Gov. Larry Rhoden's office released funding plans for a men's prison project legislators are voting on at a Special Legislative Session on Tuesday. While it outlines $154 million in "savings" from the previous Lincoln County site, the state spent $20.8 million that can never be recovered.
The state expended $52.7 million to the Lincoln County site to use for an $825 million prison project. Lawmakers rejected the project in February during the 2025 Legislative Session. In response, Gov. Rhoden established a task force to 'reset' the project and find a new path forward to address overcrowding in the South Dakota State Penitentiary in Sioux Falls.
That task force rejected the Lincoln County site. The Governor's office now estimates that $20.82 million of taxpayer money is lost at the site if lawmakers approve the new plan on Tuesday.
Some funds were considered recoverable, including $4.5 million the state would receive in a "land swap" for land in Sioux Falls along Benson Road that would be earmarked for a new prison. The state can also recover $17.44 million in repurposed design expenses that's considered transferrable to the Benson Road site. The state spent $10 million in federal ARPA eligible service funds to upgrade the sanitary sewer connection in the City of Lennox.
The $154 million in "savings" account for unrecoverable dollars at the Lincoln County site. The biggest difference maker is that the Project Prison Reset Task Force voted to allocate $175 million less in July. Lawmakers set forth a $650 million recommendation to build a 1,500-bed men's prison in Sioux Falls that could last 100 years. Gov. Rhoden adopted that recommendation when calling the Special Session.
The state has most of the money to pay for the project in cash in the Incarceration Construction Fund. Currently, there is $505 million in the ICF, and it's expected to earn over $24 million in interest during Fiscal Year 2026.
The state would still need nearly $121 million to fund the project. However, Gov. Rhoden's office said it anticipates about $42 million of earned interest over the next four years. They recommend the rest, a little under $79 million, come from the state's General Revenue Replacement Fund, which has $255.3 million today.
Prior to any amendment, the draft legislation put before the Legislature on Tuesday authorizes the aforementioned "land swap" and purchase of the Benson Road site and grants DOC spending authority to begin construction of a new facility immediately. It also transfers the $78.8 million from the General Revenue Replacement Fund to the Incarceration Construction Fund.
To do any of this, a two-third majority of both the state House of Representatives and Senate need to approve the project. That means 24 Representatives or 12 Senators could fail the vote.
Eight members of the House and one member of the Senate have already urged legislators to vote no on the project. In a press release, the South Dakota Freedom Caucus asked fellow legislators to vote no to prioritize reforming the state Department of Corrections first.
On Wednesday, Gov. Larry Rhoden announced a task force to address rehabilitation in the DOC as it plans for the new prison. However, he said the Correctional Rehabilitation Task Force "will be established through an Executive Order following the passage and signing of the draft legislation for the new prison."
While the Freedom Caucus commended Rhoden's task force, they claim passing the project would put the cart before the horse, saying "reform must come before big spending."
However, on Friday, the joint venture overseeing the construction of the project answered a big question legislators have asked. Henry Carlson Construction, LLC and JE Dunn Construction Group committed to a guaranteed maximum price of $650 million.
Gov. Larry Rhoden said legislators have asked the question of a guaranteed maximum price more than any other. He said with that behind them, he’s “hopeful that we can get this project across the finish line.”
Editor's Note: This story has been updated to reflect the construction contractors' commitment to a maximum cost.
