The State of SCDOT

H. B. Limehouse Jr., Secretary of Transportation

Thank you for allowing me once again to speak before the Committee as to the State of the South Carolina Department of Transportation. I very much appreciate the open lines of communication I have with Chairman Grooms and his staff, and the relationships that I enjoy with each of you on the Committee.

Let me start with positive news - - - - we have a healthy balance in the State Highway Fund. We are increasing our funding for all categories of maintenance items. We are getting more production out of our existing staff without any talk of furloughs or layoffs. This is a dramatic contrast to what you’re hearing from other state agencies.

I didn’t come here today to bore you with a lot of numbers, but I believe there are some statistics that I think are pertinent for you to know about our agency and our highway system. Our highway system consists of 41,474 miles and 8,344 bridges, making us the 4^th largest state-maintained highway system in the Nation. We have 4,974 employees, making us the second largest state agency. We operate on a 1.05 billion dollar budget from state and federal sources, with 84% of that budget going towards our maintenance, construction, and mass transit programs.

Several fundamental changes have been made since I came to the Department in May of 2007 – most notably the implementation of Act 114. It took time to ensure all the administrative pieces of the law were applied, but I can report that we have completely and fully implemented all aspects of Act 114. Politics have now been taken out of the prioritization and ranking of projects for selection. SCDOT has an administration and a Commission fully committed to ensuring that the intent of Act 114 is fully carried out. Our newly created Internal Audit Division has recently completed a review of the Department’s implementation of the 2006 Legislative Audit Council recommendations and found that we have taken the necessary action to address all 44 of the recommendations made in the audit.

Most speeches have a great catch phrase – Governor Sanford carried through President Obama’s “Yes We Can” theme in his State of the State two weeks ago. As I was preparing for my address today, I thought about using that same phrase, but I kept coming back to thoughts of what we are trying to accomplish at SCDOT…the catch phrase that describes it best is “Fix It First.”

We all know that our roads in South Carolina are deteriorating faster than we repair them, which also creates too many deadly highways in South Carolina. The collapse of the bridge in Minneapolis in the summer of 2007 brought to light the number of substandard bridges we have in South Carolina – a whopping 1,817 out of 8,344 total bridges, over 21%. In addition, our state continually ranks as one of the top ten states with the highest fatalities in the nation when comparing highway deaths per capita. The good news is that the preliminary data from 2008 shows that fatalities were significantly lower than the previous year. That could be due to a number of factors, including higher gas prices and fewer miles driven, but we’ve made many safety improvements, including intersection improvements, widening of shoulders, more signage, guardrails, and other safety devices on our most dangerous roads. Regardless, we want to do more. South Carolina has a highway system that is in desperate need of some attention and that’s why I’ve made “Fix it First” our fundamental strategy.

SCDOT staff accepted a challenge that I put on the table, and that was to make cost savings a part of our everyday business. I am convinced that we’ve turned this agency around from one that was in the spotlight for having wasted millions of dollars…to one of the most accountable…and efficient agencies in all of state government.

Our employees worked hard to cut down dramatically on travel, consolidate equipment, conserve energy in several ways, and recycle everything from office wastepaper to asphalt. All of these savings make a big difference when you add them all up. And this wasn’t just a one-time effort to save money. Our staff is constantly looking for ways to reduce costs. Recently I tried to order an electric pencil sharpener for my own office and my staff brought me this little mechanical happy face thing and told me to “deal with it!!!”

SCDOT realized 1.6 million dollars in administrative cost savings in fiscal year 07/08 and 16.9 million dollars in non-administrative engineering related savings. Now here is the real payoff for the people of South Carolina - - every dollar saved goes back to the maintenance of our roads and bridges. Isn’t that how we should be spending most of our highway dollars?

To support our “Fix it First” strategy, we presented a budget to the Commission for approval to further reduce our administrative budget for fiscal year 08/09 by $18.7 million and move the money saved into road and bridge maintenance. At the halfway point through this fiscal year, we are on track to come in under the budget passed in June by the Commission. My team at SCDOT has been as diligent as they can with taxpayer dollars.

Now let’s look at the construction side of the equation, especially in light of an anticipated federal economic stimulus bill. We can only guess as to what the rules will be and what the funding level will be for South Carolina. Chairman Grooms has specifically asked me to comment on steps taken to prepare for a stimulus bill. One aspect of the package has been made very clear. Projects will have to be “shovel-ready.” The intent of the package is to put Americans back to work within months if not weeks after the bill is passed. For SCDOT, that means we have to have all engineering criteria and permits worked out and all administrative approvals complete, so that each qualified project can be advanced to construction in a short period of time, perhaps as little as 90 to 120 days.

Two weeks ago, the Commission approved funding certain categories should a bill be passed by Congress. The funding amounts and categories were based on a list of SCDOT projects that are shovel ready. We also invited MPOs and COGs to submit their list of projects for consideration and all of those projects are currently being vetted by staff to determine if they meet what little criteria we know at this time. And this is a very important point: the Commission will reconvene to discuss what projects get funded at a later time. Let me say that again - - - the Commission will decide which projects are funded, and only after Washington sets the parameters of the economic stimulus package.

But here’s a little secret about SCDOT. Before any talk of a stimulus package came out of Washington, our engineers have been preparing projects for “shovel ready” construction ever since I began my administration. Why? Because the SCDOT staff accepted a second challenge that I put to them in 2007, to be innovative and aggressive in seeking funds beyond the normal revenue streams.

Each year South Carolina qualifies for an “unofficial economic stimulus” called After August Redistribution funding. That’s where unobligated balances from the other 49 states is put back into a national pot that is then redistributed to states that have construction projects ready to go. For the last two cycles, South Carolina received approximately 21.6 million dollars in federal funds. In addition, South Carolina qualified for 14 million dollars in additional federal funding for bridges that was made available this past summer.

We’ve seen our neighboring state of North Carolina cutting its highway program by 20% and laying off workers. Virginia DOT also announced that many of its programs are being suspended and our neighbor to the south in Georgia is drastically reducing its long range plans because the funding they thought they had just isn’t there. Yet here in South Carolina, our maintenance funds have grown due to cost savings and being prepared for extra federal funds as they become available. As a result of this large balance in our Highway Trust Fund, we will actually increase our programs this year and next. It’s a win-win for the entire state.

Let’s look at state-supported funding for SCDOT as Chairman Grooms requested. Our primary source of state revenue remains the 16 cents per gallon that we get from the motor fuel user fee – a number that has not increased since 1987. Moreover, revenues from the motor fuel user fee routinely remain flat or shrink each year with inflation. However, the extraordinary events of 2008 have put a bigger dent in our income. Since April of 2008, gas tax revenues have steadily declined as prices at the pump increased. We can all vividly remember when the tipping point was reached this past summer as prices skyrocketed to over $4 per gallon. That’s when the mindset changed significantly. In short, people generally only drove when they had to, or turned to mass transit as an option. The number of miles driven plummeted, and so did our funding. Our revenues have dropped by 4% in the past nine months compared to the same period one year before.

It’s true that gas prices have gone down, but now people are in the habit of conserving fuel, and the number of miles driven continues to decline. We have significant needs in this state and this trend in declining revenues will not help us meet the projected 20 billion dollars in additional funding we will need to maintain our existing system of roads and bridges over the next twenty years. We are going to have to find another mainstream source of revenue.

That’s the message I took to Washington last summer when I was invited to speak before a Congressional subcommittee in June. The message in my testimony was that America can no longer rely on a funding policy that depends on the number of gallons purchased as the primary source of revenue for our highways, while at the same time Congress is supporting a conflicting policy that supports fuel conservation, increased fuel efficiency and alternative fuels.

In closing, I am proud of the efforts we have made at SCDOT since I began my administration in May of 2007. A lot of credit should go to the employees who work so hard to make this a great agency, particularly those who work only inches from death out on the highways to maintain them and make them safer. I am always pleased…and I hope you are too…at the way SCDOT employees respond to emergency situations such as the recent brush we had with snow and ice, and the cleanup that went on in 25 counties last spring after tornados raced across the state. Needless to say, all of our employees at all levels have participated in the efforts to make us more efficient…and to help me turn this agency in the right direction.

I am thankful of the support I have in the General Assembly and, with your help, I sincerely believe that we can make our transportation system one of the best and the safest in the nation.