Lawmakers blasted the N.C. Department of Transportation for careless overspending, suggesting the DOT is using the coronavirus to “cover up” irresponsible cash management.
The Senate Transportation Committee used a Wednesday, May 20, meeting to lambaste DOT for overspending hundreds of millions of dollars. The agency was mired in financial problems before the outbreak. The coronavirus has worsened existing budget shortfalls.
“It seems that DOT continues to not take responsibility for the mishandling of contracts and is attempting to use the coronavirus crisis as their excuse for their financial situation. This is nothing new,” said Sen. Tom McInnis, R-Richmond.
The department overspent its budget by $742 million in fiscal 2018-19, says a May audit report. The department says COVID-19 sapped another $300 million from its accounts, draining funds from the gas tax, the Highway Use tax, and Division of Motor Vehicles fees.
But State Auditor Beth Wood said much of the department’s cash problems are self-inflicted. She asked lawmakers to ensure the DOT used better forecasting and stronger oversight, especially over the $4.8 billion advanced construction program.
“We have some serious financial issues having to do with DOT, and they’ve been exacerbated by COVID-19 and our economy,” said Sen. Jim Davis, R-Macon.
The agency announced it could furlough the entire department in phases, cutting hours from as many as 9,400 employees across the state. Executive-level management began cutting hours May 16, and the rest of its workforce could be furloughed starting May 30.
This isn’t the first time the department’s cash problems have cost jobs. DOT suspended 900 projects last summer, throwing the construction industry into chaos and triggering hundreds of layoffs.
The department failed to base its budget on actual cost estimates for projects. Nor did it monitor or enforce its spending plan at DOT’s 14 highway divisions. The report said DOT overspent its $5.94 billion budget by more than 12%.
The department knew it was digging itself into a budget hole in November 2018, but it never slowed spending, says Wood.
Lawmakers asked Wood whether Gov. Roy Cooper was aware of problems in DOT. She said she didn’t know. She hasn’t received any feedback from the governor on the audit.
“The secretary is where the buck should stop,” Wood said, referring to Transportation Secretary Eric Boyette.
Wood dismissed the department’s explanation for overspending, which blamed disasters and compensation under the Map Act.
The Map Act was a state law which for decades barred property owners from using their land if it was in a designated highway corridor without compensating them. The law was declared unconstitutional, with courts ordering DOT to compensate landowners. It was responsible for only $13 million of overspending, Wood said.
Meantime, the department failed to create a realistic budget for disaster spending.
DOT allocated $50 million for disaster spending each year since 2015 — despite breaking that threshold every year. The DOT racked up $171 million in disaster spending in 2018 and $296 million in 2019 — almost six times more than budgeted, says the report.
“The number that’s been set aside has never changed,” Wood said. “When they became aware there weren’t enough monies, they did not reject any contracts. There were no midyear budget reductions.”
Department officials argued they can’t predict the severity of disasters, noting that disaster money can’t be spent on anything else once it’s earmarked for relief.
Wood worries the state could be on the hook for the $4.8 billion balance in advance construction spending. The spending relies on reimbursement from the federal government, but that reimbursement isn’t guaranteed. Wood asked for stronger oversight.
“The information being provided is sort of sketchy,” Wood said. “How far does all this stretch out? Before the pandemic, we were comfortable that the federal money would keep coming. But you can only get so far stretched out, and the risk gets higher and higher.”
The department’s internal auditing system isn’t working, Wood said.
“There really is nobody overseeing the spending plan outside of the DOT,” Wood said. “Who’s going to provide this oversight?”
Some members defended the DOT, saying the General Assembly shares some blame and cited the need for a bipartisan solution. Others were more skeptical.
“We’ve bailed out the DOT time and time again,” said Sen. Carl Ford, R-Stanly. “Every year, there’s always an excuse of why we’ve got to have more money. It’s because they don’t manage the money they have.”
DOT spokesman Steve Abbott told CJ the department will speak to the committee next week. “We appreciate the work of the auditor’s staff,” Abbott said in an email. Next week’s presentation will supplement its response to the audit.
“[It] should provide more insight and answer many questions. In the meantime the department will continue to work to address unprecedented challenges and serve communities across North Carolina.”