Senate Joint Resolution No. 50 mandated that the Joint Legislative Audit and Review Commission (JLARC) review the programs and activities of the Department of Highways and Transportation (DHT). The resolution called for the study to focus on the administration of the department, highway and transit needs, revenues and methods of financing needs, and the fair apportionment of construction and maintenance costs among vehicles of different sizes and weights. The Commission was directed to make an interim report before the 1981 session of the General Assembly and a final report before the 1982 session.

This document presents a summary of the studies conducted under SJR 50 and highlights each principal finding and recommendation. Six other reports, one for each component of the study series, are available. These include:

1. Organization and Administration of the Department of Highways and Transportation-Interim Report.

2. Methodology for a Vehicle Cost Responsibility Study.

3. Vehicle Cost Responsibility in Virginia.

4. Highway Construction, Maintenance, and Transit Needs.

5. Financing Highway and Transportation Programs in Virginia.

6. Organization and Administration of the Department of Highways and Transportation-Final Report.

The Department of Highways and Transportation has broad responsibilities for the construction and maintenance of the 60,881 miles of roadway in Virginia's highway system. The department also has a variety of transit related duties. To these functions, the department has become one of the largest agencies of State government, with 11,818 authorized staff positions and a biennial appropriation of $1.9 billion in 1980-82.

Over the years the mission and the organization of the department have been shaped largely by external events. In 1963, the Virginia Highway Study Commission (commonly referred to as the Stone Commission) recommended increasing highway revenues and embarking on an ambitious construction program. The commission proposed modifying the department's organizational structure and streamlining highway planning, design, and construction functions. The number of employees devoted to construction activities rapidly increased.

As the highway system matured during the 1960s and early 1970s, transportation planning emerged as an important State and national concern. In 1970, as a result of federal mandates, an environmental quality division was created to make environmental impact assessments of highway projects. The following year, the transportation planning function was separated from the programming and scheduling of construction projects. Legislation was enacted in 1974 requiring the Highway and Transportation Commission to prepare a statewide transportation plan. The planning responsibility was subsequently transferred to the office of the Secretary of Transportation.

The most visible change in Commonwealth's transportation structure was the department's 1974 name change – the Department of Highways and Transportation. Although the department's primary task continued to be highway construction maintenance, the change recognized the growing interrelationships among all forms of transportation. Since 1974, DHT has added operating divisions concerned with public transportation and railroads, and has provided staff to the Secretary of Transportation for the development of the statewide transportation plan.

Highway and Transportation Funding

During the 1960s and most of the 1970s, the department operated in a revenue-rich environment. Emphasis was placed on expanding the existing road system through the additional of parallel lanes to primary routes, constructing bypasses, developing urban thoroughfares, and establishing an arterial network. Substantial progress was made in completing Virginia’s portion of the interstate system. During that time, the department was permitted to function outside the mainstream of State budgetary policies and procedures. That is, it was viewed as a special purpose organization totally supported by special, dedicated funds; as such, it was not subjected to the aggressive budgetary oversight applied to other State agencies.

However, two factors altered the funding environment for highway programs dramatically in the late 1970s. First, inflation in the cost of highway construction and maintenance began to outpace the rate of revenue growth. In the early 1970s, even with the decline in revenues consistently exceeded the amounts needed to maintain a 1970 level purchasing power (Figure 1). Between 1970 and mid-1977, DHT had sufficient revenues to support real growth in its programs. After 1977, however, highway fund revenues steadily lost ground. The two cent per gallon increase in the motor fuel tax enacted in 1980 did little more than offset the erosion in purchasing power experienced through inflation.

The second factor defining the current funding environment for DHT programs is the rapid increase in maintenance spending. Maintenance expenditures per lane-mile of highway have increased by 20 percent over the last five biennia (Table 1). The dollar amounts shown in the table are indexed to control for inflation and to exclude such items as bridge maintenance, weigh stations, ferries and extraordinary repair work, which are not likely to be correlated with changes in the lane-miles of roadway.

The table highlights several important points. Total expenditures per lane-mile increased 20 percent even after inflationary effects are eliminated. Furthermore, virtually all of the real increase in spending occurred in the category labeled "maintenance replacement." Maintenance replacement is essentially the renovation of existing highway facilities with pavement overlays, replacement of signs, guardrails and other facilities, and major repair of drainage structures and bridges. Mainte­nance replacement spending increased by 49 percent for the decade even after inflationary effects are eliminated.

The increased level of maintenance spend­ing is now part of the base DHT budget. The total maintenance budget increased from $48 million in 1970 to $186 million in 1980. It is projected to be $260 million in 1983. As a result, highway maintenance-once a relatively low cost program compared to construction-is projected by DHT to require all currently available highway maintenance and construc­tion funds by 1985. Without new revenues, such projections signify an end to Virginia's highway construction program. The alternative to new revenue authorizations would be major cuts in maintenance spending. Such cuts would run the risk of accelerating deteriora­tion of the highway network, which results from the aging of pavement and bridges, and increased traffic volume and weights.

Simply increasing one or more of the taxes supporting highway and transportation programs will not, by itself, provide an adequate basis for highway programs during the next decade. In order to effectively deal with the changes in the funding environment, other factors need to be considered.

1. DHT does not have budgetary framework necessary to be fully accountable for the use of revenues consistent with legislative direction. Changes are needed in current budgeting procedures for construction, maintenance, and public transportation programs. Greater attention needs to be given to management controls in order to reduce costs and increase efficiency.

2. Highway and transportation funding policy needs to be evaluated on the basis of three criteria, adequacy of revenue; equity among user classes; and efficiency of administration. Although Virginia's current tax structure is fundamentally sound, the revenue sources are not sufficiently sensitive to inflation. Administrative charges were designed to recover cost of services have not been updated adequately now drain funds from programs. And, some inequity exists between revenue contributions and expenditures made on behalf of the two middle weight truck classes.

The remainder of this findings and recommendations in two areas and presents several options General Assembly may wish to use in financing future highway and transportation programs. Chapter II presents an evaluation of planning, programming, budgeting, and management changes suggested for DHT. Chapter III reviews highway and transportation needs, and assesses the ability of current financing to meet those needs. Finally, Chapter IV presents four financing alternatives for legislative consideration for the 1982-84 and 1984-86 biennia.