The current prison system has not only led to the state hemorrhaging money, but the quality of the system and the quantity of prisoners has also led to great amounts of criticism around the world. There are also many trials which lead to imprisonment based on faulty or false evidence.
Prisoners should be made to compete in a martial-style tournament, in which the grand prize is (paroled) freedom for the final contestant.
This will not only generate enormous amounts of revenue for the state by broadcasting such a tournament, but it will also serve as a major deterrent for violent and sexual crime, as the prospect of prison will no longer seem as an 'out', as it often serves.