Headlines across the country have focused on the financial implications of COVID19 as it relates to businesses – but one issue in North Carolina that might not be as apparent is the impacts the Pandemic has on Government revenue and operations. Bracing for a shortfall in operating expenses, the North Carolina Department of Transportation has significantly scaled back operations such as consolidating Driver’s License Offices during the Pandemic.
While the operations of NCDOT may not be as visible as a storefront with a “closed” sign – the implications are the same. Something North Carolina residents might have noticed is the significant decrease in mowing along the roadside. Mowing operations are still being done, however, it has been reduced based on funding availability.
Sharp decline in revenue has resulted in the N.C. Department of Transportation falling below the statutorily mandated cash floor of $293 million – the first time the department has ever experienced such a drastic decline. In July 2020, the new cash floor was set at $267,322,500 under Session Law 2020-91. According to state law, once the department falls below the cash floor, the department can no longer enter into new contracts that spend money on transportation projects.
“Never in the history of NCDOT has there been such an immediate and sustained decline in revenues,” said Eric Boyette, Transportation Secretary. “We need revenue to begin putting people back to work across North Carolina.”
The NCDOT is fully funded through the Motor Fuels Tax, Highway Use Tax, and Division of Motor Vehicles fees. The drop in revenue from these sources due to COVID-19 is anticipated to result in more than $300 million in lost revenue for this fiscal year, which ended June 30. An additional shortfall of more than $370 million is projected for FY21.
The North Carolina general statutes restrict the department’s ability to enter into agreements that obligate additional funds for transportation projects until cash on hand is above the statutory cash floor, as certified on the last day of the month.
What NCDOT CAN do while below the cash floor:
Continue active projects
Maintain existing infrastructure with existing supplies and staff
Pay incoming invoices from private sector companies as long as funds exist
Continue operating DMV functions
Respond to emergency situations (with existing staff and materials)
Hire new employees for critical, safety-related positions or DMV functions
What NCDOT CANNOT do while below the cash floor:
Negotiate right of way purchases on projects not underway
Purchase additional equipment, supplies or services for transportation projects unless obligated to make such a purchase in an existing contract
Award new construction, engineering or repair contracts
The work on Cowee Mountain is one of the projects now in limbo due to COVID19 as contract negations have been halted to continue work.
Consolidated Driver’s License office and less mowing aren’t the only cost-saving measure – the NCDOT has also laid off nearly half of all temporary employees and embedded consultants, suspended most programs under the NCDOT umbrella, implemented a hiring freeze and is currently developing a department-wide plan to furlough employees.
At this time, the NCDOT does not know when the cash reserves will be above the cash floor. The department must continue meeting existing obligations and pay invoices for work completed or currently underway. For the department to begin reinstating suspended projects and programs, The NCDOT would need revenue replacement to compensate for COVID-19 losses for FY20 and FY21.