Indiana lawmakers could face a tough political choice next year between spending millions more on overcrowded prisons or reducing prison sentences and being seen as soft on crime.

A report due in December from the Pew Center on the States and the Council of State Governments Justice Center is expected to contain recommendations for overhauling the state's criminal sentencing system to reduce the pressure on prisons.

But that will require political will from lawmakers who have developed a habit of passing laws that create new felonies or lengthen sentences to get tough on crime.

Rep. Peggy Welch, D-Bloomington, a member of the State Budget Committee and the budget-writing House Ways and Means Committee, told a Monday hearing that prisons are "going to be a big issue in the 2011 session," The Courier-Journal of Louisville reported.

"I challenge all of us to have the courage to do what needs to be done," Welch said.

The State Budget Committee held hearings on the department's proposed $667.4 million budget for fiscal 2012, which begins in July. That's 1.3 percent more than the department spent this year, but less than it asked for in the previous budget cycle, due to spending cuts ordered by Gov. Mitch Daniels.

Increasing costs are due entirely to Indiana's growing prison population, said Department of Correction Commissioner Edwin Buss.

Every 100 inmates cost the department roughly $1 million annually. And more people are being sent to prison because penalties have grown harsher during the past two decades. The department now houses roughly 29,000 adult inmates.

In the last 20 years, legislators have amended the criminal code 107 times to either add new crimes or lengthen the prison sentences of existing crimes, The Journal Gazette of Fort Wayne reported.

Department officials said they have managed to hold down costs in part by reorganizing prisons to make better use of space and by using vendors to provide meals, education and other services. The state hasn't authorized a new prison in about 10 years. And the agency has simply made do with less.

"If there was a closet, we took off the door and put bunks in it," Buss said.

But Buss said prison costs will continue to go up unless legislators overhaul the state's sentencing laws.

Rep. Eric Turner, R-Marion, said he and other lawmakers had reacted emotionally to crime by voting for bills that lengthen sentences or create new crimes. He said the Legislature needs to reconsider such laws.

"We need to figure out how we can come back and fix it in one big swoop," Turner said. "It's going to be very difficult."

Daniels spokeswoman Jane Jankowski said Tuesday that the governor had made the sentencing laws one of his legislative priorities for 2011 and was looking forward to the Pew report's recommendations. Pew has helped other states deal with similar problems, she said.

She said Daniels wants to make sure dangerous criminals stay behind bars while the state finds more cost-effective ways of managing those who aren't dangerous.

Department of Correction officials said the state could save money by shifting minimum security offenders into community corrections, which can include work release, home monitoring and other programs. The Department spends about $32 per day to house a minimum security offender, said deputy commissioner Randy Koester, while the average cost of community corrections is about $20 per day.

But State Budget Director Adam Horst said simply putting more low-level offenders into community corrections programs won't solve the department's problems. That will require broader solutions, said Horst, who is on the steering committee for the Pew study.

The sentencing study is evaluating probation and parole supervision practices, community corrections and transition programs, the use of issue-specific courts including drug and family courts, and sentencing guidelines and requirements.

Changes could include decreasing prison time for certain crimes; moving more offenders to community corrections and revamping the state's earned credit rules, according to The Journal Gazette.

"This is not easy," said Rep. Jeff Espich, R-Uniondale. "This is going to take a lot of guts."