CHARLESTON — Thursday’s enthusiasm over the concept of Randy’s Dream was tempered Friday as Senate Transportation and Infrastructure pondered the details.
Members learned that a drafting error led to a substantial underestimation of how much money the bill would draw from the General Fund. And they heard that the bill could harm the state’s bond ratings.
The Randy’s Dream bill, SB 522, creates the Special Road Repair Fund from two sources. It makes a one-time, $200 million draw from the Rainy Day Fund. And as drafted, it would devote 2 percent of the state severance taxes collected on coal, oil, gas and other products to the fund.
The money would be used for road maintenance, particularly core maintenance: Ditching, mowing and snow and ice removal.
Each Division of Highways district would be required to develop a maintenance plan and complete 90 percent of its maintenance projects. If it falls short, the district would have to solicit bids for outside contractors to conduct the work.
Based on the bill as drafted, the state Tax and Revenue Department estimated that the new fund would produce $9.5 million to $10 million per year for the fund.
The severance tax rate is 5 percent and Sen. Chandler Swope, R-Mercer, told members that bill sponsors’ intent was to take two-fifths of the total revenue.
Based on the most recent figures, Deputy Revenue Secretary Mark Muchow told the members that this would put about $190 million in the fund. The total projected severance tax take for this year is $476 million, but part of that is already dedicated, so about $418 million will go into the general fund.
Sending the $190 million to the Special Road Repair Fund would leave about $228 million for the General Fund.
Muchow said counties and cities that receive shares of the various severance taxes would see their shares reduced, too.
Muchow also pointed out the potential repercussions of taking $200 million form the Rainy Day Fund. There are actually two funds, A and B. Fund A has $288 million and B has $419, for a total $719 million.
State law requires withdrawals to come from A first, which would leave only $88 million in that account.
Because the state’s economy is volatile, Muchow said, bond rating agencies look for a solid Rainy Day fund when considering the state’s credit-worthiness. So a big tap into Fund A could make the agencies nervous pose challenges for future road bond efforts.
Sen. Robert Plymale, D-Wayne, said he would prefer using one-time revenues from state budget surpluses to tackle the issue, and look at it year-by-year.
Swope offered an amendment to change the amount of severance tax taken from 2 percent to 40 percent to reflect the sponsors’ intent, but it was overwhelmingly rejected.
Members did approve an amendment offered by Sen. Rollan Roberts, R-Raleigh, to authorize the Division of Highways to include ditching in any paving contracts where it’s feasible to do that.
SB 522 goes next to Finance, where senators expect that the bill’s impacts on the General Fund and the Rainy Day Fund will receive closer scrutiny.
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