South Dakota Allocates $7.8 Million in Opioid Settlement Funds Amid Dispute Over Block Grants

South Dakota Governor Larry Rhoden and Department of Social Services Secretary Matt Althoff announced Thursday the allocation of $7.82 million in opioid settlement funding to 10 organizations statewide—a distribution unfolding against a backdrop of political tension over whether the state's two largest cities should receive block grants instead of competing for project-based dollars.

The announcement represents acceleration in spending patterns that drew legislative criticism late last year. Since disbursement began in December 2022, South Dakota has received more than $32 million from pharmaceutical litigation settlements and expects just under $99 million by 2038. Until recently, much of that money sat unspent.

"In total, these 10 awards hold great promise of filling gaps that DSS and the opioid advisory committee have confirmed exist today," Althoff said at Thursday's press conference. Of the $23 million statewide share received thus far, the state has now spent or allocated roughly $20 million—a marked shift from months earlier when legislators questioned the department's pace.

The newly awarded grants range from $100,000 for planning and coordination efforts to $3 million for adolescent treatment expansion. Many target populations facing particularly acute barriers to care: youth struggling with substance use, pregnant and postpartum women, individuals cycling through jails and prisons.

Youth, Mothers, and Justice-Involved Populations

Avera Behavioral Health received the largest single grant—$3 million—to expand adolescent addiction and behavioral health services. The funding aims to fill capacity gaps left by the recent closure of a juvenile residential program, responding to what treatment providers describe as a growing crisis among young people using opioids and other substances.

The Sioux Falls School District secured $1 million to build prevention education, community engagement, and intervention protocols for students across grade levels. Administrators have noted rising substance use among middle and high school students, compounded by limited school-based mental health infrastructure and community treatment options that often lack pediatric expertise or accept adolescent patients.

Several grants focus on pregnant and postpartum women with substance use disorders, a population facing compounded stigma and systemic obstacles to accessing care. Lewis & Clark Behavioral Health Services in Yankton received $254,000 for infrastructure supporting this demographic, while West River Mental Health was awarded $186,000 to create a recovery health care assistant position coordinating evidence-based treatment.

Research consistently demonstrates that pregnant women with opioid use disorder face significantly higher risks of adverse outcomes—including preterm birth, low birth weight, and neonatal abstinence syndrome—when addiction goes untreated. Medication-assisted treatment using methadone or buprenorphine has proven safe during pregnancy and dramatically reduces these risks, yet many women encounter providers unwilling to prescribe during gestation or postpartum periods, insurance barriers to specialized maternal addiction programs, or fear of child protective services involvement.

Justice-involved individuals represent another priority. Face It Together received $920,700 for comprehensive re-entry programming serving people discharged from incarceration. Midwest Street Medicine in Sioux Falls was granted $750,000 to expand detox, counseling, and treatment for high-risk individuals transitioning from carceral settings.

The intersection of substance use disorder and criminal justice involvement creates particularly intractable cycles: arrest and incarceration disrupt any existing treatment, jail-based medical care rarely includes medication-assisted treatment despite federal guidelines recommending it, and release without immediate connection to community providers leaves individuals facing withdrawal and overdose risk during the period when mortality spikes highest.

South Dakota, like most states, has struggled to implement jail-based MAT programs. Cultural resistance within corrections, concerns about diversion, lack of trained medical staff willing to work in carceral settings, and funding gaps all contribute. Settlement dollars now flowing toward re-entry programs signal recognition that addressing addiction solely through incarceration proves both ineffective and extraordinarily expensive compared to community-based treatment.

Political Dispute Over Block Grants to Major Cities

Thursday's announcement unfolds amid ongoing conflict between Attorney General Marty Jackley and the Department of Social Services over allocation strategies. In August, Jackley—joined by Sioux Falls Mayor Paul TenHaken and Rapid City Mayor Jason Salamun—argued publicly that most opioid settlement dollars should flow to the state's two largest cities via block grants rather than competitive project applications.

Jackley said during that press conference that if DSS disagreed with directing funding to established urban treatment infrastructure, he would request the Legislature disband the opioid advisory committee overseeing allocations. He framed the cities' existing programs as assets the state should leverage rather than duplicate.

"They are doing the state a favor by having the programs and skin in the game that we could use these dollars to enhance," Jackley told South Dakota News Watch this week. "In working with them, they have what I feel are the right proposals to strengthen those existing programs and help them serve so many others that have addiction challenges."

Althoff responded at the time that Jackley's interpretation was inaccurate and that neither city had formally requested additional block funding from DSS. The secretary has consistently emphasized competitive grant processes that evaluate proposals against strategic priorities identified through data and advisory committee input rather than distributing funds based primarily on existing infrastructure location.

The tension reflects a broader philosophical divide in how states deploy settlement windfalls. Some jurisdictions have adopted formulaic distributions—often population-based—that provide cities and counties predictable multi-year funding streams to build or expand programs. Advocates of this approach argue it enables long-term planning, reduces administrative burden of repeated grant applications, and recognizes that urban areas typically concentrate both overdose deaths and treatment capacity.

Other states, South Dakota among them, have favored competitive processes where applicants propose specific interventions evaluated against evidence-based criteria, demonstrated need, and likelihood of sustainability. Proponents contend this approach prevents entrenchment of ineffective programs, encourages innovation, and ensures rural and underserved regions can compete for resources rather than watching dollars flow disproportionately to cities.

Census data shows Sioux Falls and Rapid City now comprise half of South Dakota's total population—a milestone reached last year. Minnehaha County and Sioux Falls have received nearly $3.4 million to date from the localized share of settlement funds (distributed separately based on population) and reported $1.4 million in spending. Pennington County and Rapid City have received $1.5 million with roughly $300,000 spent, according to DSS dashboard data.

Those figures represent 56% of the total $9.6 million localized share distributed thus far. The dispute centers not on these population-based allocations but on the separate statewide share—the pot from which Thursday's grants emerged.

Althoff suggested during the press conference that even without formal block grants, Sioux Falls and Rapid City would likely capture substantial portions of project funding simply because provider concentration in those areas positions organizations there to submit competitive applications. Indeed, two of Thursday's 10 grants went to programs operating in the state's largest cities: The Link addiction triage center in Sioux Falls received $100,000 for planning and coordination, while Pennington County Sheriff's Office Care Campus in Rapid City was awarded $615,000 to develop strategy and sustainability plans for treatment and recovery engagement.

Pennington County Sheriff Brian Mueller told News Watch the planning grant would allow the Care Campus to address assessment backlogs at the county jail and evaluate community needs in anticipation of potential future block funding. "We want to be prepared, if we're going to be able to free that money up, to come out here and do something truly transformative instead of piecemealing things together," Mueller said.

He described the current approach as incremental when the scale of funding—nearly $100 million over 15 years—could support more ambitious interventions if strategically concentrated.

"When you look at the amount of money that South Dakota is expecting to receive over the next several years, I think we have to be able to think big," Mueller said. "The cost of just continuing to do things the same, I don't know that we can build enough jail beds. I don't know that we can build enough prison beds. The criminal justice system is not the primary way to handle substance abuse. So we need to get outside the box."

Provider Training and Rural Infrastructure

Two grants target systemic gaps that settlement advocates have identified across states: insufficient addiction medicine expertise among primary care providers and lack of coordinated infrastructure in less-populated regions.

The Center for Family Medicine received $750,000 to develop clinical training programs dedicated to addiction medicine in primary care settings. South Dakota, like most rural states, faces severe shortages of addiction specialists. People struggling with opioid use disorder outside Sioux Falls and Rapid City often encounter family doctors uncomfortable prescribing buprenorphine, mental health providers lacking MAT training, and emergency departments that stabilize overdose patients then discharge them with referrals to distant specialists booked months out.

Federal elimination of the X-waiver requirement in 2023 means any DEA-licensed practitioner can now prescribe buprenorphine without special certification. Yet surveys consistently show that regulatory barriers represented only part of the reluctance; many primary care physicians cite inadequate training, concerns about managing complex patients, fear of scrutiny from DEA or state medical boards, and practice logistics like prior authorization burdens.

Training programs that embed addiction medicine into family practice rotations, provide mentorship from experienced MAT prescribers, and normalize treating substance use disorder alongside diabetes and hypertension have proven effective at expanding access. Whether $750,000 proves sufficient to shift South Dakota's primary care culture remains uncertain, but the investment acknowledges that medications alone don't expand treatment if providers won't prescribe them.

The Cheyenne River Long-Term Recovery Group received $250,000 for mobile crisis response and cultural healing programs in northwest South Dakota, a region where geographic isolation compounds treatment access barriers. Tribal communities have borne disproportionate impact from the opioid epidemic while often excluded from state and federal resources flowing to counties and municipalities.

Mobile treatment models that bring medications, counseling, and peer support directly to communities—rather than expecting individuals to travel hours for appointments—have demonstrated effectiveness in rural and tribal areas. Integration of cultural healing practices alongside evidence-based medical treatment addresses the reality that Western clinical models often fail to resonate with or serve Indigenous populations adequately.

Spending Acceleration and Future Uncertainty

The $7.82 million allocation represents substantial acceleration from South Dakota's earlier settlement spending pace. State legislators criticized DSS last fall during discussions about prison rehabilitation infrastructure, questioning why millions sat unallocated while overdose deaths continued and treatment waitlists stretched weeks or months.

Rhoden said during Thursday's announcement that more than $10 million has now been allocated to individual grantees in 2026 alone. The state began accepting grant applications for projects and programs only in October, establishing a timeline that delayed initial disbursements but theoretically allowed more strategic planning than immediate distribution would have permitted.

Whether this spending velocity continues depends partly on how many competitive rounds DSS conducts and partly on resolution of the block grant dispute. If Jackley's position prevails—either through legislative intervention or DSS policy shift—subsequent allocations might consolidate into larger streams for fewer recipients. If competitive project-based funding remains the model, smaller organizations across the state could continue accessing resources through focused proposals.

Settlement dollars represent a one-time windfall, not ongoing appropriations. The $99 million South Dakota expects by 2038 sounds substantial but spread across 15 years amounts to roughly $6.5 million annually for a state with persistent addiction treatment infrastructure gaps, limited Medicaid expansion to cover low-income adults, and geographic challenges that make service delivery expensive.

Programs launched with settlement funding will eventually require sustainable revenue sources—private insurance reimbursement, Medicaid billing, state general fund appropriations, local levies—or face contraction when settlement dollars exhaust. Whether the planning grants embedded in Thursday's announcement produce sustainability strategies that work in practice will determine whether this investment expands South Dakota's long-term treatment capacity or creates temporary programs that collapse once federal litigation proceeds conclude.

Althoff said DSS would continue evaluating strategic plans and spending effectiveness. "We want the data to inform, 'Where is the greatest threat to the spectrum of resources that South Dakotans are toiling every single day to make sure are in place?,'" he said.

For the organizations receiving grants Thursday, the immediate focus turns to implementation: hiring staff, establishing partnerships, developing protocols, and beginning to serve populations that have waited too long for adequate addiction treatment infrastructure. Whether South Dakota ultimately concentrates settlement resources in its largest cities or distributes them more broadly across competitive applicants, the state joins dozens of others navigating the complex challenge of converting pharmaceutical litigation proceeds into meaningful expansion of evidence-based care.