content?oid=oid:57551