Inflationary prices have put the Missouri Department of Transportation millions over budget.
In his report to the Missouri Highways and Transportation Commission on Thursday, MoDOT Director Patrick McKenna said the department was roughly $140 million over budget because of rising prices and challenges facing contractors.
The department’s budget for fiscal year 2022 was more than $3.1 billion, according to the state’s Division of Budget and Planning.
MoDOT was projecting $750 million in new construction being added to next year’s Statewide Transportation Improvement Program (STIP), but current price increases have MoDOT 11 percent over budget a month before the end of the 2022 fiscal year.
McKenna said contractors are facing price escalations, labor and equipment shortages and issues obtaining materials.
“If this continues on pace, that’s going to cut at least in half what we can bring forward as new construction next year,” he said.
MoDOT programs 80 percent of its available resources on a five-year basis with the STIP, McKenna said, which allows it to bring in new projects as resources allow each year.
MoDOT’s 2023-27 draft STIP contains about $10 billion in transportation improvement projects over the next four years, McKenna said. It’s the largest STIP in state history, but the number of projects that it contains for 2027 and beyond could be less than originally expected.
“That’ll be a little disappointing next year in terms of the level of new projects coming in,” McKenna said. “That’s just what we have to deal with.”
Commissioner Gregg Smith said the labor shortage and rising costs are concerning, but inflation is impacting every business in the country. He thanked MoDOT staff for working on solutions.
MoDOT’s budget for fiscal year 2023, which begins July 1, totals more than $3.5 billion and is awaiting the governor’s approval.
Chief Financial Officer Brenda Morris said 90 percent of the budget will be spent on transportation work and projects. The rest goes to administration, refunds and fringe benefits.
The budget incorporates recent pay increases for state employees, but Morris said many employees continue to be paid “well below” market rates and the department still has significant turnover. The commission-approved market pay adjustment was not passed by the General Assembly.
The department’s safety and operations budget includes an additional $5 million to offset the rising costs of roadway materials because of inflation, Morris said.
“We expect additional adjustments will be needed in the future,” she said. “We are just not keeping pace in this area.”