NC’s Transportation Funding Crisis
North Carolina’s competitive economy depends on the health of our state’s transportation infrastructure. From shipping products around the world to helping employees get to work, businesses in every corner of the state rely on our transportation networks to operate, but they aren’t the only ones who depend on them – we all do. As North Carolina continues to experience rapid population growth, it is imperative that we continue to make the necessary improvements to these networks to meet our state’s growing demand.
This requires predictable, consistent funding so that critical projects can be financed and employers can hire and retain the employees needed to complete them. Unfortunately, North Carolina is on the brink of an infrastructure funding crisis that, if left unaddressed, will deal a significant blow to our state’s infrastructure industry and our business community as a whole.
Many of you were involved in our NC Can’t Afford to Wait campaign in 2015, which helped secure the first long-term transportation funding reform measures in North Carolina since 1989. As a result of these reforms, the NCDOT increased the number of active projects. However, when Hurricanes Florence and Michael and winter storm Diego walloped our state in 2018, many of our infrastructure networks experienced catastrophic damage, requiring substantial funds to restore them. This challenge came at the same time millions of Map Act payments matured and the NCDOT became obligated to pay damages earlier than had been anticipated. We initially formed the NC Can’t Afford to Stop Coalition to respond to this crisis, and our efforts last year ultimately helped pass legislation that infused nearly $300 million into DOT by way of the Highway Trust Fund and Build NC bonds.
But despite our successes, North Carolina’s transportation challenges remained. In May, a Department of Transportation Cash Spending Plan released by the State Auditor’s Office revealed that, in 2019, DOT overspent its budget while trying to deliver badly needed construction capacity across the network. And the COVID-19 pandemic, which has curtailed major portions of the economy and drastically lowered gas tax revenues for use in road construction, has only added to our problems.
What Does this Mean for Businesses?
The uncertainty caused by our transportation funding crisis affects a multitude of North Carolina businesses and creates a ripple effect throughout our state’s economy.
In recent years, many employers in the infrastructure industry have been forced to eliminate positions and lay off employees, as hiring decisions were made based on the labor needs for current and pending contracts. Citing IMPLAN statistics, Dr. Michael Walden, William Neal Reynolds Distinguished professor and extension economist at North Carolina State University, has stated that every one million dollar reduction in highway construction spending in the state results in a total loss of $1.86 million in economic activity, and for every one million dollar reduction in highway maintenance spending, the state loses $1.85 million in economic activity. From the engineers designing projects to those painting our roads, these funding challenges will impact employees at every level and will pressure employers to make decisions no job creator ever wants to make.
Ultimately, if employees are laid off and businesses struggle to operate, North Carolina could lose coveted talent and valued economic impact to competing states. Additionally, if our state can’t make improvements to meet the demands of its growing population, we will be at a severe disadvantage that could prevent us from effectively relaunching our economy in the wake of COVID-19.
Solving Current Challenges and Preventing Future Shortfalls
It is clear that our state needs solutions to this funding crisis, and we need them now. However, it is equally important that we develop solutions to prevent this from ever happening again. To that end, the NC Chamber is working to implement a three-step plan to provide solutions for our immediate, medium-range, and long-term transportation funding challenges.
For the immediate push, we’re reactivating the NC Can’t Afford to Stop Coalition to leverage the credibility of last year’s efforts for use in encouraging the General Assembly to secure immediate solutions for the revenue shortfalls caused by COVID-19. Looking beyond these efforts, however, the NC Chamber is currently considering a number of medium-range solutions. One possibility has come from the General Assembly itself: House Bill 1225, introduced in May, would place a bond referendum on the November ballot allowing North Carolina voters to approve the borrowing of $1.5 billion for DOT’s use in road construction projects. Given the historically low interest rates right now, this bill could offer a prudent course for funding DOT projects in 2021 as we work to make our economy more resilient from the impacts of COVID-19.
But if the COVID-19 pandemic has taught us anything, it’s that we can’t lose sight of our long-term goals. Traditional revenue sources like the motor fuels tax are only becoming less and less viable as time goes by. We must work together and encourage lawmakers to embrace new ways of diversifying and modernizing our transportation revenue stream. The NC Chamber and NC Chamber Foundation are currently in the planning stages for a new initiative that aims to do just that, by bringing business leaders and other stakeholders together to decide which funding options make sense for North Carolina.
In the coming days and weeks, the NC Chamber will be communicating with coalition members to let them know about our progress on our short- and medium-range funding goals; and ultimately, members of the coalition will be the first to hear about the details of our long-range strategy. This challenge is not one that affects a single industry in our state, but one that will impact our entire business community if we do nothing. As we reactivate this coalition, we would love to hear from you. To share what you think about North Carolina’s transportation funding challenges or to join the coalition, click here.
Our state has come too far in recent years to let this hinder our progress. We must work as a collective to develop solutions and propel our state forward. North Carolina can’t afford to stop.
Gary J. Salamido
President and CEO