While the drop in prisoners reoffending after their release last year is yet to be reflected in the ballooning crime rate, the reduction is an indication rehabilitation programs could be working.

In 2014-15, Victoria reached a 10-year high for recidivism of 44.1 per cent of prisoners returning to custody within two years of their release, but that figure dropped marginally to 42.8 per cent in the past year.

It is unclear exactly how many less inmates are returning to prison within two years of their release, as raw numbers on recidivism are not released.

But the new rate will bring Victoria closer to the national average, which is just above 40 per cent.

The recidivism rate and prisoner population have exploded in the past five years, with the Andrews Government largely blaming the increases on harsh sentencing reforms and under-investment in the prison system by the former Coalition government from 2010 to 2014.

The crime rate is also at a 10-year high, and there were more deaths in prison this year than in the past eight years.

Corrections Minister Steve Herbert heralded the drop in recidivism as a sign that investing in the future of prisoners could make all Victorians safer.

He said more than $80 million would be spent on prisoner rehabilitation and reintegration programs this year, including on alcohol and drug addiction programs, mental health services and transitional support.

There was $233 million allocated to community corrections in the state budget, which would ensure offenders met conditions set by the courts or the Adult Parole Board.

Mandatory literacy and numeracy testing was introduced for all prisoners last year, including for those on remand or with short sentences.

"Not addressing the underlying causes of crime is a recipe for reoffending," Mr Herbert said.

"Victorian prisons were actually producing more criminals, rather than getting people back on track.

"That's why we're putting $80 million into programs that help prisoners adjust to the normality of life when they're released."

In a review released in September last year, Ombudsman Deborah Glass outlined in troubling detail the importance of an effective prisoner rehabilitation system.

"This issue is no longer at the margins. It has profound implications for public safety, the state's economy and the sort of society we create.

"While the public is understandably horrified by violent crime, we cannot keep pouring public funds into a correctional system that is not making us safer.

"If we continue in this way, current trends in both prisoner numbers and cost mean it will not be long before we have to make hard decisions between prison beds or hospital beds, better schools or more security."

The $80 million spent on prisoner programs this year is $25 million more than was spent in 2012-13.

Programs for violence intervention, aimed at those convicted of violent offences who are considered at risk of reoffending, are among those that have been funded.

Reintegration programs address individual needs of prisoners in relation to housing, employment, education, life skills, mental health, and substance abuse.