DEAR PRUDENCE

June 19, 2020
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With the huge budget shortfall stemming from the COVID-19 outbreak and subsequent stay-at-home economic shutdown by Governor Cooper, fewer people have been traveling and buying gas. As a result, gas tax collections have been down – resulting in a billion-dollar hole in the state’s transportation budget to build new roads.

A bill is being discussed in the legislature to address that shortfall by having a $3.1 billion bond referendum on the election ballot this fall, of which $1.5 billion would go to the NC Department of Transportation to help with road construction. The money would go for operational expenses like maintenance, as well as projects that are already approved in the Strategic Transportation and Infrastructure Plan. (The rest of the bond package would include $1.6 billion to be divided between universities – $600 million; community colleges – $200 million; and local K-12 school districts – $800 million; for construction and repair needs.) 

Here’s a couple of thoughts on the transportation part of the bond proposal. 

Several days ago, we talked about State Auditor Beth Wood’s report of the NCDOT’s handling of the state transportation budget and how mismanagement of the NCDOT budget in the last fiscal year led to overspending of $742 million. In describing the mess, the auditor cited “the lack of oversight” and said, “There is nobody to ensure that once there’s a spending plan in place, there’s no one overseeing them or holding them accountable to stay in line with that spending plan.” That’s a real concern.

Second, our Carolina Partnership for Reform poll taken May 9, 11-13 – prior to Auditor Wood’s remarks on May 20 – showed that of those surveyed, only 18% chose to “have the state borrow money by issuing bonds” as a solution to state transportation spending shortfalls resulting from the travel slow-down and gas tax reduction.

As hopeful as we are that this recession is short-lived, we’re not sure of the wisdom of borrowing money like this right now with the possible financial uncertainty ahead of us. Caution and prudence, and maybe other options, seem to be the order of the day.


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