The Biggest Little Scandal You’ve Never Heard Of

When the North Carolina General Assembly overwhelmingly approved a $3 billion transportation package in the summer of 2018 to fund road construction and repairs, few would have imagined that it would take over two years for the bonds to actually be issued.

But the legislation, the Build NC Bond Act of 2018 (Senate Bill 758), required that before the bonds could be issued, the State Treasurer (in this case fiscally conservative Dale Folwell) would have to sign-off on it first.

But there was big trouble over at the North Carolina Department of Transportation.

According to Treasurer Folwell, since 2019, the department overspent its maintenance and construction budget by $2 billion and emptied out the Highway Trust Fund to the tune of another $1 billion. And an audit earlier this year revealed nearly $750,000,000 in overspending by the agency in 2019, including nearly $60 million in raises to nearly 7,400 government employees, more than ten times that of other state employees. The Raleigh News & Observer reported that the great majority of those raises were in the double digits, some even as high as 65%. State Auditor Beth Wood concluded that the additional spending was a lack of oversight.

This fiscal mismanagement resulted in widespread employee furloughs at the agency, uncertainty in road funding, and it risked North Carolina’s triple-A credit rating. Eventually, the secretary of transportation was fired.

“With all the problems going on in the department at the time, NCDOT was not in position to make Treasurer Folwell happy,” said Chuck McGrady, a newly-minted board member of the Department of Transportation and former state representative from Henderson County.

Earlier this year, McGrady led the effort in the House and Senate to address the agency’s budget shortfalls in light of its huge revenue loss as a result of the pandemic. The Highway Trust Fund has three primary revenue sources: highway use tax, motor fuel excise tax, and title and registration fees. “When people stay home, they’re not driving,” continued McGrady. “When people aren’t driving, they aren’t buying gas, and the revenue doesn’t come in to the state.”

McGrady’s appointment to the board was part of a larger effort over the summer by the conservative majority in the General Assembly to address management problems at the NCDOT. Among other provisions, House Bill 77 restructured the agency’s governing board of directors to include appointments by both the Speaker of the House and the President Pro Tem of the Senate. Prior to this reform by the legislature, the entire board was appointed  by the governor — and often as a vehicle for political patronage.

“The most recent restructuring was meant to give the board back oversight on how monies are spent without giving individual board members responsibility for decisions on individual projects,” McGrady concluded. “Hopefully, the right balance has been struck.”

In response to these fiscal and management reforms, on October 6 NCDOT’s newly constituted board of directors, Treasurer Folwell and the Council of State all gave their approval to issue $700 million in bonds to cover existing road construction and repair projects.

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