The case of a sex offender accused of kidnapping a girl and holding her 18 years as a sex slave is fueling debate over California's plan to cut prison costs by releasing thousands of inmates back onto the streets.

Phil Garrido, an ex-con with a history of violence, is charged with concealing the girl, Jaycee Dugard, in his backyard and fathering two children with her. Such horrors allegedly occurred even though Garrido is a registered sex offender, subject to home visits and monitoring by parole officials.

"Some people should not be out on parole," argued Republican Assemblywoman Diane Harkey. "They are dangerous. They are violent. And they are repeat offenders."

But California is under a federal court order to fix a prison system so chronically overcrowded that a panel of judges says it violates prisoners' constitutional rights.

Moreover, Sacramento plans to cut prison spending by more than a billion dollars to close a $26 billion budget deficit.

Republicans say rather than freeing criminals, it's better to cut costs, like inmate health benefits.

"Our seniors on Medicare do not get the same quality health care that these prisoners get," Harkey said.

But to close the budget gap, the Democrat-controlled Legislature voted to reduce the prison population by 16,000 inmates through expanding credits for inmates in rehab, changing some property crimes from felonies to misdemeanors and focusing parole supervision on the most dangerous offenders.

"All of them will be released at some point," said Democratic Assemblyman Sandre Swanson. "The question is whether we will do it in an orderly, supervised released schedule, so the most violent offenders can be supervised properly."

The governor is expected to sign that legislation, but the work is far from over. On Friday, state prison officials must tell the courts how they'll reduce overcrowding.

Building new lockups may be the most obvious answer, but with a smaller budget, the state may have to release another 24,000 inmates -- new neighbors many communities will be hard pressed to welcome.

Claudia Cowan currently serves as Fox News Channel's (FNC) San Francisco-based correspondent. She joined the network in 1998.