Putting people in prison is expensive. The US has more people in prison, by far that almost every other nation, yet for this investment, we don't have particularly low crime rates.
What to do?
Allow caining as an option for crimes. Let a person recieve 10 lashes rather than 10 years for example for certain crimes. This would save half a million dollars, for just one prisoner.
I don't take illegal drugs because I was educated in grade school that they degrade quality of life. We have spent millions sending our military to South America to go after the drug lords. This hasn't stopped the flow of drugs nor has it driven up the cost to the point that anyone who wants drugs can't get them, nor is it likely to.
Given that using the military to fight drugs doesn't work, stop spending money on doing this. Put a fraction of this money towards education, which is what really does work to stop illegal drug usage.
Have the government compete with the drug lords and gangs in manufacture and distribution of (presently) illegal drugs. If the government does this, let the government do this in a sterile clinical setting, to take away the 'glamor' of drug usage. Taking away the 'cool' factor, by making drugs unavailable at parties and raves will make it unlikely that new people will start using, and the government providing drugs for free would put the drug lords and gang member distributors out of business. Therefore they will no longer be able to supply the drug parties and raves with drugs.