The closest thing I've ever heard of is when prison operations have been subcontracted out by the state in an effort to lower costs. The state usually retains oversight and authority, but I don't know of any doing it any more.
I think Corrections Corp of America owns a bunch of facilities, as well as managing dozens more for federal, states, and cities. The DUmmies hate them because they have jobs that the AFSCME drones would otherwise occupy.