RALEIGH – There’s a good reason to question the wisdom of placing a $1 billion+ transportation bond on the November ballot. But you won’t find it voiced in most of the legislative and public debate on the issue.
For years now, a coalition of local governments and business groups has advocated legislative action to increase dramatically state spending on North Carolina’s transportation infrastructure. One key plank of the platform has been a proposal to seek a referendum on a statewide bond to repair rickety bridges and speed up the construction of congestion-alleviating highways, among other things.
In the 2008 session, there’s already a push for a bond of up to $1.75 billion, to be financed by gas-tax and car-tax revenues currently devoted to paving rural secondary roads and financing the General Fund budget. Critics advance several arguments against the idea, all of them flawed.
First, given the tightness of the proposed 2008-09 state budget, they question the wisdom of ending the annual transfer of $172 million from the Highway Trust Fund to the General Fund. If all that money is dedicated to transportation, lawmakers will have to either raise General Fund taxes or find $172 million in General- Fund savings, critics point out.
Quite right. I vote for the latter option. The fact is, there is far more than $172 million a year in state spending – in areas ranging from pork barrel and business-subsidy items to Medicaid fraud and ineffective education programs – that the General Assembly ought to get rid of anyway. North Carolinians get a lot less benefit from these wasteful expenditures than they would from $172 million devoted to financing highway improvements.
During the past decade, there’s been an explosion of interesting research into which public policies have the most effect on state economic growth. In general, governments retard rather than enhance state economies when they tax and spend. But you’ll find two interesting exceptions in much of the research: public safety and public infrastructure.
State and local expenditures on police, fire, and the courts actually boost state economies, all other things being equal. Communities where people feel safe and confident that their property and contracts will be respected are more likely to attract entrepreneurs and private investment. As for public infrastructure, a category dominated at the state level by highway spending, some of the best-designed studies find a solid connection to economic growth. More and better roads make it faster and safer to move people and products, increasing the productivity of labor and reducing the real cost of goods and services.
Of course, it is possible to waste tax dollars on ineffective law enforcement or poorly sited and designed roads. To say that, on average, these public expenditures confer economic benefits is not say that every dollar spent on public safety or transportation is economically valuable. But it’s more likely to be valuable than a dollar spent on most other government programs.
Another common argument against the transportation bond is that there are many other lobbies advocating multi-billion-dollar statewide bonds – for public schools and colleges, local water and sewer projects, open space, and other causes. Given that North Carolina taxpayers can’t afford all these proposed debts, why should we act first on transportation? Won’t it soak up much of the state’s available borrowing capacity?
Yes. That’s a good argument for it. The other bond proposals would either finance lower priorities (e.g. open space) or functions that are traditionally local and should remain so (e.g. sewer projects and school construction). Highways have been primarily a state responsibility.
Finally, some argue for skepticism about the transportation bond because its supporters include firms that design, manage, or supply inputs to road projects. I agree that skepticism is warranted, actually, but critics should apply the same skepticism to those who stand to benefit financially if the state expands the university system, builds schools, bails out ailing localities, or buys private land. In the highway case, there happens to be a strong case for public benefits. There may also be private benefits, which should always be incidental to legislative decisions, but there are always private benefits from any legislative decision.
The real reason to ask tough questions before signing onto the proposed 2008 transportation bond is the state Department of Transportation’s well-documented management problems. Acting on a private consultant’s recommendations, DOT appears to have improved somewhat in the past year – it now takes three years instead of five to build a new bridge, for instance – but the department has a long way to go. Taxpayers have legitimate reasons to doubt whether DOT will effectively spend another $1.75 billion. It will take further reform, and quite possibly a leadership change in Raleigh, to dispel such doubts.
Hood is president of the John Locke Foundation.
p.s. Some readers may have noticed that in my discussion of recent research on the effects of state government on economic growth, I didn’t mention the single-largest state/local expenditure: education. That’s because the subject is complex. Many past studies have concluded that, contrary to popular belief, there is no statistically significant relationship between public education expenditures or outputs and economic performance. But other scholars argue that the measurements are flawed – public-school spending is mostly for salaries but is not adjusted for cost of living, for example, and years of school completed is not a good proxy for educational achievement. As it turns out, I’ll be delving more deeply into these issues in tomorrow’s column.