Some legislators lukewarm on Noem’s plan to spend $81 million surplus on prisons

The site plan for a women's prison in Rapid City, as displayed at a groundbreaking ceremony Oct. 16, 2023. (Seth Tupper/South Dakota Searchlight)

Some South Dakota legislators aren’t sure they’re ready to support Gov. Kristi Noem’s plan to devote an $81 million budget surplus to prison construction.

The future women’s prison in Rapid City is estimated to cost $87 million, and already has funding from the Legislature.

The state has also allocated $567 million from state and federal funds for a new men’s prison about 15 miles south of Sioux Falls in rural Lincoln County. Lawmakers expect to receive a guaranteed maximum price from a contractor this fall. Last year, the cost was roughly estimated at $707 million.

Noem announced the 2024 fiscal year-end budget surplus in a Monday news release, along with her “intention to set aside the surplus to offset the cost of prison construction.” The state’s fiscal years begin in July.

Noem can recommend how to spend the money but can’t decide how to spend it on her own. State lawmakers will consider what to do in January when they convene for their annual legislative session. 

Legislators who draft the state budget serve on the Appropriations Committee. One of its co-chairs is Sen. Jean Hunhoff, R-Yankton, whose 24 years in the Legislature will end in January after she lost to a fellow Republican in the June primary election.

Hunhoff said South Dakota’s low 2% unemployment rate is driving up wages and could force state government to pay its employees more to remain competitive with the private sector. 

Additionally, she said a Nov. 5 ballot measure that aims to eliminate the state’s sales tax on groceries could affect the state budget. The Legislative Research Council has estimated the measure would cost the state $124 million annually in lost revenue.

Hunhoff suggested the surplus might be needed in other areas as legislators work on the budget.

“It’s just too early to say when we still have questions regarding what could happen after this election,” she said. 

Another Appropriations Committee member, Rep. Chris Karr, R-Sioux Falls, said other priorities could use the one-time funding.

“Let’s be mindful of the other projects that need attention in this state,” he said. 

Karr said he is not convinced the state has considered all its options for creating new prison space, like expanding current facilities.

“We’re consistently underestimating the cost of these sorts of projects, and they just keep coming back with a bigger and bigger bill,” he said. 

In 2022, the new men’s prison was projected to cost $339 million, Hunhoff said, while the women’s prison was projected to cost $28 million in 2022 and $64 million in 2023. 

“I think from the original estimate, we went up about $60 million,” she said. “Inflation was eating away at what we had projected.”

Rep. Tony Venhuizen, R-Sioux Falls, also serves on the Appropriations Committee. He said it makes fiscal sense to set aside money and avoid taking on debt to finance prison construction.

“The goal all along has been to pay cash for as much of the construction as possible,” Venhuizen said. “What the governor is proposing, to continue to set aside funds for that purpose, is a good idea and consistent with that plan.”

Dirt-moving has begun at the future site of the women’s prison in northeastern Rapid City. The facility is intended to ease overcrowding at the existing women’s prison in Pierre.

The future men’s prison is designed to largely replace the Sioux Falls state penitentiary, parts of which date to 1881. Some landowners neighboring the proposed site in rural Lincoln County are suing to block the project by attempting to subject the state’s plans to local zoning rules. The lawsuit awaits a judge’s decision.

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