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Millions in federally-funded projects in South Dakota frozen in review process, requiring state infusions

With construction inflation hovering at anywhere between 25-40% over the past year, previously-approved projects requiring federal approval will need state funding to meet their initial scope.

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The State Public Health Laboratory in Pierre is set for a $68.5 million re-design and renovation, with a new laboratory space planned directly adjacent to the current structure. However, the federally-funded project is awaiting federal approval — and, in the meantime, rising construction costs, which will require state dollars to supplement, continue to accrue.
Jason Harward / Forum News Service
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PIERRE, S.D. — High-dollar projects approved throughout the pandemic — initially paid for with pandemic-era windfalls of federal funding — are stuck in bureaucratic limbo, and millions in state dollars have been proposed to cover the rampant inflation plaguing the construction industry and driving up projected costs.

All told, about $115 million in approved projects and expenditures using federal dollars is tied up in the federal approval process, according to a Jan. 10 presentation by the Bureau of Finance and Management to legislators on the Joint Committee on Appropriations.

“For some of these, were hopeful that we would hear something before the start of the legislative session so we could come up with a gameplan, as there are some cost overruns to be considered on some of these projects,” Jim Terwilliger, the commissioner of the bureau, told appropriators. “But until we hear on some of these, it’s a wait-and-see.”

Last year, nearly $70 million in federal funds were earmarked for the construction of a new state public health laboratory in Pierre as well as renovations to the existing building. According to budget documents from Gov. Kristi Noem’s proposed budget last year, the “public health laboratory needs can no longer be met by the existing building.”

“Space available for laboratory operations is currently one-half of what is needed. Science and technology have advanced since the original building was designed and constructed over twenty-five years ago,” the budget document reads. “Critical building systems, including air-handling, are operating at maximum capacity and not able to accommodate new or emerging testing requirements.”

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That cost estimate was developed in mid-2021; almost two years later, the project is still awaiting federal approval.

“Since then, we have experienced unprecedented inflation that has disproportionately impacted the construction industry, including raw materials and workforce cost increases,” Kieran Tate, a spokesperson for the state Department of Health, told Forum News Service on Jan. 19.

To begin to make up the difference, the department requested $12.8 million in state general funds this year. Yet there is potential for even further cost increases, as Tate said the department “hopes to break ground in Q2 of 2024, with project completion projected for Q3 of 2026.” He added that further information would be available during the Department of Health’s presentation to appropriators this week.

However, it appears that not every one of these frozen projects will be getting the necessary adjustments to keep the legislature-approved plans feasible.

At Northern State, a $29.5 million investment to demolish two campus buildings and rebuild Lincoln Hall was approved by the legislature last year. The new facility would “enhance the recruitment, education, and workforce readiness of the students in the NSU School of Business and SDSU Accelerated Nursing program,” according to last year’s proposed budget.

Though initially funded entirely through the 2021 American Rescue Plan Act’s Capital Projects Fund, an August 2022 application for federal approval of the plan has yet to be processed, “with no date certain on a decision,” according to a spokesperson for the Board of Regents.

The projected demolition and construction cost now stands at some $39.4 million, a one-third increase in just one year. The Board of Regents included the $9.9 million cost increase in its appropriation requests to Noem; however, the ask was not honored in the administration’s proposed budget.

“As a result, the Board of Regents is considering alternatives to cover the cost increases,” a board spokesperson wrote in an email to Forum News Service.

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Jason Harward is a Report for America corps reporter who writes about state politics in South Dakota. Contact him at 605-301-0496 or jharward@forumcomm.com.

Jason Harward covers South Dakota news for Forum News Service. Email him at jharward@forumcomm.com.
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