The Department of Highways and Transportation (DHT) has broad responsibilities for the construction and maintenance of 60,881 miles of roadway in Virginia. The department also performs a variety of transportation-related duties, such as providing planning, financial, and engineering assistance to cities, towns, public transit systems, and rail lines. To fulfill these duties, the department has become one of the largest State agencies, with 11,818 authorized staff positions and a biennial appropriation of $1.9 billion for 1980-82.

The last comprehensive examination of DHT occurred in the early 1960s when the Stone Commission made major recommendations for improving departmental management and organization. At that time the legislature also endorsed an ambitious program of highway construction consistent with Virginia's population and economic growth and the availability of ample revenues from taxes on gasoline and motor vehicles.

The policy environment for DHT changed dramatically in the late 1970s, however. Slow revenue growth coupled with inflation and increasingly costly maintenance requirements resulted in a one-third reduction in the purchasing power of the construction program. Despite an increase in the motor fuel tax in 1980, DHT projects that without additional revenue the highway construction program will end in 1984.

In response to these trends DHT has reduced staffing levels and taken steps to improve financial management and control. A number of additional improvements are needed to provide a suitable framework for increased accountability and to make best use of available resources. Fifty recommendations for improvements are included in this report. Foremost among these are major changes in highway construction and maintenance budgeting procedures, increased attention to the public transportation function, organizational restructuring to address concerns first raised in the Stone Commission report, and a general upgrading of management controls.

Policy and Program Development (pp. 9 to 27)

The Highway and Transportation Commission and the Secretary of Transportation are primarily responsible for developing highway and public transportation policy. The 11-member Highway and Transportation Commission is legislatively assigned the tasks of allocating construction funds, establishing a reasonable and necessary maintenance budget, approving actions taken by the public transportation division, and a variety of other duties. The secretary of transportation is formally charged with directing the development of the DHT budget. Since 1978 the secretary has also been responsible for preparation of the statewide transportation plan.

The development of highway construction, maintenance, and public transportation programs, and conversion of these programs into budget proposals for legislative review, are carried out at several levels of the department. Program development involves the planning, programming, and financial affairs directorates, the public transportation division, and construction and maintenance program managers in the central office and field offices throughout Virginia.

Policy Development. The commission devotes most of its attention to highway construction with correspondingly less attention to highway maintenance and public transportation. In fact, a number of the commission members believed that a legislative formula governed the size of the maintenance budget when, in fact, the General Assembly has directed the commission to provide for "reasonable and necessary" levels of maintenance spending. The commission needs to expand its oversight of maintenance and public transportation in order to provide a comprehensive and uniform base for policy development.

The secretary of transportation has taken important steps toward completing the statewide transportation plan first mandated by the General Assembly in 1974, including the release of a status report in 1981. The plan is needed to provide a multimodal framework for highway and public transportation policy. A completion date for the plan should be established, possibly through legislative action, and the proposed form and content of the plan should be exposed for review as soon as possible. It is essential that the plan contain specific discussion of the major transportation issues and present recommendations for meeting future needs.

Highway Program Development. DHT employs a large staff to carry out the complex process of assessing highway needs, preparing plans to meet those needs, scheduling projects, and managing the flow of federal, State, and local revenues to fund programs consistent with legislative appropriations. In the past, however, information provided the legislature on highway and transportation needs and funding alternatives has tended to be overly general and in some cases unrealistic.

Major revisions are necessary in DHT’s current approach to highway program development and budgeting. Highway construction funds are limited and a means of establishing priorities and monitoring accomplishments is needed. Budgeting for highway maintenance will require increased use of systematic pavement and bridge ratings and closer adherence to maintenance standards. Several important actions, including adoption of an interstate pavement management system and preparation of a departmentally endorsed construction program, have been taken recently by DHT to meet these requirements. DHT should continue refining procedures and adopt a uniform commitment to improving the quality of information available to the legislature for its deliberations.

Public Transportation Needs. DHT assumed formal responsibility for public transportation programs in 1974. The public transportation division was created in 1978 and given a broad mandate to develop information on transit needs, funding requirements, and the efficiency and economy of transit systems operating in Virginia. Statute mandated that the division report to the commissioner. This high-level reporting relationship prescribed in statute was intended to prevent the special needs of public transportation from being overshadowed by the traditional highway responsibilities of the department.

The public transportation division does not however, play the role intended by the General Assembly. On a day-to-day basis the division reports to the director of planning rather than to the commissioner. And although the division has been active in grant administration, it has not produced the in-depth needs assessments, efficiency studies, or program options provided for in statute.

A clear focus for public transportation programs is particularly important today in light of federal policy shifts which could result in the loss of over $15 million annually in operating subsidies and a corresponding increase in pressure on State and local resources. Creating a standing committee for public transportation on the commission, upgrading the public transportation division to directorate status, and expanding the division’s role consistent with statute would improve DHT’s ability to help the General Assembly deal with changing federal policy.

Compliance with Statute (pp. 25 to 32)

The General Assembly uses both statutory allocation formulas and the appropriations act to control the distribution of highway and transportation funds. In several instances DHT appears to have been out of compliance with these provisions.

Construction Allocations. The General Assembly has historically employed an allocation process for stating its intent regarding highway construction funding. The process also communicates construction plans and priorities to legislators, local officials, and the public.

In practice, actual spending patterns vary greatly from allocations. Between 1967 and 1981, $206 million more was allocated to the urban system than was expended. The primary and secondary systems also showed underspending of $59 million and $39 million, respectively, compared to allocations. In contrast, $14 million more was spent on the interstate system than was allocated.

Variations between statutory allocations and expenditures may not satisfy the intent of the General Assembly. However, although there is a common perception that allocations and expenditures coincide over a reasonable period, this relationship is not firmly established in law.

For the purpose of correcting the imbalance between the allocations made to the secondary, urban, primary, and interstate systems, the General Assembly may wish to (a) require DHT to prepare a plan to address and amortize the existing imbalances, (b) suspend the application of the allocation formula in Code of Virginia § 33.1-23.l for a period sufficient to allow DHT to correct the current imbalances, or (c) require consistency between expenditures and allocations made in the future but provide more flexibility in meeting past allocation commitments. In addition, the General Assembly may wish to clarify whether expenditures should be consistent with allocations and whether the term "allocation" means intent to expend allocated funds within a reasonable period of time.

Appropriation Provisions. DHT overspent the legislative appropriation for highway maintenance by $59 million in the 1978-80 biennium. DHT contends that these funds were used for purposes more similar to construction than maintenance and were, therefore, authorized by a separate provision of the Act. However, similar expenditures have been coded as maintenance by the department at least since the early 1970s.

DHT overspending occurred because checks by the Department of Planning and Budget and the controller were not adequate in this instance. All highway work, both construction and maintenance, is included under one accounting code even though construction and maintenance are separate Appropriations Act items. This arrangement has effectively removed the primary check available to the controller to ensure that spending is consistent with law. The use of one accounting code for these two major DHT programs should be ended immediately.

Capital Outlay. DHT is subject to standard provisions for review and approval of capital outlays for departmental facilities. Only land acquired for highway construction is exempted by statute. Despite these provisions DHT has intended to operate outside established procedures. Consolidation of the capital outlay function with the operating budget would improve control and better ensure compliance with State review and approval procedures.

Management Controls (pp. 37 to 66)

DHT recognizes the need to operate efficiently in order to make full use of its limited resources, and a number of improvements have recently been implemented. During the course of this review cost savings of about $20 million were identified. Additional savings are likely through monitoring of resource requirements and spending levels. Three ways to improve efficiency are described below.

Equipment Purchases. DHT maintains a fleet of equipment valued at over $100 million. Based on DHT’s own standards, many pieces of equipment appear to be underutilized. A review of utilization records for 1980 compared with outstanding requests for new purchases identified as many as 592 items which appeared unnecessary. Deferring new purchases was projected to save up to $9.5 million in 1981. In fact, $8 million in proposed purchases was deferred by DHT.

Inventory Control. The department maintains a large inventory of common stock items. Comparison of current stock levels with issue rates for the last five years indicated that DHT is overstocked by as much as $5 million. This overstocking ties up funds unnecessarily and increases storage and handling costs. A series of eight recommendations have been made and accepted for improving inventory management and reducing overstocking.

Preventative Maintenance. The equipment fleet is well maintained but some field units spend more time than necessary on maintenance. For example, half of all residencies suspend operations once a week for preventative maintenance. Analysis of cost reports and breakdown rates reveal weekly programs to be no more effective than monthly preventative maintenance. Establishing a monthly program would save $820,000 annually.

Organizational Structure and Function (pp. 67 to 87)

DHT is a large bureaucracy with 11, 818 authorized positions, 85 separate organizational units, and eight levels of management between the commissioner and field crews. The current organizational structure is fundamentally sound and reflects, in large measure, the recommendations of the Stone Commission. However, some of the problems noted by the Stone Commission have reemerged and several other changes now appear warranted. Figure I shows a proposed reorganization of DHT with key changes highlighted.

Deputy Commissioner. A problem with the current organization is that several major organizational units report directly to the commissioner. In 1963 the Stone Commission criticized excessive day-to-day involvement of the commissioner in routine activities and the resulting “inadequate opportunity to devote effort to the executive responsibilities of the position." Creation of separate deputy commissioner and chief engineer positions would provide better distribution of workload at the top management level and would improve coordination of planning, programming, and budgeting. This change would also free the commissioner to focus on duties as chief policy officer for the department.

Internal Auditing/Applied Research. A function which has received increased attention in recent years Is internal auditing. Internal auditing to inform management about the effectiveness of efficiency of agency operations can be improved by establishing a separate organization unit reporting to the commissioner and the commission. At the same time, the existing management services division can be streamlined to serve as a focus for applied research into ways to improve practices and reduce costs.

Public Transportation. As described previously, the public transportation division appears to lack the organizational status intended when the General Assembly mandated its establishment. The directorate level is consistent with the legislature’s intent to give public transportation a high status in the department. In addition, placing public transportation at a level with highway planning, programming, and financial affairs will provide a better focus for multimodal program planning and development under the deputy commissioner.

District Structure. Boundaries of the eight highway construction districts have not been adjusted since 1923, although changes in population and economic concentrations have resulted in imbalances in district workload. A series of studies has recommended creation of a ninth district in Northern Virginia, an DHT recently established a Northern Virginia Division which appears to be a partial response to the transportation needs of that area. Staffing and maintaining a ninth district would cost about $860,000 annually and would require changes in commission membership and statutory allocation formulas.

Before creating a ninth district, DHT should review the boundaries of the existing eight and consider realigning boundaries to establish a Norther Virginia district which distributes counties in the existing Culpeper district more in line with workload and logical economic, political, and geographic boundaries.

Other proposed organizational adjustments include consolidating the programming and scheduling function to take advantage of cross-training of staff and relocation of the environmental quality division in recognition of its preconstruction role.

Coordination and Staffing (pp. 87 to 101)

DHT is a highly decentralized organization with field offices across the State. Decentralization promotes efficiency in the department but can also lead to coordination problems. Currently, for example, there is no clear consensus as to when central office policies take precedence over field judgements. As a result, practices which may be standard in one area are not followed in another. The roles the district engineer, resident engineer, and district preconstruction staff need to be clarified with particular attention to the status of central office policies and directives.

DHT has taken action to lay off 251 employees during 1981, and the establishment of a layoff policy is an important step in controlling cutbacks. Department officials, however, are delaying the layoff of some surplus positions until there are clear indications of department funding. Alternatives to permanent layoffs such as shorter work weeks should be considered. Department-wide manpower planning should be developed to facilitate adjusting the number and type of staff with workloads.

Inmate Labor (pp. 105 to 111)

A special study was conducted of the inmate labor program. Since 1906 DHT has used inmate labor for highway maintenance activities. The department has proposed reducing the number of inmates used daily from 1,026 to about 640 as a means of reducing the $3.8 million annual cost of the program. The Department believes that the road program reduces discipline problems with inmates and wants the program to continue at its current level.

Costs of the inmate labor program can be reduced by restructuring the work crew to eliminate one of the two DHT employees assigned to the crews. An estimated $1 million could be saved by DHT without increasing costs to the Department of Corrections. The General Assembly may wish to consider funding all or part of the inmate labor program from sources other than the highway maintenance and construction fund in recognition of the role it plays within two State agencies.

DHT is currently out of compliance with the laws governing the payment to the Department of Corrections for inmate labor. The Joint Subcommittee on Economic Productivity of the Prison Population and on the Work Release Programs should examine the language and intent of § 53-109.1 of the Code of Virginia regarding the reimbursement requirement.

Conflict of Interests (pp. 113 to 123)

During the course this study, several highway commission members resigned as a result of conflict of interest problems. At the request of the committee, a special review was made of the Virginia Conflict of Interests Act as it applies to the highway commission. Chapter VI reports staff findings and includes eight preliminary recommendations concerning administration of the statute.