According to John Hopkins's David Dagan and Steve Teles, writing in the Washington Monthly, the change is not primarily due to economic constraints. The change started in the early 2000s, with major conservative-led reforms passing in Texas in 2007, when times were flush, and states weren't facing draconian budget cuts of the kind they've been forced to implement recently.
Nor is this a case of corporate cronyism. The American Legislative Exchange Council (ALEC), which drafts model legislation for conservative state legislatures and is a newfound supporter of prison reform, does not receive support from any prison privatization companies, and has renounced its previous support for privatization measures.
Instead, the change has come about due to an alliance between libertarians, who are as skeptical of the prison system as they are of all uses of state power, and religious conservatives. The latter group was brought into the fold because of two activists who served time in prison: Charles Colson, a former Nixon aide convicted for his role in Watergate, and Pat Nolan, a former Republican legislator in California who was put away on corruption charges.
The two headed up Prison Fellowship, an evangelical group that works with prisoners, and Nolan in particular ran its policy arm. In the mid to late 1990s, they began to put together a conservative coalition in support of reforms. It wasn't long before big players like Grover Norquist and direct-mail magnate Richard Viguerie joined in the discussions.
The group has already chalked up major victories. Federally, the two big accomplishments are the Prison Rape Elimination Act of 2003 and the Second Chance Act of 2007, both signed into law by George W. Bush with substantial Republican support in Congress. The former lead to the Obama administration issuing new standards which advocates argue could dramatically reduce sexual assaults in prisons, and the latter provides funding for programs intended to reduce recidivism.
But the biggest changes are coming at the state level. Marc Levin, a fellow at the Texas Public Policy Foundation who has become many conservative legislators' point person on prison issues, is a big advocate of expanding probation, house arrest, and parole as alternatives to prison. His group, Right on Crime, has garnered support from the likes of Newt Gingrich, Jeb Bush and Ralph Reed. ALEC has abandoned its previous support for mandatory minimum sentences and now offers five model bills designed to reduce prison populations and increase the use of alternative penalties.