SpongeBob is taking his driver's license exam yet again and ends up leaving the driving course and wrecking the city before driving off an unfinished bridge the mayor just opened. The police follow the boat and end up driving off the bridge themselves. They hit a truck full of fruit punch which is being delivered to Shady Shoals Rest Home, causing it to explode and flood the home in punch. Although SpongeBob is responsible, Mrs. Puff is sent to prison for gross negligence. In prison, she realizes that she'll never see SpongeBob again, and starts to enjoy it.
Meanwhile, SpongeBob is depressed that Mrs. Puff in jail and Patrick tells him it is his fault. The duo sets out to free her from jail. First, they try to rob the "1st Nautical Bank" in order to get arrested themselves but fail. Next, they disguise themselves as rocks that the prisoners are made to smash as labor, and try to communicate with Mrs. Puff, who calls the guards, but they dismiss it as a hallucination and move her to kitchen duty. SpongeBob and Patrick are then smashed by another inmate, costing them their deposit on the costumes. They then hide in a vat of chili in the cafeteria and offer to help Mrs. Puff escape through it, but she explains to them that she likes it in prison, which they refuse to believe. SpongeBob worries that Mrs. Puff is completely institutionalized in Prison and he needed to get her out. So SpongeBob tells Mrs. Puff if she can escape, he will stay after school and decorate the entire classroom, but Mrs. Puff refuses. She calls for the prison guards again and is reassigned again after the prison guards think Mrs. Puff is going crazy.
SpongeBob and Patrick appear to her yet again on a hanger assembly line, and when she calls for the guards, they dismiss SpongeBob and Patrick as raw materials (out of extreme stupidity) and send Mrs. Puff to her cell, convinced that she is going insane. SpongeBob and Patrick next appear in Mrs. Puff's toilet, which causes the guards to flush them, then they appear on her bed and when she calls the guards, they turn out to be SpongeBob and Patrick in disguise. When she next sees the real guards, she rips off their faces after thinking it is SpongeBob and Patrick in disguise and is put in solitary confinement after the guards believe that Mrs. Puff has gone mental. She is glad that she is finally safe from SpongeBob, but she begins hallucinating her room to be made of sponge which is SpongeBob and is driven insane by his laughter.
Mrs. Puff wakes up screaming in the car flying off the cliff and realizes that it was a dream. The car crashes into the fruit truck again and they were arrested again; however, this time, Mrs. Puff is not the one that got arrested—it is SpongeBob. While she is happy because not going to the jail, a police officer told her she already did her time, and Mrs. Puff realized that she is already wearing a jail outfit. She screams, and wakes up screaming in the car flying off the cliff again. When she was about to relax, it turns out that the one that driving the car does not seem to be SpongeBob anymore, but instead it was Donna, the prisoner who incredulously asked her what is "the jail's dinner menu tonight." She screams, and wakes up screaming in the car flying off the cliff, yet again. This time SpongeBob's driving. She panics for a while, but after realizing it is just going to loop again, she stops screaming and says "Oh, forget it," as the episode ends and it fades to black afterward.
SpongeBob wondered if the president was in town, and the fish opening the unfinished bridge looked like the mayor or president. However, King Neptune should rule the entire sea, including Bikini Bottom.
On August 31, 2005 airing of this episode, a network glitch occurred while this episode was on the air.
About three minutes into the episode, right after Mrs. Puff gets locked up, the screen suddenly went black for a few seconds, before turning into magenta.
After that, it glitched even more, and a shot of Cosmo from the show, The Fairly OddParents could be seen for about a 10th of a second.
Then the episode restarted, but only for about 2 seconds after the opening credits when the episode picked up 10 seconds before it left off.