As NCDOT cash runs low, the state coronavirus relief law doesn’t provide much help
With tax revenue cut sharply by the coronavirus outbreak, the N.C. Department of Transportation now has less cash in its accounts than it is required to maintain by state law.
The dwindling cash balance means NCDOT cannot enter new contracts for supplies and equipment or begin new highway projects. It’s the first time NCDOT has failed to maintain an adequate balance since the General Assembly set the minimum more than a decade ago.
NCDOT estimates it will receive about $300 million less in state tax revenue in April, May and June because people are traveling and spending less during the COVID-19 outbreak. It has already laid off more than 350 temporary and contract workers and delayed the start of about 88 major construction projects.
Now the department is considering further cuts that could include furloughing some of its 9,300 employees and halting some construction projects that are already underway, said Transportation Secretary Eric Boyette and Bobby Lewis, the department’s chief operating officer.
In a joint interview Monday, Boyette and Lewis said the sudden decline in revenue is unprecedented.
“We’ve both been here a long time; we’ve seen some crises before,” Boyette said. “This is probably the worst one we’ve ever seen.”
Under state law, NCDOT is required to maintain a cash balance of at least $293 million; it ended April with less than $272 million, all of it allocated for a particular use or project.
Boyette and Lewis said the public may notice cutbacks at NCDOT.
“Grass will get taller than what they’re accustomed to,” Lewis said. “Litter will get more prominent. Potholes will get more prominent.”
Highway rest areas will remain open, in large part to serve truckers who depend on them, Lewis said. But the Piedmont passenger train between Raleigh and Charlotte, already reduced from three round-trips a day to one because of reduced demand, may be suspended altogether, Boyette said.
Federal money doesn’t help NCDOT
Gov. Roy Cooper signed a bill into law Monday that ostensibly allocates $300 million in federal money to NCDOT. But because Congress hasn’t approved the use of coronavirus relief funds to make up for lost tax revenue, that money is not available to NCDOT.
During a bill-signing ceremony, legislative leaders acknowledged that their support for NCDOT was contingent on the federal government changing how the money can be spent.
“We’ve set the $300 million to the side so that it’s there as soon as the federal guidance comes that we can spend that money and help save some jobs and keep projects going,” said Rep. Darren Jackson of Wake County, the top Democrat in the House.
House Speaker Tim Moore said the state may need to find a way to help NCDOT without federal help.
“We know that we must keep the road projects going. We have to maintain our infrastructure,” Moore said. “And so looking at creative ideas of how we do that going forward into the fall or into the next year — whether it’s appropriations, whether it’s a bond, whatever it is — we know that we’re going to need to continue to invest there.”
Lewis said NCDOT isn’t counting on help from the federal government anytime soon.
“I certainly know that everybody is wanting to be helpful,” he said. “But it would be hard for us to predict what they’re able to achieve with so many pressing needs around the nation.”
The finances at NCDOT were already strained before the coronavirus outbreak. The department was slowly recovering from a financial crisis that mostly resulted from repairs and cleanup costs after major hurricanes in 2016 and 2018 and from legal settlements related to the Map Act, a law that was declared unconstitutional.
But NCDOT had always managed to maintain the minimum cash balance required by law until the COVID-19 pandemic. Gas tax revenues, which account for about 54% of NCDOT’s state income, are down about 40% compared to February, Boyette said, while the highway use tax, a sales tax on cars and trucks, has plunged as dealers report slower sales.
The third big source of revenue is fees, mostly collected by the Division of Motor Vehicles, which have also slowed as people stay home, Boyette said.
Those lower tax revenues are expected to continue into the coming fiscal year, which begins July 1. NCDOT estimates it will be short more than $370 million in state revenue next year.
All of this has NCDOT planning for something it has never considered before: halting construction projects that are already underway.
Lewis said the department wants to avoid leaving construction projects unfinished for safety reasons and because the contracts usually require some payments even if no work is getting done. He said if all 620 active construction projects were halted now, NCDOT would still be paying contractors an estimated $1.5 million a day.
Still, the department is starting to look at which projects could be safely suspended and how much money it would save.
This story was originally published May 4, 2020 at 4:34 PM with the headline "As NCDOT cash runs low, the state coronavirus relief law doesn’t provide much help."
