In my feed on the X platform, I'm seeing discussion of yet another "Freedom Works Here" ad featuring South Dakota governor Kristi Noem:
This ad focuses on encouraging nurses to move to South Dakota. It touts our lack of income tax but doesn't mention, as @LeeSDPB points out, that our median nursing income is ~$18,300 less than the median national nursing income.
— Arielle Zionts (@Ajzionts) January 4, 2024
(According to the latest BLS data from May 2022) https://t.co/KyzqUeKcRs
Also in the flow? A discussion about how investments in incarceration are rising. The South Dakota Searchlight provided an overview in an article published Thursday afternoon by the South Dakota Searchlight.
Price tag for new prisons, already historic, could grow significantly
By John HultEarly in 2023, the South Dakota Legislature budgeted $60 million for a new women’s prison in Rapid City. The state also set aside $330.9 million to start work on a new men’s prison to replace the aging state penitentiary in Sioux Falls.
Then, in December, Gov. Kristi Noem surprised some lawmakers by saying the women’s prison already has a $27 million budget shortfall. Her proposed budget would cover that amount and add $238.2 million to the construction fund for the men’s prison, which would be in rural Lincoln County. If adopted, the total money set aside for both projects will grow to $656.2 million.
A few weeks after Noem’s budget address, lawmakers at a community meeting in Harrisburg about the proposed penitentiary said the budget for the men’s facility could climb well above the initial $600 million price tag for the multi-year project.
Noem and the state Department of Corrections did not respond to multiple requests for comments from South Dakota Searchlight.
Lawmakers on the Joint Appropriations Committee, which drafts the annual state budget, haven’t heard much from the administration about prison project costs, either, but many have questions.
Without adjusting for inflation, the new penitentiary alone amounts to the largest one-time capital investment in state history. The Sanford Underground Research Lab in Lead is more expensive overall, but state taxpayers aren’t on the hook for the lion’s share of its costs.
“In terms of the largest construction project the state’s ever undertaken, the penitentiary is certainly it,” said Tony Venhuizen, R-Sioux Falls, who sits on the appropriations committee.
Noem, the DOC and lawmakers have all said over the past few years that severe overcrowding at the women’s prison in Pierre and safety issues in the state penitentiary – a building whose construction predates statehood – mean that the new facilities are an unavoidable expense for taxpayers.
Price increases common in recent years
Inflation, supply chain problems and workforce shortages in the construction industry caused legislators to approve extra money for nine projects during the 2023 legislative session. Some lawmakers worry a continuation of those trends could push the combined cost of the prison projects to more than $1 billion.
Venhuizen isn’t one of them, though he acknowledges that those factors have led to several years’ worth of unexpected price hikes for state work
An influx of federal cash during and after the COVID pandemic has put the state in a position where it’s able to shoulder higher costs for the most part without taking out interest-bearing loans.
Unfortunately, Venhuizen said, the influx had a hand in creating the inflation and workforce issues behind recent cost overruns.
Every state took in pandemic relief, setting off a scramble for contractors as states moved to spend their respective windfalls on roads, bridges and buildings.
“The worst of that is over, construction prices have stabilized, and the construction industry has more of an ability to predict costs,” Venhuizen said.
Others aren’t quite so hopeful. One appropriator in particular, Sioux Falls Republican Rep. Chris Karr, is frustrated by the lack of information on the growing bill for the women’s prison and a lack of certainty on the penitentiary price.
The supplemental budget requests in 2023 for the DEX building on the South Dakota State Fairgrounds, two nursing program expansion facilities and the state public health lab are all fresh in Karr’s mind.
Cost overruns, he said, have become a theme for the Noem administration.
“When you look at all the projects the governor has proposed, there’s a lack of planning,” Karr said. “To me, it feels like they just want to get something passed and figure out the details later.”
Karr did vote to allocate funds for the prison projects – projects he sees as necessary and important for the state – but said he’s grown wary of swollen price tags.
“I hadn’t heard about an increase in the women’s prison until it came out in the governor’s budget address,” Karr said, referring to Noem’s speech on Dec. 5.
The $27 million shortfall was also news to Rep. John Mills, R-Volga.
“That’s a big number,” said Mills, who sits on the appropriations committee.
The supplemental budget requests approved earlier last year ranged from $1 million to $9 million per project. The run of surprise requests for extra money and the potential for far larger requests from the DOC are one reason the committee has asked state agencies to report their final costs after work is complete, Mills said.
Mills, himself in construction, said he understands that numbers can change. But he also said appropriators need to hold agencies accountable and check their work.
“I found it frustrating that we don’t have those kinds of records as legislators,” Mills said.
Lawmakers: Cost controls possible
Sen. Linda Duba, D-Sioux Falls, was also blindsided by the $27 million figure attached to the women’s prison. She sits on the appropriations committee with Mills, Karr and Venhuizen, and said no one got a head’s up on the size of the shortfall.
Like Venhuizen, however, she’s bullish on the prospects for keeping penitentiary prices in check.
The cost concerns about the nascent penitentiary project stem as much from location-based controversy as any concrete budget reports. During a Dec. 21 meeting in Harrisburg on the penitentiary, Canton Republican Rep. Karla Lems said she’d “heard from appropriators” that the facility could cost double the $600 million estimate floated last session.
Later, Duba said she has “no idea” where Lems got that number.
The meeting was organized by a group of citizens opposed to the state’s penitentiary site selection. Landowners near the plot of ground 15 miles south of Sioux Falls have sued in hopes of forcing the state to comply with county zoning rules.
Duba said that billion-dollar speculation doesn’t square with what she’s heard from DOC Secretary Kelli Wasko about the men’s prison. The DOC chose the site for the penitentiary in part because the state already owns the land. The commissioner of school and public lands owns and oversees the 300-acre property, leasing it for farming and funneling the payments back into state education. The DOC’s transfer of about $8 million to the land office to get its agency listed as “owner” will also be funneled into education.
That price tag is smaller than what it would’ve been had the state been forced to negotiate with private landowners for a sale, Duba said.
“What I’m hearing is that what we’re doing will push the price (of the penitentiary) down,” Duba said.
The appropriators interviewed by South Dakota Searchlight all said that it’s too early to venture truly educated guesses on final costs.
The penitentiary does not yet have a final design. Ground is not broken; contracts for its construction are many months away.
Venhuizen believes there is room for adjustment in the design process. Not enough to chop the prison price in half, but enough to work around the margins to ease the sting of unexpected costs.
“There is some room to scale the number up or down,” Venhuizen said.
Karr’s concerns, though, are based on projects where that scaling only went one way: up.
He pointed to the DEX as an instructive example. “DEX” stands for “Dakota Events Complex,” a building pitched by Noem in 2020 as a modern, climate-controlled replacement for a livestock complex at the state fairgrounds in Huron destroyed by a fire in 2020.
Lawmakers voted to shell out $20 million in 2021 for the DEX. In 2023, the year after the project missed its once-promised 2022 opening, they added $9 million to the state’s share of the DEX budget. The remaining funds, around $6 million, came from insurance and fundraising.
A ribbon cutting for the facility took place on Aug. 31, 2023. Its official grand opening celebration comes in 2024.
Karr sees more than external factors at play in the upward-moving targets and missed completion dates. He sees a lack of forethought. He doesn’t trust that the state has put enough of it into planning for a project that aims to turn a remote patch of soil without electricity, sewer lines or paved roads into a sprawling penitentiary campus that will employ 400 and house three times that.
It’s a lot to do by 2026, the DOC’s hoped-for opening date.
“Right now, people are just speculating, saying that based on the track record and what we’re seeing from the executive branch,” Karr said. “Anything they say has been so far off. They say we’re going to spend $600 million. I mean, you just do the math, and you’re probably pushing a billion bucks.”
Unexpected costs, unexpected revenues
Sen. Jean Hunhoff, R-Yankton, co-chairs the appropriations committee. Hunhoff and Venhuizen said separately that they knew an overrun was coming on the women’s prison project, but that they only heard the $27 million figure at the governor’s budget address.
“I was not aware of the number, but there have been discussions with the Governor’s Office,” Hunhoff said.
She knows the cost of furniture – beds and the like – has gone up. She also said she knows little beyond that, and that furniture prices alone don’t account for such a large number.
“Through the appropriation process, we will get a detailed accounting of exactly what those overruns are, and where those dollars are going,” Hunhoff said, referring to the budgeting work lawmakers will begin this month.
Some recent budget adjustments on other projects have been tied to federal spending requirements and federal approval issues.
Just last month, Hunhoff said, appropriators learned that the state’s plans to use federal relief dollars on the public health lab and nursing program expansions at Northern State University and Black Hills State University would be rejected unless each included public access areas.
“Well, Black Hills State, Northern, and the public health building all were redesigned,” Hunhoff said. “They’ve made it available to have access for the public to come in.”
The state had hoped to use some of the same federal money to renovate the state’s existing women’s prison and add space for substance abuse treatment. The public access requirement took that money off the table, though.
“You can’t do that at a prison,” Hunhoff said.
The co-chair echoed Venhuizen on the importance of putting money aside while surpluses remain to avoid interest charges for taxpayers. Prison overcrowding won’t end until new facilities come online, she said, so adding more to the state’s prison construction fund only makes the state less likely to take out loans.
“If we can start building that fund, then I think that’s a benefit to the citizens, and it means it’s a priority,” Hunhoff said. “I mean, we know we need to do something.”
That’s a key point for Sen. David Johnson, R-Rapid City, who served on appropriations through 2023 but will not in 2024. The new women’s prison will be in his district. In the end, he said, the prisons are necessary. As important as it is to watch the budget, there just aren’t as many adjustments the state can make when building a secure facility.
That’s one reason Johnson’s resigned to accept higher prices as they come. Another is the number of supplemental budget requests he heard as an appropriator.
“It will happen, and the price tag is going to be what it is,” Johnson said. “If you start taking shortcuts on something like a prison, you’ll pay the price down the line.”
As far as asking for better cost estimates, Johnson said it would be nice to see something more firm up front. But firm estimates have been hard to come by in recent years, and Johnson believes many of his fellow lawmakers see adjustments as inevitable. A reliance on anticipated surpluses and supplemental budget requests is “kind of built into the way things get funded,” he said.
“We can’t predict what inflation is going to be,” he said. “But we do know we’ll have a surplus.”
This South Dakota Searchlight article us republished online under Creative Commons license CC BY-NC-ND 4.0.
Photo: A semi truck carries haybales painted with “NO PEN” through the Canton Parade of Lights on Dec. 2, 2023. The new state penitentiary is planned to be built near the community. (Makenzie Huber/South Dakota Searchlight).
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