The State Treasurer on Thursday called on Gov. Roy Cooper to replace the head of the state Department of Transportation and to put the department’s finances under the control of the state Office of State Budget and Management.
Dale Folwell says NCDOT spent nearly $2 billion more in the most recent fiscal year than it took in from the gas tax and other sources of revenue, resulting in a financial crisis that forced the department to delay planning for hundreds of projects.
Folwell says NCDOT borrowed money from the state’s highway construction fund to pay for maintenance and operations without his authorization, as he says is required by state law. He also cites a report commissioned by the state budget office that blamed the department’s financial trouble in part on poor cash management and overspending on preliminary engineering work.
“The word ‘trust’ in the Highway Trust Fund implies that taxpayers, rating agencies, and bond holders trust that the money is being used properly,” Folwell said in a statement. “The lack of oversight at NCDOT is outrageous.”
Cooper, a Democrat, is not inclined to fire Secretary of Transportation Jim Trogdon at the urging of Folwell, an independently elected Republican. Cooper spokeswoman Megan Thorpe wrote in an email that “a financial lecture from the nation’s least effective state Treasurer ... is not credible.”
NCDOT officials have cited two main reasons for its financial problems this year: unusually high costs for cleanup and repairs after storms, including Hurricane Florence, and the costs of settling lawsuits related to the Map Act, a 30-year-old law that allowed NCDOT to reserve land for future roads without actually buying it. The state Supreme Court declared the law unconstitutional in 2016, and NCDOT says settling lawsuits with individual landowners has cost more than $350 million so far and could exceed $1 billion.
NCDOT officials also note that the legislature sets limits on how much cash the department can keep on hand, with a floor of about $300 million and a ceiling of $1 billion. The department’s cash balance topped $2 billion two years ago, prompting it to accelerate spending on highway projects. Folwell says department officials should have known that pace of spending was not sustainable.
“The NCDOT didn’t know it was speeding,” he said in a statement. “When it was told that it was speeding, it didn’t slow down and, eventually, it didn’t slow down enough.”
Both NCDOT and Cooper’s office cited the challenge of maintaining a cash balance in the face of unexpected expenses. They also note that while the department has delayed work on future projects, it has not suspended any that are under construction.
“NCDOT is continuing to complete projects across the state while working within the guidelines set by the legislature in statute and navigating unprecedented costs from historic storms and flooding and the MAP Act settlements,” Thorpe, the governor’s spokeswoman, wrote in an email.
Folwell says that he sped up the issuance of $900 million in bonds for transportation projects in March and June at the urging of state legislators who were concerned about cash flow problems at NCDOT. As late as June 27, he says, NCDOT officials were telling bondholders that Map Act settlements would be immaterial.
“We cannot trust what we’re being told by NCDOT,” Folwell said in a statement. “Their mismanagement directly undermines the faith that the rating agencies put in our disclosures and threatens the state’s triple ‘AAA’ bond rating. We should not spend additional taxpayers’ money or put more transportation debt on the backs of North Carolina’s citizens until Governor Cooper fixes this mess.”
It’s not clear yet if the General Assembly will move to help NCDOT through its financial problems. Rep. John Torbett, a Republican who heads the House Transportation Appropriations Committee, has proposed providing $660 million to the department, including $360 million from the state’s general fund, but so far his bill has not been approved by the Appropriations Committee.