Fact Check: "The Last Resort: SC infrastructure needs and how to address them"

The House budget committee (aka Ways & Means) put out this propaganda piece last week to make the case for raising the gas tax as the solution to fixing our roads. Short version: it's rubbish.

"1. South Carolina has grown."

True, and well documented, but with that growth comes increased tax revenue. Sales taxes, registration fees, and gasoline taxes all increase with the population.

"2. SC’s road system has grown and its needs have, too."

This is obvious. However, using this as a springboard to claim that we are behind other states in terms of taxation and spending assumes we cannot do things better in SC than in other states. It also overlooks the primary driver of the population increase here: a low cost of living.

Do you think that we can do better than other states? I am not willing to let the performance of other states to be a "glass ceiling" for South Carolina.

"3. Road funding has NOT kept pace with growth."

"SC motor fuel user fee has not been increased since 1987, putting us at a disadvantage compared to neighboring states."

Only in government are low taxes considered a "disadvantage," and it shows just how out-of-touch the legislature is with their own voters. In reality, our relatively low per-gallon gas tax rate contributes to our low cost of living and gives us a competitive advantage over other states like NY, FL, MI, and CA, not a disadvantage!

Our roads were pretty decent from 1987 to about 2008. Then, road conditions took a sharp decline. How can 1987 be the problem when the decline happened 20 years later?

The answer is actually how the funds were used as a result of a massive $5 billion borrowing spree known as the 27-in-7 program. Instead of using the maintenance dollars to preserve the pavement with protective coatings, SCDOT used the money to pay the debt service on the 27-in-7 bonds. This allowed road conditions to deteriorate past the point of no return, and now they need to be rebuilt.

During this entire period of decline, road spending increased:

"Revenues aren't even keeping pace with inflation."

In reality, revenues have increased faster than inflation relative to 2005 dollars. Road spending has increased steadily since 2008:

Road spending increases have outpaced inflation since 2008 (the blue line is steeper than the red dashed line.)

Road spending increases have outpaced inflation since 2008 (the blue line is steeper than the red dashed line.)

"SCDOT has been living on a fixed income since 1987."

This is downright offensive. SCDOT does not have an “income” and does not “live.” Claiming they are on a “fixed income” is disrespectful to the taxpayers who actually do live on a fixed income, and whose budgets will be disproportionately affected by the current proposal.

  • John makes $10/hr delivering pizzas for Dominos. John's car breaks down, and he can't afford a new car at the local new car dealership, so he goes to Bob's Used Cars and scrapes together just enough to buy the cheapest junker on the lot for $1,000. John pays $50 in sales taxes (5%). John wonders if he will get enough tips to pay the additional $0.02/gallon he will have to pay to keep gas in the car during his delivery runs.
  • Walter makes $500,000/yr at his law practice. Walter enjoys driving in the sun and wind on fine sunny days, so he drops by the local BMW dealership and plunks down a cool $50k for a new Z4. Because the vehicle sales tax is capped at $500, Walter only pays $500 in sales taxes (1%).

This absurd "fixed income" notion also neglects to mention the diverse revenue streams that have been appropriated to roads as highlighted in the 2016 LAC audit:

Let's allow for a moment that roads are in fact more expensive to build, repair, or maintain than they were in 1987. Of course, even if this is the case, road spending has also increased since 1987. However, there are things that could be done to address rising costs, for instance:

  • Cut employee fringe benefits, cost of living increases, and/or salaries. 
  • Re-evaluate SCDOT's organization chart to make it more efficient by eliminating or consolidating positions.
  • Materials research would pay immediate dividends. Shortages of certain key materials have greatly inflated the cost of asphalt, and research is needed to identify alternative materials.
  • SCDOT could implement a system to identify the roads, treatments, and timing needed to preserve the pavement quality of existing roads. These treatments are an order of magnitude cheaper than rebuilding the road, and preventive maintenance should be prioritized in SCDOT’s budget.
  • What can we privatize? Open bidding processes can do wonders for driving down costs—even if the same methods and materials are used.

Any or all of these things could happen if the Transportation Commission were eliminated and SCDOT becomes a cabinet agency under the Governor. A similar thing DID happen after Gov. Haley put Catherine Templeton in charge of LLR.

"Less than one cent per gallon is left to fund state system needs."

Then stop! This is itself an admission that SCDOT does have money, but they aren't spending most of it on roads. Stop using the gas tax to fund agency overhead at SCDOT, DNR, and the Department of Agriculture. Stop using it to pay for debt. Even if this were done just for a few years, it would resolve the alleged revenue problem.

What the below illustration actually shows is not that SCDOT doesn't have enough money, but that only about 7 cents out of the 16.75 cents gets turned into pavement. No wonder our roads are in such bad shape.

What SCDOT does with your gas tax pennies: 25% keeps the lights on, 25% pays for Federal roads, 18% mows the grass and fills potholes, 16% pays for county roads, 8% funds DNR and the Department of Agriculture, 6% lets the State Transportation Infrastructure Bank borrow more money to build new big construction projects, leaving only 2% for state bridges, repaving, expansion, and safety projects.

What SCDOT does with your gas tax pennies: 25% keeps the lights on, 25% pays for Federal roads, 18% mows the grass and fills potholes, 16% pays for county roads, 8% funds DNR and the Department of Agriculture, 6% lets the State Transportation Infrastructure Bank borrow more money to build new big construction projects, leaving only 2% for state bridges, repaving, expansion, and safety projects.

"4. We have implemented significant reforms to SCDOT, with further improvements in H. 3516."

None of the “reforms" offered have worked, because after each reform was enacted, SCDOT was still unaccountable to the taxpayers who fund it. The diffusion of responsibility and layers of bureaucracy were left intact. You can’t put the Governor a little bit in charge and expect it to work.

Act 114 of 2007 and Act 275 of 2016 left the Commission in place to stand between the Governor and SCDOT.

H.3516 also leaves the Commission in place to stand between the Governor and SCDOT. Letting the Governor pick the commissioners, but not the Secretary of SCDOT, still fails to put the responsibility where it belongs. Furthermore, if you put the Governor in charge, you don’t need a Commission at all. Under this bill, the Commission still exists to insulate SCDOT from the Governor.

This, and the previous “reforms,” are carefully designed to look like reform without letting any real power change hands. If these “reforms” were so great, we wouldn’t need to keep “reforming” SCDOT every few years.

The “Infrastructure Maintenance Trust Fund” is nothing but sugar to make the poison go down better. We already have a “trust fund” for roads, and it’s called the State Highway Fund. Any new fund that we may create just makes things more complicated than they already are, and fails to protect the funds from the legislature because a budget proviso exists that would allow the legislature to suspend this law and re-appropriate the funds as they see fit. There are many, many precedents of this happening in previous budgets. 

"5. We must address funding needs to fix our roads—it IS the last resort."

If funding is really the problem, this bill does a lousy job of addressing it.

SCDOT purportedly “needs" $1.1 billion more per year for the next 23 years—a total of $25.3 billion—but H.3516 provides a paltry $214 million in year one, and $570 million in year 5! Even if raising taxes were the last resort, this bill doesn't deliver!

The 23-year billion-dollar shortfall claim appears to be based on the 2040 Multimodal Transportation Plan, which actually cited a $1.47 billion annual shortfall for every imaginable need, including massive new interstate expansions, rail and mass transit. This grossly-inflated report was prepared by CDM Smith, a contractor commissioned by SCDOT. In the 2015-2016 session, SCDOT backed away from these numbers, first insisting they could "get by" with about $550 million more per year, then about $400 million per year. Which number is correct?

This claim takes Gov. McMaster’s “last resort” comment grossly out of context. The Governor supports making roads an executive responsibility, and his position reflects that of most responsible citizens: fix the systemic problem first, then we can revisit the funding issue later--if and only if it is actually needed, hence, it is a "last resort."

We might discover that we can get things done faster, better, and cheaper under new leadership. The Governor no doubt also wants to see if his request for Federal funding from the Trump administration is successful before we go and raise taxes on our citizens.