There are many reasons resulted this change. One of them is that incarceration is very expensive.

Sure, by not incarcerating at all the government can save some money. But the cost is pushed to normal people.

California falls into a dilemma: it costs government money if punishing "petty theft" by incarceration; it costs people's property and safety if not punishing at all.

But the people and the government has social contract: the people pay taxes and obey the laws and the government should maintain social order for the community. Now by not maintaining the social order, the government broke the social contract.