Roads: What Reform Is – and Isn’t

THREE STEPS TO FIXING SOUTH CAROLINA’S ROADS – AND NONE OF THEM INVOLVES RAISING TAXES ON A POOR AND OVERTAXED POPULATION

One thing has become increasingly evident in the debate over the gas tax: lawmakers have no real solution to South Carolina’s infrastructure problems. Their only solution is raising taxes. But lawmakers haven’t shown, or even tried to show, that this is a revenue problem. And they haven’t shown that it’s a revenue problem because it isn’t one. It’s a management problem.

Before lawmakers demand more money from taxpayers, they have an obligation to explain why the current system hasn’t worked. And as many members of the General Assembly are quick to admit, it hasn’t worked because the state’s transportation funding system is politicized – politicized by a DOT commission that’s beholden to legislative leaders, and politicized by an Infrastructure Bank that directs road money away from repair and maintenance and toward expansion projects in the districts of well-connected politicos. Lawmakers owe it to South Carolinians, then, to reform the broken system first. Only then should they even talk about revenue.

So what is reform? And just as importantly, what is it not?

What reform is

Any reform to South Carolina’s transportation funding system should consist of three elements.

1. Making the Department of Transportation a cabinet agency under the governor. Until one person for whom all South Carolinians vote takes responsibility for the state’s road system, there is no incentive to actually patch the potholes. Currently the blame is diffused among the DOT Commission appointed by a conglomeration of public officials and entities, with no one person being accountable for any one decision or policy.
2. Eliminating the State Transportation Infrastructure Bank. This agency only finances new and expansionary projects, and then only in 10 of South Carolina’s 46 counties. Worse, it does so exclusively by bonding existing road dollars. So the STIB uses revenue that could go to paving and maintaining existing roads to borrow money to build new roads – which will then need to be maintained as well. Which is why the whole agency should be eliminated rather than, as some have proposed, transfer its power to the DOT.
3. Enacting transparency measure for the DOT. Taxpayers have a right to know just how the gas tax revenues they send to Columbia are being spent. This means the process for all state contracts for road construction, maintenance, or repair should be open to public inspection – no exceptions. The DOT should also make publicly available detailed descriptions of its expenditures, including all the road projects in which it’s currently engaged. Transparency will allow citizens a better view of just how the DOT is prioritizing maintenance needs versus new construction. And transparency in the contract process can help to prevent the awarding of contracts on any criteria other than cost and effectiveness.

What reform isn’t

1. A tax hike. Setting aside the system’s politicization above, no one knows how much revenue is needed to repair roads. Many of the statistics used to support the case for a tax hike were developed by special interests who stand to benefit from that very tax hike. Other statistics have come from the legislatively controlled DOT with no indicator of research soundness. The current spending levels may be enough, or more may be needed, but until we have a transparent roads plan presented to the public by an accountable cabinet agency, there is no way to know. Even the legislature does doesn’t believe it’s a revenue problem: members routinely spend new revenue on non-core government functions at the expense of roads. Case in point: the pension “reform” bill passed by both chambers of the General Assembly increases the employer contribution without specifying how that increase is to be funded. This means that unless otherwise specified in future years, the increase will be paid for out of the general fund. Which raises an important point: priorities are funded because they have to be, and that is what the general fund is for in the first place. It exists to fund core government services. Yet any time someone proposes paying for roads with general fund money – that is, paying for a core service with general fund dollars – lawmakers call it a “raid.”
2. Convoluted tinkering with the legislatively dominated system. The House version of the gas tax hike bill, for instance, would allow the governor to appoint DOT commissioners with the advice and consent of both the House and Senate and would remove the requirement that the legislative congressional delegations approve the governor’s appointees. Various proposed amendments in the Senate would require the audit reports prepared by the internal auditor to be placed online, and would require commissioners to “represent the transportation needs of the State as a whole” and “not subordinate the needs of the State to those of any particular area of the State.” The problem with the state’s funding system – again, as even pro-tax-hike members openly acknowledge – is that no one official is accountable for any one decision or policy. Reforms like the one described here wouldn’t change that.
3. Tax off-sets or tax “relief” schemes. What may be “revenue neutral” to government is never cost-neutral to taxpayers. Last year lawmakers pushed an income tax cut to “off-set” the proposed gas tax hike. This year the proposed off-sets have taken a number of different forms – from revamping the income tax brackets to earned income tax credits to a direct tax credit equal to the gas tax amount an individual paid. The important principle here is this: tax swaps are designed to help spare politicians the political pain of shifting revenue from one “priority” to another. In addition, tax swaps make our already-convoluted tax system still more regressive. Tax swaps are pursued not for their soundness as policy for their ease as politics. Taxpayers always end up paying more.

Reforming South Carolina’s infrastructure system is much simpler than most lawmakers would like to admit. All it would take is making the system accountable to taxpayers – which means shifting power from lawmakers and to the governor. Until this happens, no amount of added revenue or cosmetic reform will change anything.

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