essays and articles by david g allen


The Paving Cycle: A Sad Tale of West Virginia

 

Back in the 70’s, we had double-digit inflation combined with price gouging by OPEC. And we learned a new phrase—The Paving Cycle.

Whereas in normal times our roads were resurfaced every seven years, by 1979 the paving cycle had increased to 17 years. Two actions were taken to shorten the duration. First, a 5% tax on the wholesale price of motor fuel was imposed. And second, the Legislature added a line to the Department of Highways budget for Paving.

The fuel tax, by being levied on the wholesaler, was a clever ploy because the consumer never saw it posted at the pump. On the other hand, the budget line item for Paving guaranteed our legislators that they could, in effect, micro-manage the paving cycle.

In FY 1986, the Department of Highways was short on cash. Faced with spending $77M for debt service on road bonds plus increased costs to match federal aid construction, the DOH had just over one million dollars to allocate to Paving. In other words, the paving cycle soared to 350 years!

The Legislature wasn’t about to let FY 1986 pass without some sort of paving program so it transferred $9.4M from the General Fund to the DOH budget and earmarked it for Paving. Where did the money come from? From redirecting a portion of the appropriation for payments to the state employee’s pension plan. That’s right—pension money became election year pavement.

At this point, I could load my slingshot and pick off Lilliputians with ease. But it is better to focus on the macroeconomic picture than this particular snapshot.

West Virginia cannot afford the services that it commits to. This state does not have the financial wherewithal to borrow huge sums for superhighways, re-pave secondary roads every 7 years, and promise a pension to retired state workers. And this observation does not apply just to the Highway Department. Every department of state government operates beyond its capacity.

Recently, the School Building Authority approved $1,750,000.00 for the new Pickens School. Pickens is our most remote outpost for crying out loud. And people who live at outposts should expect outhouses, not plumbing.

We have far too many colleges. But try to close just one. Politics has prevented implementing a comprehensive plan for higher education such as the one that the Carnegie Commission recommended thirty years ago. Instead, both WVU and Marshall University have been forced to cut programs and staff in order to subsidize unneeded colleges. We will, if we have not already done so, redefine our higher education institutions as being mere "13th Grades" by continuing this charade.

West Virginia has a very nice system of state parks. Though a stated goal of the park system is to maximize self-sufficiency, the system annually relies on a 40% taxpayer subsidy to pay its bills. Our parks are, quite simply, a luxury.

There is the issue of payroll. Government employees are paid well. And they have been paid with scarce cash at the expense of incurring a $5 billion long-term deficit in their pension accounts.

The "Enron of pension plans", as it is known nationally, is now making clear just how dire the situation is. But there’s more. The state has deferred maintenance on every asset it owns, including the capitol and over 1,000 highway bridges. And with so little to spend, our government has not invested in technologies that would actually improve the productivity of state workers and, thus, reduce annual operating costs. The pension debt, as astronomical as it is, comprises perhaps just half of the state’s financial black hole.

If you think I exaggerate, then consider this. Gov. Wise took office in 2001 and pledged to sell all excess state vehicles. It took two years for state agencies to inventory their vehicles and submit a count to his office. By comparison, not only does FedEx know exactly how many vehicles it owns, the dispatcher can locate each one at any given moment of the day.

This, then, is the true cost of spending pension money to pave roads in an election year. It’s the difference between knowing where you are and knowing where you’re headed versus getting waylaid in Pickens, WV with aspirations for the 13th grade.

 

David G. Allen, Clarksburg, WV

David G. Allen served as Assistant Highway Commissioner, 1985-86.  "The Paving Cycle" is Part 4 of a continuing series based on "The Road to Serfdom" by F. A. Hayek and appeared in the January 16, 2004 issue of the WV State Journal.

 

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Copyright 1990-2005  David G. Allen