The California Department of Corrections (CDC) projects that the state prison population will grow by almost 70 percent in the next five years. Much of this growth will be driven by enactment of the "Three Strikes and You're Out" legislation. Building new state prisons to accommodate this growth will be both challenging and costly. In this report, we discuss (1) the CDC's inmate population projections and new prison needs, (2) the current status of funding for prison construction and renovation, and (3) the state budget implications of accommodating growth in the state's prison population.