Your idea is the reality. Except the profits do not go toward offsetting the taxpayer costs of prison, in most cases. Also, the possibilities for corruption are rampant, due to unaccountability. Here are a few sites:
http://www.interactivist.net/housing/prison2.html
To clarify: Prison industries fall into four categories: (1) private sector employer (2) state-use industries (such as UNICOR); (3) private-industry customer (state-owned factory); and (4) state-owned, privately-operated (such as the PRIDE program discussed below).
In 1992, about 81,000 inmates were employed in prison industries (CURENY, 1997). Meanwhile, “…nearly all prisoners already work–91% in the federal system, 70% in the state, according to a 1991 report by the Bureau of Justice Statistics. Those who don’t work typically include the medically or mentally unfit, as well as the most dangerous offenders…The average prisoner’s workweek is 34.5 hours. Federal inmates put in 37.5 hours…” (emphasis added, BJS, 1993: 4).
unicor/FPI (Federal Prison Industries) legislation 2003
http://www.mlive.com/news/statewide/index.ssf?/base/news-2/1059163800215820.xml
UNICOR DOESN’T LOWER TAXPAYER COSTS, IT RAISES THEM
http://edworkforce.house.gov/hearings/105th/oi/prison8598/martin.htm
Prison Industries Enhancement Program (P.I.E.)
http://www.peol.com/industries_facts.htm
Making Crime Pay
Who profits? The building trades are experiencing a huge windfall. Phone companies, providers of vending machines, and HMOs are all finding new markets in the burgeoning prison population. One phone company charges $22 for a collect 15-minute cross-country phone call, and provides a 35 percent kickback to the prison. They have a captive audience in prisoners who cannot carry cash in prison and must rely on collect calls. A single phone can gross $15,000 a year. Snack machines offer the staple food supply for visiting rooms in prisons. One provider has reported a doubling of sales each year.
To keep prisons - both public and private - financially self-supporting, prison officials are bringing private industry inside the walls, using captive (and therefore cheap) labor.
Prison profiteers fighting over prisoners
http://www.corpwatch.org/news/PND.jsp?articleid=22
More prisons coming soon
http://www.notwithourmoney.org/03_prisons/resources.html
Rather than expand use of community sentencing, the FBoP plans to build 29 new public prisons and contract for more than 20,000 new private prison beds.