Road Funding: Another Bad Idea

JUST WHAT WE NEED: A NEW, MORE COMPLICATED
INFRASTRUCTURE FUND

A bill recently introduced by Senator Larry Grooms aims to create the “Palmetto Highway Improvement Fund.” The bill – S. 14 – would establish a new fund for both the Department of Transportation and its sub-agency, the State Transportation Infrastructure Bank (STIB). While transportation funding is an issue that needs to be addressed – the current funding “system,” if that’s the right word for it, is a debacle – the method proposed in this bill needs closer examination.

First: the STIB has been under a great deal of scrutiny lately for its decisions to fund certain projects not on the DOT priority list. Yet this bill aims to dedicate funding at certain levels to the STIB without addressing those concerns at all.

Facts presented at a conservation hearing in early January raise additional concerns:

The STIB has received $4.1 billion in funding since its creation in 1997.

• 35 counties have received no funding at all from the STIB since it was created.
• 33 percent of all STIB money has gone to one county: Charleston.
• 95 percent of STIB monies have gone to six counties.
• 0 percent of STIB funding has gone to maintenance and repair.1

So how would the Palmetto Highway Improvement Fund work? The fund would get its first allocation – one percent – in a year in which the Board of Economic Advisors (BEA) projects that state revenues will see a three percent surplus.

The new fund would have the potential to receive a dedicated 5 percent of all general fund revenues annually. This growth would be triggered by the same mechanism – a revenue surplus projection – that created the fund. Every fiscal year following a February BEA projection of a 3 percent increase in General Fund revenue, the Highway Improvement Fund would receive an additional 1% in dedicated general fund revenue. If the BEA projects a 3 percent growth increase in two consecutive years, the Palmetto Highway Improvement Fund’s dedicated funding will increase to 2 percent annually. This trigger would continue to increase funding for the fund for up to five years, when its size would be capped at a dedicated 5 percent of General Fund revenues.

The funds from Palmetto Highway Improvement Fund would be divided between the Department of Transportation and the State Transportation Infrastructure Bank in accordance with a 5 year plan that is to be completed by the two agencies. Projects would receive funding by the same 5 year plan. For the STIB specifically, the funds it receives would be utilized to capitalize the bank.

Although the bill requires that the STIB’s funding go towards maintenance and adding new capacity to existing highways, the former is a far more urgent priority, as the Department of Transportation has attested. Since the STIB does not maintain roads, every dollar it receives from the Highway Improvement Fund would be a dollar that wouldn’t be going towards the DOT – where it could be more appropriately used to maintain South Carolina’s existing infrastructure.

To elaborate: earmarking more funds for the STIB could be used as a method for funding projects like the I-526 expansion – a project that’s controversial, of questionable necessity, and has exceeded allotted funding. The expansionof I-526 is opposed due to both potential negative environmental effects and the short-term thinking method of funding the project; all for a highly uncertain level of congestion alleviation.2

It’s worth noting that Senator Grooms’ district contains parts of Charleston – the county that has received by far the most STIB funding throughout its existence, and the county where the I-526 expansion would take place.

Rather than seeking to expand the State Infrastructure Bank and allowing it to pursue more questionable projects, the General Assembly should be focused on concentrating oversight of the state’s infrastructure where it belongs – within the Department of Transportation. There are at least two bills – S. 209 and H.3476 – that take modest steps in that direction by eliminating the board of directors of the STIB and placing its administration under the Commission of the Department of Transportation. The bills also contain a clause stating an infrastructure project could not become eligible for STIB funding unless the STIB, at the time of adopting the project, had enough funds to complete it. And H.3476 contains a notable provision requiring qualified projects, in order to be eligible for STIB funding, to be ranked according to SC code 57-1-370(8), a subsection of the Statewide Transportation Plan.

One appreciates the desire to address road funding without simply raising taxes and throwing more money at it. But reforms need to go much further. What’s needed isn’t more money or a more complicated funding mechanism. What’s needed is transparency and accountability. If state government is going to use tax dollars (federal or state) to build our roads, it should so under the auspices of one agency, and that agency should be accountable, not to another anonymous board, but to the state’s chief executive.