I am wondering what the legality is of using state owned
property/equipment to make a profit off the equipment in the private
sector.    I know of a company that times and scores track meets for
schools.  They have an agreement setup with the coaches at particular
schools to time and score the track meets for half price, in return
the timing and scoring company gets to use a very expensive photo
finish camera for free.  The camera is then used at other schools who
do not own photo finish equipment.  The timing and scoring company
charges for their services but uses equipment owned by the states of
Minnesota and Wisconsin and makes a profit doing so.

I am wondering if this is legal or not?  What kind of laws does this fall under?

Practices of this sort are common and account for a significant
portion of taxes. They may be for the public good in some situations,
but the person giving permission could be prosecuted in most cases,
even if a not for profit organization benefits, perhaps not
successfully prosecuted. This is just my opinion.   Neil

The private company is making a profit off their services, not the
equipment. As long as the equipment is used for its intended purpose
and accounted for, there shouldn't be any problems.
As federal employee, I've seen specialized equipment provided as part
of a contract. The contractors sign for the equipment and assume
custodial control of the equipment. If the contractors destroy the
equipment through negligence, then they could be held liable. After
contract expiration, the equipment is returned and inventoried, and
the owning organization assume custodial control once again.
It should be the same for state owned equipment. The owning agency
signs out the equipment and the private organization retains custodial
control. It would be the legality of the contract that's in question.
As long as the contract was provided by career contracting officials
(no one of political affiliation) and the correct procedures were
followed awarding the contract, then it should be legal.

The issue is one of "misuse of public property for personal gain". As
others have said, this may or may not be legal. The outcome of any
such charge is very fact-dependant. It may be construed that there is
a loan of the publicly-owned equipment from one government entity to
another, and that the payment covers solely personal services and not
implicit rental or use of the equipment.

There is a dearth of reported cases dealing with the issue. In a quick
search commensurate with the terms of this question, I found seven
that contain the phrase "misuse of public property". Some involve
dismissal of employees -- in one case a probationary employee who
protested the city manager's wife using public space to sell
counterfeit goods. Others involve freedom of information requests by
journalists. Here are some selected cases:

http://www.uniset.ca/other/cs2/655NW2d384.html  (Neb.)
http://www.uniset.ca/other/cs2/126A2d915.html  (Penna.)
http://www.uniset.ca/other/cs2/925P2d591.html  (Ore.)
http://www.uniset.ca/other/cs2/752A2d828.html  (N.J.)

I found no Wisconsin or Minnesota cases; on the other hand public
corruption, major and minor, is unlawful in every city, town and
state. Indeed, at a certain level it can give rise to a federal
prosecution, under RICO or otherwise. This is trivial: and the result
is that a search of statutes in Wisconsin
http://www.legis.state.wi.us/rsb/stats.html
and in Minnesota
http://www.leg.state.mn.us/leg/statutes.asp
is unhelpful -- although if I spent more time (i.e., if you were my
client and were paying me, and if moreover I were licensed in either
Wisconsin or Minnesota or both) I could certainly pinpoint the laws
that a prosecutor or an attorney general bent on dismissing your
public contractor would cite.

I don't think a definitive answer is possible in this case without
seeing the contract in question. Public-private partnerships are
fashionable in the present political climate; the U.S. Supreme Court
just ruled (to the chagrin of many on both ends of the political
spectrum) that the power of eminent domain can be used by cities for
private profit in pursuit of a (vague) public policy. This is the kind
of deal that smells bad, but one that is perhaps better aired in the
press than in the courts.

(One problem with the question is that it refers to "state owned"
property, but we don't really know if the property is owned by the
state, by a municipality, by a PTA or nonprofit association, or what.
Nor do we know whether the lower price given by the contractor to one
school district is adequate compensation. Or whether the ownership and
de facto rental of that equipment is ultra vires (outside its legal
scope of activity, perhaps endangering -- if it's a nonprofit
organization and not a government -- its tax exempt status).