On February 22, 1889, President Grover Cleveland signed into law the Omnibus Bill. This bill or enabling act permitted the Dakotas, Washington, and Montana to reach statehood if and when Territorial officials wrote a proper constitution.
For six weeks delegates at the Constitutional Convention of 1889 hammered out a state constitution. By an overwhelming margin, 24,676 to 2,274, Montana voters ratified the document on October 1, 1889. President Benjamin Harrison officially pronounced Montana the forty-first state on November 8, 1889. The termination of Federal control accompanied Montana's attainment of statehood and, consequently, the burden of operating the Prison fell on the shoulders of the new state government.
Montana law quickly created and then empowered a State Board of Prison Commissioners to manage the Prison's affairs and business. The governor, secretary of state, and attorney general constituted the member of the Board. Meanwhile the problems confronting the Prison Board approached critical proportions. Not only did the continued deterioration and regression of the Prison's structures jeopardize the institution's very existence, but a depleted state treasury compounded an already desperate situation. The state lacked the financial means to properly operate the institution, let alone to renovate or modernize the Prison.
To resolve its dilemma, the Board of Prison Commissioners contracted out the entire Prison operation. The Board later reported that "in February, 1890, a contract for the keeping and maintaining of all State prisoners was entered into between the State and Frank Conley.