NC’s Impending Infrastructure 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. We could not have secured this investment without the help of our aligned business community and the leadership of the General Assembly and the North Carolina Department of Transportation (NCDOT). 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 last year, 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.
Now, the NCDOT is dangerously close to dropping below a legislative cash floor balance that our leaders agreed upon in order to be good stewards of the people’s dollars. This balance is set at 7.5% of the Department’s appropriations for the current fiscal year (NC G.S.143c-6-11(f)). If the NCDOT dips below that floor, the Department will no longer be able to enter into any new contracts and, already, it has suspended preliminary engineering for approximately 900 transportation projects across the state.
What Does this Mean for NC?
The uncertainty caused by this potential funding crisis affects a multitude of North Carolina businesses and creates a ripple effect throughout our state’s economy.
Many employers in the infrastructure industry are being 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, said, 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 take years to overcome.
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.
In the coming days, our team will be working in collaboration with members of our aligned business community to discuss the first steps in a long-term, future-focused plan to develop funding solutions to increase available transportation infrastructure investment. These initial steps will likely require a cash infusion to the NCDOT to keep current projects on track and reopen those that were suspended, but with a forward-thinking strategy in place to address our state’s infrastructure needs, we can prevent future funding shortfalls, manage risk, create stability and continue strengthening our roads, railways, ports, airports, water and sewer systems, energy and broadband infrastructure.
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 begin to form a coalition around this issue, 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