The master plan outlines the department's recommendations for ending years of federal court oversight, overcrowding, poor inmate medical and mental health treatment, and soaring budgets.
It came at a time when the nation's largest state prison system is being transformed by ongoing state budget deficits, federal court orders and a realignment ordered by the governor that shifts its focus to the most violent and dangerous offenders.
The changes are possible because of a state law that took effect Oct. 1 that shifts lower-level offenders from state prisons to county jails. That shift is the main consequence of a federal court order requiring the state to reduce its prison population as a way to improve inmate medical care.
"It's a massive change to our system," Corrections Secretary Matthew Cate said at a Capitol news conference.
Lowering the inmate population eliminates the need for $4.1 billion in construction projects and will let the state Department of Corrections and Rehabilitation reduce its annual budget by $1.5 billion, officials said.
The plan calls for returning to state prisons by 2016 about 9,500 inmates who are currently housed in private prisons in other states. That alone would save the state $318 million a year.
But prison officials also acknowledged for the first time that they will not meet a June 2013 deadline ordered by federal judges for reducing the state's prison population to end poor medical and mental health care.
The corrections department said it will ask federal judges to allow the state to keep an additional 6,000 inmates behind bars, exceeding the limit set by a special panel. The court's order was upheld last year by the U.S. Supreme Court, but the high court also gave the state leeway to negotiate the final inmate count.
The state will have difficulty demonstrating why the judicial panel and the nation's high court were wrong in setting a lower population cap, said Rebekah Evenson, an attorney with the Berkeley-based nonprofit Prison Law Office that plans to oppose the move.
Prison officials likely would have to continue housing inmates in private prisons out of state if the court rejects the state's higher goal for its inmate population and orders it to meet next year's deadline.
The federal courts had ordered the state to reduce its inmate population by 40,000 from the record high of 173,479 in 2006, ruling that jamming inmates into triple bunks, day rooms, gyms and other areas was preventing the rapid and efficient delivery of medical care. The corrections department has shed a little more than 20,000 prisoners so far.
While it argues against building new prisons, the corrections department is going with a separate plan to build medical and mental health facilities to accommodate the mandates of a federal receivership that has been in place since 2006. That includes a new prison hospital in Stockton to treat inmates requiring long-term medical care and intensive mental health treatment.
The state and attorneys representing inmates have a deadline next week to recommend to a federal judge how and when to end the receivership.
"It's our goal to get out of all of our health care-related court oversight by the end of 2013," Cate said.
Complying with the court oversight of inmate medical and mental health treatment is just one of the challenges facing the state prison system. Equally problematic is California's ongoing budget crisis.
The Legislature has cut tens of billions of dollars from higher education, health care, social services, state parks and other core functions during the recession, a time when state prison costs have soared.
California's prison costs rose from 3 percent of general fund spending in 1980 to 11 percent in 2009. If the master plan released Monday is implemented, that would fall to 7.5 percent.
County officials have expressed concern over the realignment plan because the state has not guaranteed them the money to pay for it. Gov. Jerry Brown wants to place that guarantee in the state Constitution as part of a tax-hike initiative he is proposing for the November ballot.
The master plan released Monday also calls for closing the California Rehabilitation Center, a 3,900-inmate medium security prison in the Riverside County community of Norco, a building that opened in 1928 as a luxury hotel and served as a Naval hospital before the state took it over.
Closing the prison would save about $160 million a year in operating costs.
