For the first time in nearly 40 years, states see a decline in prison population, as reported by this new Pew report. The decline in California, though not the most impressive percentagewise (that honor falls to Rhode Island, per Jesse's post), is the largest in total numbers: we have shedded 4,257 prisoners in 2009. Compared to the total numbers we are dealing with, this is a modest beginning, but maybe the financial crisis will have a "humonetarian" impact after all. The report ascribes the reduction in California to a combination of the financial crisis and the development of intermediate sanctions for parole violators.
The number of federal prisoners, however, has increased.
Incidentally, check out the impressive 6.7% reduction in the Michigan inmate population. Ironically, Michigan's ability to do more about overcrowding than we do is what allows them to try and enter contracts to house our prisoners out of state. If we were able to do, in-state, what Michigan has done, we would have no need for Michigan's services.