S.C. Going the Wrong Way on Road Funding

FOR HOUSE LAWMAKERS, ROAD FUNDING IS ABOUT BUILDING NEW ROADS, ‘ECONOMIC DEVELOPMENT’ – AND JUST ABOUT ANYTHING BUT FIXING THE STATE’S CRUMBLING ROADS AND BRIDGES. 

Lawmakers are quick to bemoan the state of South Carolina’s roads and bridges, and virtually all have stated an intention to do something about it in 2015, but something terrible happens each time they’re given the opportunity to take action. This tendency was on full display during the House’s 2015-2016 budget debate. That chamber’s policymaking decisions amount to little more than an incoherent mess.

An amendment to delete the Act 98 transfer to STIB

Representative Jonathan Hill (R-Anderson) introduced a budget amendment that would delete a one-year proviso requiring the Department of Transportation (DOT) to transfer $50 million to the State Transportation Infrastructure Bank (STIB). Under the proviso the STIB would bond the $50 million into up to $500 million to be used on projects of the STIB board’s choosing. This proviso gives effect to an annual transfer program laid out in Act 98, which became law in 2013

The STIB exists to siphon off DOT dollars to expansionary projects in politically important counties, and the agency spends – literally – nothing on road maintenance. The STIB also creates billions of dollars in new debt in the process. The legislature and the governor, unbothered by these considerations, have doubled down on the ideas behind Act 98 by massively increasing the STIB’s budget. The FY 15 budget (under which the state currently operates) increased STIB funding by $100 million, and both the executive budget and the House Ways and Means budget include another $105 million increase for the next fiscal year. If these recommendations are included in the final budget, the STIB’s budget will have grown from $50 million in fiscal 2014 to $250 million in fiscal 2016 – a 400 percent increase over only 3 years.

Regardless of this STIB funding bonanza, the House apparently cannot bear to part with the $50 million transfer from DOT to STIB. After Rep. Hill introduced and explained his amendment, Rep. Gary Simrill (R-York) spoke out against the amendment. Rep. Simrill defended the STIB by claiming it doesn’t only create new roads but also provides “some” maintenance. He cited the financing of new medians on existing roads as a maintenance expense, but said nothing of the massive increases of the STIB’s budget in recent years. Rep. Hill countered by asking Rep Simrill if he could produce any examples of what most would consider actual maintenance by the STIB since its inception (repaving and resurfacing, filling potholes, etc.). Rep Simrill could not provide an example.

These facts notwithstanding, the House easily voted to table (reject) Rep. Hill’s amendment on a simple voice vote.

An amendment to require STIB to follow Act 114 funding priorities

Rep. Hill introduced another amendment related to the STIB shortly after his first was tabled. This second amendment would force the STIB to follow the project funding prioritization requirements laid out for the DOT in Act 114 of 2007. Act 114 requires the DOT Commission to consider nine different criteria when determining which projects will be prioritized for inclusion in the Statewide Transportation Improvement Program (which lists the projects scheduled to receive funding). Under current law the STIB has very few restrictions on the projects it can choose to finance, and the its board has been known to ignore the few restrictions it has. This helps to explain why the counties that have received the most STIB financing tend to be the home counties of either STIB Board members or lawmakers who choose STIB Board members.

Rep. Hill’s amendment wouldn’t necessarily require the STIB Board to select the projects they finance from the Statewide Transportation Improvement Program; it would simply require them to incorporate the nine criteria laid out in Act 114 into their decision making. The amendment also would have allowed the General Assembly to override, by joint resolution, the mandate that STIB follow the priorities criteria. It’s worth pointing out that even if the STIB Board were to follow Act 114 criteria, it wouldn’t be prevented from financing only expansionary projects.

Again, however, even this modest reform was too much for the House. Rep. Alan Clemmons (R-Horry) strongly objected to the amendment, saying he didn’t want the STIB to turn into another DOT and be focused on maintenance. The STIB is needed, Clemmons argued – though without providing examples – to finance necessary new roads. Besides, he argued, the STIB is already following Act 114 criteria even though it isn’t legally required to do so. One wonders why Rep. Clemmons would object to codifying a practice he claims is already standard operating procedure.

Rep. Chip Limehouse (R-Charleston) was quick to follow up Rep. Clemmons’ objections with a few more of his own. But unlike Rep. Simrill earlier, Rep. Limehouse did not attempt to justify the STIB by claiming it provides any maintenance. Instead Rep Limehouse stated the purpose of the STIB and the reason for which it was created was economic development. Rep. Limehouse said he did not wish to lose an important tool for recruiting companies to South Carolina. (Rep. Simrill offered the same argument, to a much smaller audience, earlier this year.) So now the STIB is an economic development tool. Presumably Rep. Limehouse means that if a large out-of-state company won’t come unless the state commits to building a road in a certain location, and state officials can’t justify the construction using DOT’s priority list, the STIB can do the company’s bidding instead.

Following these objections, Rep. Clemmons moved successfully to table the amendment.

An amendment to dedicate one third of recurring new revenues to the DOT 

Rep. Kirkman Finlay (R-Richland) introduced an amendment that would have required one third of all new recurring General Fund revenues not to exceed $10 million for the Fiscal Year 2015-2016, as certified by the Board of Economic Advisors, be dedicated to the Department of Transportation. As a brief explanation, new recurring General Fund revenues are tax receipts in excess of the previous fiscal year’s tax receipts. In other words, they are money the legislature has never had access to before and hence money that isn’t already tied up in service to one agency or another. The funds transferred by this amendment would have to be used exclusively for maintenance, repair, and replacement of existing roads and bridges. Finally, the amendment would require that the DOT use any and all federal matching funds when spending the dollars dedicated by the amendment.

The requirement to use federal matching funds is a questionable one, as the regulations tied to federal funding typically drives up costs and limits the state’s options. The amendment was notable, however, for providing new money to DOT without raising taxes or cutting spending.

The amendment never stood a chance. The same members who consistently lament the lack of funding for roads could not bring themselves to dedicate $10 million of brand new unrestricted money to roads. They would rather spend on the new funds on other favored agencies and pet projects.

Rep. Simrill moved to table the amendment, which was agreed to by a simple voice vote.

An amendment to alter the membership of the STIB Board

The last notable transportation-related amendment was filed by Rep. Joshua Putnam (R-Anderson). Rep. Putnam’s amendment would have altered the makeup of the STIB Board by expanding its membership, increasing the appointments made by the House Speaker and Senate President Pro Tempore, and eliminating the governor’s appointments altogether. Specifically, the STIB Board would be increased from 7 to 13 members by including all members of the DOT Commission. The House Speaker and Senate President Pro Tempore would each get three rather than their current two appointments to the board (one of each of their appointments must be a member of their respective bodies), and the governor would lose her two appointments.

The STIB Board should be reformed, to be sure. But this is the opposite of reform. Rep. Putnam’s amendment removes the appointing power of the one appointing authority – the governor – who is accountable to the entire state electorate. Further, adding the DOT commission to the STIB board is unlikely to improve STIB decision-making. The DOT Commission is itself unaccountable and in need of serious reform. Adding its members to another agency will not make it any more accountable.

Predictably, Rep. Putnam’s amendment passed on a voice vote.

Bottom line

House members fell appallingly short of providing good governance during the budget debate. Any attempts to achieve even a small measure of accountability or fiscal sanity in transportation policy were met with confusion and easily defeated.

The transportation debate isn’t over however. The House will begin debating standalone transportation bills soon, and most of these feature tax increases – almost guaranteeing they’ll meet with more favorable responses.

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