THE EFFECTS OF INFLATION AND FISCAL PRESSURES ON SELECTED ENVIRONMENTAL PROGRAMS IN REGION I Analytic Center Management Division August 27, 1980 ------- PREFACE In setting out to explore the issues outlined in this study, the Analytic Center of the EPA Region I sought first to define the scope and significance of the financial problems faced by New England’s state environmental agencies. The Center then tried to ascertain how the States expected to deal with these problems. To accomplish these purposes, data was pulled together on past and present State and Federal environmental funding, and the processes and criteria used by the States to determine environ- mental priorities. The study covers environmental programs in all six New England States: Maine, New Hampshire, Vermont, Massachusetts, Connecticut, and Rhode Island. Examination of all Region I states enabled com- parisons to be made of the problems faced by large, southern, urban and smaller, northern, rural New England States. This report is based on reviews of State budget documents, EPA financial status reports that summarize State and Federal spending in EPA grant program areas, and individual meetings and telephone conversations with state officials, EPA Headquarters personnel, and the Region I staff. At this time, a high percentage of all environmental resour- ces, including EPA grants, are spent by state and local government units. At one time, it may have been assumed that the states would ultimately assume most of EPA ’s field responsibilities with EPA’s regions playing a supportive and oversight role. However, recent widespread budget trimming sentiments at federal and State levels and high rates of inflation have combined to make realization of this expectation questionable. In the past few years, the New England States have provided level or marginally above—level funding to their environmental agencies. When the effect of inflation on these dollars is considered, such funding patterns translate into major cuts for the agencies involved. These sustained cuts in valuable dollars cannot leave the operational capabilities of state environmental agencies unaffected. State agencies are likely to retrench by reducing their enforcement, permitting and/or monitoring efforts. tn the extreme, they may return previously delegated programs to EPA, and as a consequence, the agency’s success in achieving the intent of Congress may be in jeopardy. —i— ------- ACKNOWLEDGEMENTS Many individuals contributed work on specific sections of this Report. Deserving of particular recognition are the two Analytic Center staff members: Norman Willard, Attorney Advisor, who assisted with the study design, compiled data for the many charts, wrote and/or edited numerous sections of the report, and who, together with Beverly Roehrig on short—term loan from the Office of Public Awareness, prepared the Maine report; and Jane Nowak, Program Analyst, who also assisted with the original study design and produced the Vermont profile. Brian Morrison and Hasan Usmani, students at the Kennedy School of Government at Harvard, volunteered their time and talents during the Kennedy School Spring Exercise” program to prepare the Connecticut and Massachusetts profiles. On detail to the Analytic Center, thanks to Robert Thompson, Regional Council, were two summer legal associates — Janet Corcoran of Boston College Law School and John LeClaire of Boston University Law School. Janet worked on the New Hampshire study and John traced the growth in requirements of the Clean Air Act and the Clean Water Act. Gary Verdon, a summer intern from the Harvard Business School—Kennedy School Energy and Environmental Policy Program, developed the Rhode Island profile and contributed to other sections of the Report and the analytic work therein. EPA Region I is fortunate in its physical proximity to the Boston academic community. The Analytic Center sought and re- ceived assistance from faculty members at the Kennedy School of Government, Harvard Graduate School of Design, and the Fletcher School of Law and Diplomacy who provided background information on budget analysis and inflation factors. As anyone who has participated in this kind of research project and the preparation of a lengthy report realizes, it is the secretary for the Analytic Center, Joanne Greenwood, who deserves special recognition for bringing order out of chaos, typing and retyping drafts of this report. This effort would not have been possible without the continued support of Regional Administrator, William K. Adams, who requested the study and Louis F. Gitto, Director of the Management Division, who provided continuing encouragement. It is, however, the Region I States and the Region I Division Directors and staff who deserve special thanks. It is they who provided the data, received the brunt of our many questions, and made suggestions, corrections and candid comments so that the information provided in this report would be timely, accurate, and useful. Patricia L. Meaney, Director Region I Analytic Center Management Division —ii— ------- TABLE OF CONTENTS Page Preface j Acknowledgements ii List of Charts vii EXECUTIVE SUMMARY ES—i STUDY OVERVIEW BACKGROUND 1 Why do an inflation study? 1 Methodology 1 The PAC Deflator 1 Focus of the Study 2 OVERVIEW — INFLATIONARY TRENDS 2 Purchasing Power of the “Environmental Dollar” 2 National EPA Grant Awards 3 Select National and Region I EPA Grant Awards 3 Water Pollution Control 8 Evolution of the Clean Water Act 11 Water Pollution Control — Budgetary Problems as a Result of Personnel Costs 15 Air Pollution Control 16 Evolution of the Clean Air Act 18 Air Pollution Control — Budgetary Problems as a Result of Personnel Costs 20 Hazardous Waste 21 Increases in Starting Salaries for Typical 22 Positions —iii— ------- Page The Importance of Federal Funding in Support of Region I State Government Agencies 24 REVIEW OF STATE INTERVIEW HIGHLIGHTS 25 STATE STRATEGIES FOR DEALING WITH INFLATION AND FISCAL PRESSURES 27 SUGGESTIONS AND RECOMMENDATIONS 29 II STATE PROFILES CONNECTICUT Study Overview CT—i Connecticut’s Fiscal & Economic Environment: An Overview CT—i The Connecticut DEP: Fiscal Pressures CT—2 State and Federal Administration of Program Grants CT—4 Water Pollution Control CT4 Air Pollution Control CT—7 Hazardous Waste Program CT-8 Toward a Strategy for the 80’s CT—iO MAINE Background ME—i The Budget Process ME—i Overview of Programs NE—3 Air Pollution Control ME—4 Hazardous and Solid Waste ME—5 Water Pollution Control ME6 NPDES ME—6 Summary and Recommendations ME—7 -iv— ------- Page Conclusions ME—9 MASSACHU SETTS Overview — The Environmental Landscape NA—i The Commonwealth — Budget Situation MA—2 Environmental Affairs — Budget Situation MA—3 Department of Environmental Quality Engineering — General Inflationary Effects MA—3 Water Pollution Control NA6 Air Pollution Control MA—8 Hazardous Wasted MA—li The Budget Process MA12 Conclusions MA—12 NEW HAMPSHIRE Overview NH—i The Budget Process NH2 Solid Waste Management & Hazardous Waste Programs NH—4 Air Pollution Control NH—6 Conclusions NH—8 RHODE ISLAND Overview RI—i The Budget Process RI—2 Revenues R 16 Air Pollution Control R 17 Water Pollution Control R 110 Hazardous Waste RI—13 Conclusions RI—14 Appendix —v— RI—l6 ------- Page VERMONT Overview VT—i Budget Overview VT—i The Budget Process VT—3 Budget Cycles VT—4 Report on Specific Programs — Air Pollution Control VT—6 Water Pollution Control VT—7 Solid Waste Management and Hazardous Waste Programs VT—8 Recommendations VT—9 Conclusions VT—1O III THE GROWTH OF REQUIREMENTS & RESOURCE DEMANDS IN THE CWA §106 & CAA §105—FUNDED PROGRAMS G—i Bibliography B—i -vi— ------- LIST OF CHARTS Page The Impact of Inflation on Pollution Abatement and Control Expenditures 1972—1980 2 National EPA Grant Awards to State & Local Governments 3 National EPA CWA §208 Water Quality Planning Grant Awards to All Government Units and §208 Needs FT 81—84 as Projected by the States 4 Region I CWA §208 Water Quality Planning Grant Awards and §208 Needs as Projected by New England States FY 80—84 4 National EPA Safe Drinking Water Grant Awards to State and Local Governments 5 Region I Safe Drinking Water Grant Awards to New England States 5 National EPA CWA §314 Clean Lakes Grant Awards to State and Local Governments 6 Region I CWA §314 Clean Lakes Grant Awards and §314 Needs as Projected by New England States FY 80—84 6 National EPA Pesticide Enforcement Grant Awards to State and Local Governments 7 Region I Pesticide Enforcement Grant Awards to New England States 7 National EPA Clean Water Act 106 Grant Awards to State & Local Governments and §106 Needs as Projected by the States 10 Region I CWA §106 Expenditures and §106 Grant Needs as Projected by New England States FY81—84 10 Region I CWA §106 Federal & State Allocations 1972—1980 10 Clean Water Act §106 Program Requirements & Expenditures of State & Federal Monies by the Region I States 13 Federal Laws, Executive Orders and Administrative Policies that State Water Pollution Agencies Must Deal With 14 Region I States CWA §106 Water Pollution Control Expend— itures Salary and Fringe Uenefits as a Percent of Total State and Federally Funded Expenditures 15 —vii - ------- Page National EPA Clean Air Act Grant Awards to State & Local Governments 17 Region I CAA §105 Air Pollution Control Expenditures 17 Clean Air Act §105 Program Requirements & Expenditures of State & Federal Monies by the Region I States 19 Region I State Expenditures of Federal CAA §105 Grants on Salary and Fringe Benefits as a Percentage of Total State CAA 4105 Grant Expenditures 20 Region I State Expenditures of State CAA §105 Grant Match Funds on Salary and Fringe Benefits as a Percentage of Total State CAA §105 Grant Match Expenditures 20 Sanitary Engineer Percent Increase in Base Salary from 1976 to 1980 by State 22 Environmental Quality Specialist Percent Increase in Base Salary from 1976 to 1980 by State 23 Principal Civil Engineer Percent Increase in Base Salary From 1976 to 1980 by State 23 Federal Funding as a Percentage of Total Air & Water Program Funding 24 Connecticut State—Funded Expenditures of the Environmental Quality Division Department of Environmental Protection CT—14 Connecticut CWA 4106 Water Pollution Control Expenditures CT—15 Connecticut CAA §105 Air Pollution Control Expenditures CT—16 Maine Legislative Appropriations for the Department of Environmental Protection ME—lO Maine’s Total Budget Appropriations ME—il Maine CAA 5105 Air Pollution Control Expenditures ME—12 Maine CWA §106 Water Pollution Control Expenditures ME—l3 Massachusetts Budget — Department of Environmental Quality Engineering MA—4 Massachusetts CWA 5106 Water Pollution Control Expenditures MA—7 Massachusetts CAA §105 Air Pollution Control Expenditures MA—lO —viii— ------- Page New Hampshire CWA §106 Water Pollution Control Expenditures NH—b New Hampshire Solid Waste Program Expenditures NH—li New Hampshire Budget for the Bureau of Solid Waste NH— 12 New Hampshire Bureau of Solid Waste Management — Salaries Z of Total Budget NH— 13 New Hampshire Bureau of Solid Waste Management Salaries NH—13 New Hampshire CAA §105 Air Pollution Control Expenditures NH—l4 New Hampshire CAA §105 Air Pollution Control Expenditures NH—15 Rhode Island General Organization of Rhode Island State Government RI—2 Rhode Island Estimated Actual and Projected Expenditures for Environmental Control RI—7 Rhode Island CAA §105 Air Pollution Control Expenditures of State and Federal Funds RI—9 Rhode Island CAA §105 Air Pollution Control Expenditures RI—9 Rhode Island CWA §106 Water Pollution Control Expenditures RI—il Rhode Island CWA §106 Water Pollution Control Expenditures of State and Federal Funds RI-li Vermont Budget for Environmental Programs within the Agency of Environmental Conservation VT—12 Vermont Deflated Budget for Environmental Programs with the Agency of Environmental Conservation VT—13 Vermont CAA 4105 Air Pollution Control Expenditures VT—14 Vermont CWA §106 Water Pollution Control Expenditures VT—16 Vermont Solid Waste Expenditures VT17 - ix— ------- EXECUTIVE STJMI 1ARY A. PURPOSE AND SCOPE o This Region I Analytic Center study was undertaken at the direction of William R. Adams, EPA Regional Administrator for the New England States. o The working hypothesis for the study was based upon expressions of concern by state environmental agency officials to the Regional Administrator about present and projected resource conditions. In— flation and increasing program requirements, coupled with inadequate federal grants and levels of state appropriations were straining the ability of state agencies to carry Out their responsibilities ade— qua tely. o In order to better understand the effects of inflation over time on state agency resources, principal emphasis in this study is placed on the older, traditional Clean Water Act §106 and Clean Air Act §105—funded programs. Because the resource needs urgently felt by the states in the area of hazardous wastes are being filled (albeit inadequately) at the expense of traditional programs, the study also focuses on hazardous waste management at the state level. B. APPROACH * The Analytic Center undertook a literature search, consulted with economists and statisticians from educational institutions and other federal agencies, examined state and federal budget documents, grant applications and financial reports, studied the evolution of the Clean Air Act and the Clean Water Act and their associated require- ments, held discussions with EPA Region I Division Directors, program personnel and grants officials, and conducted interviews with state agency administrators, program officials and budget personnel. C. WHAT HAS HAPPENED TO THE DOLLAR ? * The dollar of 1972 is worth only 51 cents today. Prices for environ- mental “goods and services”, i.e. salaries, fringe benefits, travel, contractual services and capital goods, increased dramatically during the past decade. D. EPA NATIONAL GRANT AWARD TRENDS * Overall, national EPA grant awards (excluding construction grants) to all states grew 87% between 1975 and 1979. Expressed in constant 1972 dollars, however, the increase was a more modest 54%. During this period several significant new federal grant programs were initiated, eg. RCRA, FIFRA and Safe Drinking Water. And over these years, there were added a host of additional federal program require- ments applicable to all states receiving EPA grants. ES — 1 ------- E. WATER POLLUTION CONTROL: CLEAN WATER ACT §106—FUNDED ACTIVITIES Levels of Clean Water Act §106 grant awards to all states have remained basically constant — about $50 million a year — since 1975. Region I awards hovered near the $4 million mark during the same period. Because of this level funding pattern, inflation has hit hard at §106 monies available to support state water pollution control programs. Based on interviews with state officials, in this program area, the smaller Region I states of Maine, Vermont, and Rhode Island have suffered most from the effects of inflation. • The freeing—up of some CWA §106 resources, (an intended result of making available 2% supplemental funding under CWA §205 for state administration of the construction grants program), was considered illusory by the smal- ler states in Region I. Officials in Maine stated that by the end of 1980, nearly all of their §106 money could be applied to cover only personal service expenses of its employees engaged in traditional water pollution control activities. • The needs assessments completed by the states in 1979 reveal an enormous gap between current funding levels and those the states project they would need to fulfill their water pollution control program responsibili- ties from 1980 to 1984. • Federal requirements under the Clean Water Act have increased substan— tially, particularly with passage of the 1977 amendments. The states must do more today than before. The State water pollution control agencies, in addition to the Clean Water Act, must also respond to some 54 laws, executive orders, and administration policies that are both resource intensive and, time consuming. The states are just beginning to devote resources to these latter responsibilities as they move into the Step 1 portion of the 205(g) delegations. • The gap between resource needs and funds available that has been exacer- bated by inflation and basically level federal grant support, may not be made up by Increases In spending on the state level. Throughout the Region, state governors and legislatures are intent on limiting (or halting) tax increases, slowing the growth in state expenditures and restricting growth in the very size of agency staffs during the current period of economic hardship. F. AIR POLLUTION CONTROL: CLEAN AIR ACT §105—FUNDED ACTIVITES • Federal grants under 3105 of the Clean Air Act have Increased since 1975. The Region I states saw a 42% growth in §105 grant award levels from 1975 to 1979. In 1972 constant dollar terms (factoring in infla- tion), however, the increase was a mere 3%. The smaller New England States of Maine, Rhode Island, Vermont, and New Hampshire benefited from the new funding formula contained in the Clean Air Act Amendments of 1977. Based on interviews in Region I, the air programs in the larger industrial states of Massachusetts and Connecticut in particular are being affected by inflationary pressures. ES — 2 ------- 0 The 1977 amendments to the Act brought a marked increase in federal program responsibilities applicable to the states, most notably the new nonattainment area initiatives. At the same time, EPA adopted a more firm stance on state adherence to federal program requirements, e.g. public participation and prevention of significant deterioration (PSD) work. 0 Analytic Center interviews with state air pollution officials suggested that because of resource constraints, the states may not be able to accomplish all that their §105 grant award work plans indicate. C. SOLID AND HAZARDOUS WASTE: RCRA—FUNDED ACTIVITIES o Federal and state funding for solid waste activities is declining. De- spite considerable interest in New England in resource recovery and waste—to—energy projects, money is not available in sufficient quanti- ties to fund projects of this kind. 0 The new national focus on the hazardous waste problem is reflected in Region I. To date, both state and federal funding has been inadequate for the states to begin to deal effectively with the size of the hazar- dous waste problem in New England. Wherever possible, states have diverted staff and financial resources from other program activities i.n order to respond to this new priority. This means, as a consequence, that emphases in these other programs shIft in an unplanned fashion. U. FINDINGS 0 Fueled by inflation, constantly rising costs for such items as salaries, fringe benefits, equipment, utilities, travel and transportation are affecting the ability of state agencies to carry out all of their program responsibilities adequately. Neither federal grants nor state ap- proprIations have kept pace with inflation. Agency programs are in competition with each other for available resources, and environmental agencies are competing with important human service agencies for state dollars. o States are wary of accepting new EPA programs that are’ not accompanied by commitments of long term federal funding. They are also reluctant to expand existing programs. Thus far, it does not appear that any dele- gated programs will be returned to EPA, but delegable programs that do not carry with them incentive funding and continuing federal support will be difficult to “sell” to the states. o From the states’ perspective, the principal problem confronted is the incremental addition of new federal requirements and abrupt changes of EPA program direction. The agencies feel they can weather their current economic difficulties by maintaining the essential elements of core programs. However, EPA’s insistence that all program elements be accomplished in the depth and scope sought is simply not realistic given present (and anticipated) fiscal conditions. 1. COPING STRATEGIES States are engaging in program management and priority setting on a ES — 3 ------- regular basis in order to better allocate available resources. 0 Despite growth in the number and complexity of federal program and re- porting requirements, some states have eliminated purely administrative pO8itiofls. This means that program personnel must increasingly be used to handle administrative matters. ° Resources from traditional air and water pollution control program acti- vities are being directed into second generation environmental concerns like hazardous waste, acid precipitation, groundwater protection and energy—related activities. • Some state agencies are not hiring to capacity in order to save or redirect salary, fringe benefit, transportation and travel resources. In other states where agencies face government imposed ceilings on staff size, personal services monies are being reprogrammed into other line item areas. -. • Monitoring and inspections are being performed on a more selective basis, with attention focused on pollution sources that historically have had difficulty meeting compliance deadlines or which pose more immediate and serious threats to public health. • Reporting, planning and labor intensive activities are deliberately being allowed to slip. Instead, resources are being targeted at problems that bring more i uuediate, measurable and concrete results. • Purchases of expensive analytic equipment and staff to operate it are being deferred. J. RECOMMENDATIONS • The initiators of new EPA programs and priorities should be sensitive to the growing financial pressures on the states. • Both EPA and the states should undertake an intensivereview of exist- ing programs and priorities. Federal and state program requirements should be carefully evaluated, and their resource implications thoroughly assessed, so that their contribution to the achievement of clearly arti- culated environmental and public health—related goals can be determined. ° The Regions should step up their efforts to work closely with the states to assure that identif led national EPA and state objectives are included in work plan development. If all objectives cannot realistically be met with available resources, priorities should be established. • While recognizing the need for adequate national consistency among state program activities, EPA Regions should be given more flexibility to work with the states on an individual basis to develop creative stra- tegies for dealing with state—specific problems. • EPA and the states should examine the feasibility of Inter—state sharing of laboratory equipment and analytical capabilities, where appropriate, in order to reduce and eliminate any unnecessary duplicative capability ES — 4 ------- and/or underutilized laboratory equipment. 0 The Clean Water Act §106 and Clean Air Act §105 grant programs should be evaluated as to funding adequacy. Funding should be increased and! or requirements should be made more realistic. o The formula for Clean Water Act funding in support of state adminis- tration of construction grants should be examined as to adequacy. More attention could be given to the resource implications of the 205(g) delegation. Every effort should be made to speed up the process of obligating funds to grantees. o The needs assessments” completed by the states in the water program provides a useful resource for assessing the gap between current funding levels and resources needed to comply with program requirements. A similar “needs Survey” in the air program would be a useful vehicle to assess the disparity between program requirements and funds needed to comply with §105 requirements. o EPA and the states should work to make grants management administration, tracking and reporting simpler and more uniform. • EPA should review all of its reporting requirements so that unnecessary and/or duplicative reporting by the State can be eliminated. The states, for their part, must remain mindful of the important purpose served by reports: by aggregating individual state data, national data can be assembled. Reporting information can help all to make the case for adequate budgets and sound national policy initiatives. • Consideration should be given to making financial incentives available to states that accept delegation of EPA programs. 0 The states and the Region should regularly share appropriation informa- tion so that budget developments can be tracked on an ongoing basis. o Enactment of superfund should be a top priority. K. STRUCTURE OF THE REPORT This Report is organized in two sections. The first section presents an historical overview of national and Region 1 grant awards to state agencies and an examination of the evolution of Clean Air Act §105 and Clean Water Act §106 program requirements applicable to the states. The second section contains profiles of each of the Region I states, Including descriptions of budget processes, current program conditions, environmental expenditure patterns and a statement of state agency strategies for coping with inflation and budget constraints. The second section also contains a discussion of the growth in requirements and resource demands of the §105 and §106 programs. An appendix to the Report includes a bibliography and listing of indivi- duals and agencies that contributed information analyzed in the Report. ES — 5 ------- STUDY OVERVIEW BACKGROUND Why do an inflation study ? The Region I Analytic Center initiated its study of The Effects of Inflation & Fiscal Pressures on Selected State Environmental Agencies in EPA Region I” at the direction of the Regional Admin- istrator, William R. Adams. By the spring of 1980, the Administrator was becoming increasingly concerned about the financial condition of state environmental agencies in New England. Inflationary pres- sures on federal grant monies and on state appropriations to support state environmental programs were growing. There was concern: (1) that some state environmental program activities might be curtailed (2) that resource constraints might force some of the Region I states to return previously delegated federal programs and (3) that environ- mental quality gains previously achieved in New England could be jeopardized. Methodology The Analytic Center sought to disaggregate the problem of infla- tion in New England in order to determine its shape and dimensions. After consultations with the Regional Administrator, Region 1 Division Directors and program grants managers, the Center conducted interviews with the chief administrators and program officials in the principal state environmental agencies in New England.* Informa- tion was gathered on the budget processes of the states and their administrative agencies. EPA financial status reports and state budget documents were examined so that histories of environmental program appropriations and expenditures over the past five years could be constructed. Based on thIs information, the Center prepared individual profiles of the New England States’ environmental agen- cies. The PAC Deflator In order to analyze trends in expenditures over time, the Analytic Center used the Pollution Abatement and Control (PAC) deflators developed by the Bureau of Economic Analysis of the U.S. Depart- ment of Commerce. The PAC deflators proved to be the most valid and reliable means of expressing actual expenditures in constant 1972 dollars. Although the veil known Consumer Price Index would have supplied very similar deflators, the PAC was more appropriate for use in this study because it is based specifically on environ- mental expenditures. * The Executive Director of New Hampshire’s Water Supply and Pollu- tion Control Commission declined to participate in the study. —1— ------- Focus of the Study ‘The study focuses on the water (CWA §106) and air (CAA §105) p 01 — lution control programs that essentially have formed the core of state environmental agency efforts. Because these programs have been in place for a decade or more, they can better demonstrate the long term effects of inflation on the purchasing power of monies targeted to support state environmental agencies. State hazardous waste programs also received attention because of the emergence of hazardous waste management as a priority en- vironmental and public health issue and because of the current and anticipated effects these new programs will have on resources in traditional EPA programs. OVERVIEW — INFLATIONARY TRENDS Purchasing Power of the Dollar The following chart shows that the purchasing power of the 1972 dollar has declined to just over 51 cents in 1980 — a decline brought about by the downward pull of Inflation. The figures reveal that about half as much can be bought with today’s “environmental do1lar as was possible only eight years ago. 1$ THE IMPACT OF INFLATION ON POLLUTIOtJ ABATENE?T AND CONTROL EXPENDITURES 1972 — 1980 85 1972 1973 j97L 1975 1976 1977 1978 1979 1980 (SOURCE: ANALTYIC CENTER I, BASED ON FIGURES FROM DEPT. OF COMMERCE. BUREAU OF ECONOMIC ANALISIS) - —2— ------- National EPA Grant Awards In actual dollar terms, EPA grant awards to all states in 1979 were 87% higher than amounts awarded in 1975. In constant dollars, how- ever, the increase was a more modest 54%. One should bear in mind, too, that during this period a number of new EPA grant programs were started, e.g. RCRA, SDWA and FIFRA. The chart below shows the gap between actual and constant 1972 fed- eral grant dollars widening over time in direct relation to the rate of inflation. At the same time, inflation was eroding the value of state government appropriation dollars also going to support state environmental agenci es. 100 50 0 FY MATIONAL EPA GRft iT AWARDS TO STATE i LOCAL &OVER ( ’EKT5 (CURREP T A L 1372 COt STANT DOtJ..ARS) tIOURCI. LU& TYZC C*UTE& Z. 1*5*0 0 5 FIGURES nOR EPA SQ RUOGET OPERATIONS GROUP) •C.f.tEiiet .n ItsAts. •ro .uid . .t. pr.t.etl.. s.d othir ap.etsI sat. drt .k n s•ter p ,.1.ets. r,aovre. tSCOV$Z7 locil ILSSIICt .Z s.ststs,c. s.d •Csiita for pZ . .aLitq CO • p.ttol .ua OS eo .itg. sot tacL,d.d. Select National and Region I EPA Grant Awards The charts which follow demonstrate the effects inflation has had on National and Region I EPA grant awards for §208 Water Quality Plan- ning, Safe Drinking Water, 5314 Clean Lakes, and Pesticide Enforce- ment. 350 300 250 5 20O -J -J 150 CURRENT — — — — — — .— — e — S — — — — 1972 1 1977 1978 1979 —3— ------- NATiC AL EPA CWAE 2C5 WATER QUALITY PLANNING GRANT AW PD TO ALL GOVER ENT UNITS AND 208 NEEDS FY 81-84 AS PROJECTED BY THE STATES 1 Asauces 8½ annual rate of inflation FT 80 to FT 84 REGION I CWA 1 208 WATER QUALITY PLANNING GRANT AWARDS AND 208 NEEDS AS PROJECTED BY NEW ENGLAND STATES FY8O-84 STATES NEEDS IN 1980 3LLARS 1978 1979 1980 I, BASED ON FIGURES FROM STATES NEEDS ASSESSMENTS 1982 1983 198’4 I hATER QUALITY FY 1975’ 1976 1977 (SOURCE: ANALYTIC CENTER IBANCH AND N.E. 1’ FT 75 figure for RI of $2.3 sullen used over three year period 2 FT 79 figure does not include 1519.700 of BQ —iaaUed N.t On$l Urban Run—Off Funds 3 Includes S159,759 of FT 7S funds 4 Assuaea h 1 % annual rate of inflatiOn FT SO tø FT 84 175 150 125 100 —J 75 -J —50 25 ACTUAL $ STATE NEEDS 1 (SOURCESi ANALYTIC CENTER I, BASED ON FIGURES FROM EPA NO BUDGET OPERATIONS GROUP AND EPA SQ WATER PLANNING DIVISION) 12 11 - J -J 6 CURRENT $ 1981 EPA REG. 0? 1979) —4— ------- NATIONAL EPA SAFE DRINKING WATER GRANT AWARDS TO STATE AN LOCAL GOVERN!EWTS (CURRENT AND 1972 CO STA IT DOLLARS) 1976 1977 1973 1979 1980 (SOURCE: kNALY IC CENTER I. BASED ON FIGURES FROM EPA EQ BUDGET OPERATIONS GROUP) 1 Does net inciude special projects 2 0• 1.5 - 0.5• REGION I SAFE DRINKING WATER GRANT AWARDS TO NEW ENGLAND STATES (CURRENT AND 1972 CONSTANT DOLLARS) - CURRENT $ F’ L76 ! 77 1 79 1 8O (SOURCE: ANALYTIC CENTER I, BASED ON FIGURES FROM EPA REC. I WATER QUALITY BRANCH) l• Does not include surface iapounda.nt funds available only in l 7I. special projects or U.1.C. 30 25 v 2C -J 1O 15 CURRENT $ 1972 $ 0 U, -J -j ------- NATIONAL EPA CWA 314 CLEAN LAKES GRANT AWARDS TO STATE & LOCAL GOVER .ENTS (CURRENT AND 1972 CONSTANT DOLLARS) 15 1.URRENT S 10 1972 5 5- 1 I F? 1976 1977 1978 1979 1980 (SOUPCL ANA .YTIC CENTER I. BASED Oil FIGURES FROM EPA SQ BUOGE OPERATIONS GROUP) REGION I tWA 1 314 CLEAN LAKES GRANT AWARDS AND 314 NEEDS PROJECTED BY NEW ENGLAND STATES Fl 80—84 1984 (SOURCE: ANAL!TIC CENTER I, BASED ON FIGURES FROM EPA REGION I AND EPA IQ BUDGE OPERATIONS GROUP) C,, -J E 1$ 0. -J . 0. 0. CURRENT $ 0. Os \_———1972 $ STATE NEEDS IN 1980 DOLLARS F? 1976 1977 1978 1979 1930 1981 1982 1983 1 Figures incomplete for FT $0 and FT Ii 2 Assumes inflation rate of 1.51 ------- NATIONAL EPA PESTICIDE ENFCRCE ENT GRINT AWARDS TO STATE AND LOCAL GOVERNMENTS (CURRENT AND 1972 CONSTANT DOLLARS 12 10 0 FY1977 1980 (SOURCE: ANALYTIC CEN ER I . BASED ON FIGURES FROM EPA HQ BUDGET OPERATIONS GROUP) REGION I PESTICIDE ENFORCE1IENT GRANT AWARDS TO NEW ENGLAND STATES 0.1 0 FY1977 (SOURCE: ANALYTIC CENTER. BASED OK FIGURES FROM EPA REG. I PESTICIDES BRANCH) C,, - -J 8 6 CURRENT S 2 1972 S 1978 1979 0.5 0.4 (CURRENT AND 972 CONSTANT DOLLARS) O.3 -J CURRENT 0.2 S 1978 1979 —7— ------- Water Pollution Control In the area of traditional water pollution control activities (ex— chiding construction grants), national EPA funding to the states under Clean Water Act §106 has remained comparatively steady between $40 to $50 million from 1975 to the present. As the charts on page 10 indicate, Region I grant expenditures by the New England States have also, stayed fairly even at $3.5 to $4 million a year. Inflation has had dramatic effects on these level funding patterns. In constant 1972 dollars, Clean Water Act §106 grants to New England states were 152 lower in 1979 than they were in 1975, the peak year of purchasing power. State appropriations for water’ pollution acti- vities also declined 19% from 1975 to 1979. Yet, as the Clean Water Act §106 graphs indicate, the states project a need for twice current funding amounts to carry out program requirements through 1984. On the basis of interviews with New England state agency officials, it is apparent that the smaller states of Maine, Rhode Island and Vermont seem to be particularly hard hit by the fiscal squeeze in the water pollution control area. Salaries, fringe benefits, tra- vel, rents and energy costs have increased. Many state officials voiced concern about the impact of fiscal pressures on their labor- atories: more sophisticated and expensive laboratory equipment is needed to meet EPA standards for sample analysis, and greater capa- city is needed for exotic toxics analysis of surface and ground— waters in all New England States. Without increases in §106 funding, basic program elements such as ambient water quality monitoring programs will be severely curtailed. All of the Region I states receive or will soon receive Clean Water Act 205(g) funds to administer the construction grants program. The infusion of 205(g) monies to the states should provide short term relief to traditional water program activities by freeing up §106 monies formerly devoted to municipal facilities construc- tion activities. In the longer term, however, it appears that 205(g) monies will not be available in sufficient quantities to alleviate the projected financial squeeze on the states’ §106 programs. In all but one New England State, it appears that 205(g) alloca- tions will be sufficient to cover construction grants management needs at least through F? 1983. Among all of the Region I states on an aggregate average, surpluses will be the rule through 1983. In that year the level of Region I surplus will be on the order of $3.8 million. Vermont, on the other hand, projects a deficit of 205(g) funding of nearly $450,000 by 1983. For two reasons, however, the surpluses will not afford signifi- cant relief to resource—pressed state §106 programs. —8— ------- First, the New England States are carrying 205(g) surpluses in part to serve as insurance against the risk of possible federal with- drawal from this funding program following full delegation to the states. Second, there are significant restrictions on the use of 205(g) monies for activities other than those connected directly to municipal facilities construction management. The Clean Water Act stipulates 205(g) funds can only be used for activities under sections 402, 404 and 208 of the Act. It should be noted that EPA will approve limited transfers of 205(g) monies Out of construction grants management activities only when a state demonstrates that there has been substantial delegation of the construction grants program, and that the state program will not experience a shortfall in resources needed to adequately administer the municipal facilities program. Even if the states were allowed to direct surplus 205(g) monies into §106 program activities, they would be unable to meet their long term §106 needs. By 1983, the Region I states project §106 resource need levels at nearly $7.8 million. If §106 grant levels remain constant at the $4 million level, as they have since 1975, and even if the Region I states were authorized to pour their entire 1983 205(g) projected surpluses into §106 activities, they would still experience §106 resource shortfalls. Thus, levels of 205(g) monies made available to the states following delegation, while substantial, will not solve the financial pinch being felt in the state §106 programs. —9— ------- NATJO AL EPA CLEAN WATER ACTI 106 GRANT AWARDS TO STATE & LOCAL 6O.’ER .ENTS A .;0 106 NEEDS AS PROjECT BY THE STATES (CURRENT AND 1972 CONSTAIiT DOU..ARS 120 110 100 90 80 70 60 40 -J _ 30 20, 10 0, FY 1975 1976 1977 1978 1979 1980 1981 CIouacz . au z.iiic cr* zi i. Ou PITURtO r io, c , 1’ Lisu... $5 1 •a. ,gA fit. of tafl.t o. ST Ii to PT $4 kc!1I I t1 WAT P _UiTI c .T x MO U% tJ P T .3S CJjI rv * U LMO STAlES FY s - M 515TE5 I S II 1 O XLL a . 3 2 a 1 3 1 I . IS a I.. .. PT is ,. Sia .....l ii. if I.ft.*$.. PT 5$ IS PT II Cos . i.4 I.s S ,. Ij. ,.$ p... 1 . , P 54 .5 ol •a S . STAR Q 1T $ Q IT $ STAlE t4 1172 $ 1c7 $ •1 IN 1980 DOLLARS” OJRRE’(T $ 1982 1933 1984 •UDGZ? OPCJAfZQ sa$ iOUrp 0 111 !FYA & STATE J!CAT1 $ 1S2 .L ) 1972$ $ STATE AJ 5_ — s STATE A. a 7 1S73 5 ’S 5’E 1 tSSS 4.1 laI . ...I .4 01 1 q..’i. . t&.. .1 p..i Iss I .$... I (000561. i04 Z?ZC 61411$ I. $*4$$ 0$ 141 10411$ Op LIOSOs I 14ffI StYli ic —10— ------- Evolution of the Clean Water Act Clean Water Act requirements have increased substantially since enactment of the Clean Water Act in 1972. Although the basic program categories contained in the §106 program have not changed significantly, requirements within these categories have grown in scope and complexity, particularly with passage of the 1977 amend- ments to the Act. A significant expansion of §106—funded requirements has been in the area of toxic pollutant control, mandated by NRDC v. Train , (D.D.C. 1976) and reflected in the 1977 Amendments. [ Tox1csJ has changed from a relatively minor Water Act specialty to the driving force behind the Act,* and has imposed additional responsibilities in nearly all state water program activities. These responsibilities will begin to take on truly significant proportion in 1980 and beyond. EPA has created additional demands on state agencies by emphasizing requirements which, although in effect prior to 1977, were not often stressed by EPA. For example, non—point source management activities such as groundwater protection, virtually ignored in 1976, are now high priorities. EPA today is more active in encouraging the dele- gation of programs such as dredge and ff1]. permitting. The agency has also expanded and assigned greater importance to such long- standing program activities as public participation and emergency response. It should be noted, too, that no federal requirements in existence prior to 1977 have been eliminated. The chart on page 13 outlines the important growth areas of §106 funded activities applicable to the states, and state and federal resource expenditures associated with them. As noted, the overall growth in expenditures has been moderate, from $8,913,471 and 483.5 work years expended in 1976 to $9,620,111 and 512.9 work years in 1979. Reductions in point source permItting — (partly due to five year permitting cycles) — and enforcement occur as states are unable to maintain 1976 expenditure levels. Meanwhile, funds have shifted to areas such as monitoring and non—point source management in re- sponse to new EPA requirements and initiatives. Soon the states will have to devote more resources to enforcement and permitting work as toxics limits are added. The states are thus unable to maintain existing levels of expenditures across the board and still respond to shifting priorities. Another category of Federal responsibility that state water agencies must address and comply with consists of 54 laws, executive orders, and administrative policies (see list on page 14). Douglas Costle, in his statement of November 1, 1979 to the House Subcommittee on Oversight and Review stated, “Fulfilling the applicable requirements *Arbuckle, Gordon T., et . a]., Environmental Law Handbook , Government Institutes, Inc., Washington D.C., 1978, p. 138. — U— ------- resource intensive and time consuming for states and local govern- ments attempting to construct needed treatment works.” The Region I states are just beginning to realize the scope of these responsi- bilities as they move into the Step 1 portion of the 205(g) delega- tion of the construction grants program. In complying with these requirements, difficult substantive issues often surface and make demands on state agency resources. —12— ------- CLEA N WATER ACT S 106 PROGRAM REQUIP.E NTS S E ENDITURES OF STAT! S FEDERAL MONIES IT TEE R.ECION I STATES Adnirtistration Monitoring ambient core effluent compliance irttenstve surveys siting parameters 235,300 11.78 11,210,0671 61.95 I_____ I ___ f8,9I), 470I484.1 ( Adnirzistratio Monitoring ambient core effluent compliance intensive surveys siting reduced toxics (77) ‘quality assurance (77) ‘expanded parameter. (77) STCRM & reporting reqs.(77) •emergency response (77) Enforcement litigation in.. pent ions querterly reports (77) pretreicment S toxins (77) .mergezicy response (77) Non—Point Source Mgmt . implement 208 plan agri— S silvi—culture stressed after 1978 ‘groundwater protection Point Source Permitting support EPA NPDES (vT S CT) ‘pretreataent Public Participation Municipal YacLlitles Constr. Water Quality Planning a. Water Quality Standards revise triennially was teload allocations •toxics parameters B. Water Quality Management 305(b) reports continuing progress plan work program submittal Stat./!PA agreements (79) •emergency response (77) ‘state strategy rpt. (79) plan (303(e)/208 PS) Training & Development Other REGION I FEDERAL & STAT! I PROGRAM 1 ISCAI , ACTIVITY TEAR 1976* Resources Expended lWork Dollars ‘years PROGRAM FiSCAL Resources ACTIVITY Expended TEAR 1979 o rk— I Dollars Iveara 1,657,153 1,113,900 993,368 392,218 1,457,741 130,035 937,750 763,936 87.90 70.70 57.75 23.40 79 • 81 6.47 49.6 34.78 Enforcement litigation inspections Non—Point Source Mgmt . implement 208 plan Point Source Permitting support EPA NPDES delegated to VT & CT Public Participation Municipal Facilities Constr. Water Quality Planning a. Water Quality Standards revise triennially was telo.ad allocations B. Water Quality Management 305(b) reports continuing progress plan work program submittal 303(e) basin plans 208 plan (point sources) Training S Development Other REGION I FEDERAL & STATE 1,588,210 105.70f 1,877,450 95.70f 723,4581 36.30 1f I . I I . 809,081 41.601 I I I I” I I 690,3761 34.001. I I: I I 189,8751 11.551. I I 1.713,5281 96.351 I I’ 449,8371 27.001 418,6391 21.521 11,139,637 43.20 19,620,111 ! 512.92 (Source: Analytic Center I, based on figures from Financial Status Reports) *c rreczed for 3 quarter fiscal year for federal 5106 grants FY76 ‘Denotes new requirement ------- FEDERAL LAWS, EXECUTIVE ORDERS- AND ADMINISTRATIVE POLICIES THAT $TATZ WATER POLLUTION AGENCIES MUST DEAL WITH TOTAL: 34 National Historic Preservation Act of 1966 Archaeological and Historic Preservation Act of 1974 Civil Rights Act of 1964 Executive Order 11246 Equal Employment Opportunity Executive Order 11988 Minority Business Enterprise Clean Air Act Clean Water Act Coastal Zone Management Act Davis-Bacon Act Endangered Species Act Fish and Wildlife Coordination Act of 1958 Fish and Wildlife Improvement Act of 1978 Flood Disaster Protection Act of 1973 National Flood Insurance Act of 1968 Executive Order 11988 Floodplain Management National Environmental Policy Act Executive Order 11990 Protection of Wetlands Uniform Relocation Land Real Property Acquisition Policies Act Resource Conservation and Recovery Act of 1976 Safe Drinking Water Act Wild and Scenic Rivers Act Age Discrimination Act of 1973 Soil and Water Resources Conservation Act of 1977 Toxic Substances Control Act (1976) Rehabilitation Act of 1973 Historic Sites, Buildings and Antiquities Act of 1935 Marine Protection Research and Sanctuaries Act of 1972 Rivers and Harbors Act of 1899 Solid Waste Disposal Act (1973) Water Resources Planning Act (1965) Federal Power Act (1935) Incergov.rnaental Cooperation Act of 1968 Antiquities Act of 1906 Federal Insecticide Fungicide and Rodenticide Act (1973) Marine Mammal Protection Act of 1972 Noise Control Act of 1972 Bridge Act of 1906 General Bridge Act of 1946 Contract Work Hours end Safety Standards Act (1969) Copeland (Anti—Kickback) Act (1969) Hatch Act (1967) Appalachian Regional Development Act (1969) Consolidated Farm Rural Development Act (1973) Demonstration Cities and Metropolitan Development Act Intergovernmental Cooperation Act of 1966 Housing and Urban Development Act of 1970 Public Works and Economic Development Act of 1965 Local Public Works Employment Act of 1976 Executive Order 11296 Flood Hazards Executive Order 11593 Protection of the Cultural Environment Executive Order 11738 Utilization of Facilities on EPA List of Violatin ; Facilities Executive Order 11914 Non—Discrimination with Respect to the Handicap s ad in Federally Assisted Programs Executive Order 12114 Environmental Effects Abroad of Major Federal tctioms Presidential Memorandum on Environmental Quality and Water Resources Management, July 12, 1978 —14— ------- ‘ ater Pollution Control — Budgetary Problems asa Result of Personnel Costs Many state officials stated that inflationary effects were felt most acutely in the area of personnel and fringe benefit cost increases. The chart below shows the growth of personnel costs as a percentage of total federal and state funded expenditures for water programs in Region I states. Of the states participating in the study, only Vermont reported a lower percentage expenditure for personnel costs in the last re- porting year compared to the first. In contrast, Massachusetts’ personnel costs as a percentage of total expenditures increased between 1976 and 1979 by some 21.5%. The figures reveal that between 1977 and 1979 (the only tIme frame for which records were available from the five reporting states), personnel cos:s as a fraction of total expenditures have been rising. The Region I average total percentage was 72.8% in 1979, but three states showed percentages exceeding 80% in the same year. REGION I STATES** CWA §106 WATER POLLUTION CONTROL EXPENDITURES SALARY AND FRINGE BENEFITS AS A PERCENT OF TOTAL STATE AND FEDERALLY FUNDED EXPENDITURES w r ci I EftO STATE Ffl.S77 ‘r ‘76 ‘a Th au . cs . LI. • PE.’ I*P9(1 S 1E .T M .LUfl ( T L P flC1PATE ‘79 V I. —15— ------- Air Pollution Control In Region I, EPA Clean Air Act §105 funding increased from 1975 to 1979 by some 42% in actual dollars. This figure includes a signi- ficant rise in 1978 over previous levels for Maine, Rhode Island, Vermont, and New Hampshire with the incorporation of a new funding formula in the 1977 Amendments*. In 1972 dollars, however, federal 4105 grant monies rose only 3% between 1975 and 1979. The gain in state expenditures In 1972 dollars for air pollution control was only 10%. Those states which benefited from the new funding formula charac- terized their present budget situations as manageable. However, both Connecticut and Massachusetts are operating programs on what they describe as subsistence budgets. These larger states stressed that the imposition of additional and expanded program requiremens such as the I&M program, CO hot—spot monitoring, PSD, lead SIP’s, and TSP aggravated their otherwise manageable financial situations. All states voiced the same complaint. Without more federal assistance, monitoring activities will be cut back and paperwork will be allowed to slip. * The Clean Air Act Amendments of 1977 included new language estab- lishing a minimum state share for CAA §105 grant monies of 1/2 of 1 percent of the total grant monies available to all states. ------- NATIONAL EPA CLEAN AIR ACT GRANT AWARDS TO STATE A D LOCAL GOVERNMENTS 1 100 (CURRENT AND 1972 CONSTANT DOLLARS) 50 1972 $ 30 20 10 r 1975 1976 1977 1978 1979 1980 (SOURCE: ANAlYTIC CENTER I, HASED ON FIGURES t HOM EPA EQ EUDGET OPERATIONS GROUP) 1. oo.a not include $50 aillion for planning grants, CO and petroleuc OX control REGION I CM §105 AIR POLLUTION CONTROL EXPENDITURES ( CURRENT AND 1972 CONSTANT DOLLARS ) FEDERAL-CURRENT $ STATE-1972 $ 0 1*2* FY1975 1976 1977 1978 1979 (SOURCE: ANALYTIC CENTER I, EASED ON FIGURES FROM EPA FINANCIAL STATUS REPORTS) 1’ New award forauls ir creas.d grants to so.e N.E. states 2 Corrected for S quarter fiscal year (or federal grants C,, 5 3 C , , -J -J 2 STATE-CURRENT $ _ 1 DERAL_1972 $ 1 —17— ------- Evolution of the Clean Air Act The 1977 Clean A r Act Amendments brought a significant increase in federal program requirements applicable to the states. Along with these requirements came new resource demands and a more firm EPA stance on state compliance with all federal programs. Not only were core elements of the 1970 Act retained, but several new and sanctionable requirements were added, notably the Part D non— attainment area regulations. The chart which follows traces the growth of program requirements and illustrates their impact upon dollar and work year expenditures in Region I states both before and after the 1977 Amendments. Dur— jag the early years, the states had only to comply with state imple- mentation plans (SIP) requirements, such as devising compliance schedules and conducting monitoring and enforcement activities against violators. Federal guidelines for monitoring and modeling were not comprehensive. EPA did not push hard on the states to undertake mandated activities. Between 1970 and 1977, the federal government added several new requirements such as Prevention of Significant Deterioration (PSD), offsets, and indirect source review (the latter suspended in 1975). By 1976, Congress felt that stronger medicine was needed to combat air pollution. The 1977 Clean Air Act Amendments represented an important addition of new requirements and a fundamental shift of program emphasis. The most significant 1977 additions were found in Part D of the Amendments, which mandated programs such as InspectIon and Mainten- ance (I&M) and Transportation Control Measures (TCM) as part of the non—attainment plans. Moreover, the 1977 Amendments added a new twist: Congressionally authorized sanctions could be imposed against recalcitrant states. EPA also prescribed costly and more uniform controls for state modeling and monitoring activities in an effort to upgrade data collection. Finally, since 1977, EPA has assumed an aggressive posture in encouraging programs such as PSD and public participation. The chart which follows chronicles the relationship between growth in program requirements and resources expended in Region I. Unfor- tunately, no state needs assessment has been completed to demon- strate specifically the work years needed by a state to fulfill all EPA requirements. But the chart does shows significant increases in all three major program areas — planning and engineering, en- forcement and monitoring — from 1976 to 1979 and demonstrates EPA’s air program is far more demanding and resource intensive today than it was prior to the 1977 Amendments. —18— ------- Administration 11,007,039 Planning I Engineering compliance schedules emission limits emergency plan periodic reports intergovernnentaJ. cooperat. notices and hearings update inventories long term maintenance new source review (73) TCY’s [ not done] indirect source review (73) [ suspended in 1975] Enforcement ins pec tion litigation offsets (76) permitting NSPS & NESRAPS delegated to 5 States 1975—1976 Monitoring quart’ ly, semi—annual end COS reports siting regulations Planning / Engineering Administration-merged into categories below in 1979 financial Status rpts. _______________________ 2,926 ,2891127.70 compliance schedules emission limits emergency plan periodic reports intergovernmental cooperat. I notices and hearings I update inventories long term maintenance ‘new source review expands ‘fee system established operating permits I ‘PSD expands (77) ‘more sources & pollutants I ‘VT & ME take delegation submit and revise SIP’s I ‘non—attainment SIP’s (77) ** ‘lead SIP’s (77) I ** plan & implement I & M (77) ** ‘plan & implement TCM (77) 1 ‘public particip. & inform. (77)** ‘interstate abatement (77) I ‘crc’s for VOC sOurces (77)I ** ‘fugitive dust program (77)1 • ‘TSP, SO 2 strategies (77) I ** ‘develop RACY (77) I ** ‘socio—economic analys. (77)! * Enforcement inspect tons litigation offsets permitting NSPS & NESMAPS — RI •anti—temnering (77) Monitoring quart’ly, semi—annual and expanded CDS reports NAMS & SLAMS regs. (77) ‘quality assurance (77) ‘non—attainment monitoring ‘CO hotapots TOTALS _________ ______ REGION I FEDERAL & STAIt (federal grants) CLEAN AIR ACT SlOS PROGRAM REQUIREMENTS & E ENDITURES OF STAT! & FEDERAL MONIES BY TEE R.EGION I STATES ?ROGRA.M FISCAL Resources AcrivIr! I Expended TEAR. 1976 I I Jork— I Dollars ‘years PROGRAM FISCAL ACTIVITY TEAR 1979 Resources Ex,ended IWork Dollars Iyears PSD planning (74) submit and revise SIP’s 60.30 1,273,187 59.87 1,673,727 89.10 1,205,431 77..90 in 1978 2,732,559 1101.50 2,245,927 113.60 ** 7,904,775 1342.80 1 4,941,149! TOTALS REGION I (federal (Source: FEDERAL & STAT! 15,159,404 ,287.20 1 grants) I3,221,130! I I I I Analytic Center I, based on figures from Financial Statue Rept’s & Grant Applications) *Year of enactment given only for post—1970 imposed requirements **tJ note$ requirement sanctionable by EPA •Denotes new requirement —19— ------- Air Pollution Control — Budgetary Problems as a Result of Personnel Costs A review of CAA §105 expenditure figures by expense category shows a general increasing trend for salaries and fringe benefits as a percentage of total expenditures. However, as state officials sensed, personal service increases affected §105—funded programs less than §106—funded programs because of the large infusion of §105 grant monies into the Region in 1978 and 1979. While the federally funded expenditures (Fig. 1) show the constant pressure of increasing personnel costs, state funded expenditures (Fig. 2) demonstrate clearly that personnel costs have absorbed an ever—growing share of total costs. Total state funded personnel expenditures climbed from 82Z in 1975 to 86Z in 1979. At 86Z in 1979, further inflationary increases in personnel costs for state monies promise to all but exclude expenditures for non—personnel— related budget items. Figure 1 Region I State* Expenditures of Federal CAA §105 Grants on Salary and Fringe Benefits as a Percentage of Total State CAA §105 Grant Expenditures YEAR TOTAL EXPENDITURES Z OF TOTAL GRANT 1975 $ 940,940 56 Z 1976 1,103,419 63 1977 1,227,415 65 1978 1,439,142 58 1979 2,034,023 61 Figure 2 Region I State* Expenditures of State CAA §105 Grant Match Funds on Salary and Fringe Benefits as a Percentage of Total State CAA §105 Grant Match Expenditures YEAR TOTAL EXPENDITURES Z OF TOTAL MATCH 1975 $1,056,098 82 Z 1975 1,063,574 82 1977 1,112,660 82 1978 1,180,349 84 1979 1,733,276 86 *Figures for Connecticut are not included because of aberrant CAA §105 Federal grant award funding pattern. In the early to mid— 1970’s, Connecticut received half of Region I ’s §105 funds. —20— ------- Hazardous Waste All of the Region I states intend to apply to EPA for interim auth- orization of their hazardous waste programs, but state officials remain uncertain whether the funding from all sources will be ade- quate both for program administration needs and for necessary site cleanup work. Hazardous waste is a politically visible issue that is generating concern in all the Region I state legislatures. Funding for hazar- dous waste staffs, however, is likely to be at the expense of other environmental programs, at least in the short run. State agencies are also looking to EPA for RCRA funds to help in paying for needed positions. Maine’s current three person staff is funded under a RCRA grant with a 20% state match. New Hampshire relies on RCRA monies to fund several staff positions and on a tech- nical assistance panel to assist in the development of necessary regulations. Some New England States are likely to provide additional funding for hazardous waste site cleanup operations. Connecticut, New Hampshire and Massachusetts have already done so. In Rhode Island, where an estimated $3 million is needed for the cleanup of uncontrolled sites, a special bond issue referendum will be placed before the voters. All Region I States are anxious to receive more federal assistance and therefore strongly support passage of Superfund legislation. —21— ------- Starting Salaries for Typical Positions The followir g illustrations show percentage increases in minimum base pay rates for three civil service positions common to all state environmental agencies. The first two, Sanitary Engineer and Environmental Quality Specialist, represent entry level posi- tions. The third, Principal Civil Engineer, requires work experi- ence. The percent total increase in minimum salary from 1976 to 1979 for each sample job positon is given by state and regional average. Although salaries increase significantly each year, there is Signi- ficant variance in growth. Rhode Island shows the least growth in salary for the Sanitary Engineer position at a rate roughly one—third of the New Harnpshire’s growth rate which topped other states. These rates translate into a 5.1% annual compound average for Rhode Island and a .-4.2 average for New Hampshire. The range of increase for the Environmental Quality Specialist dif- fers considerably from the Sanitary Engineer. While the total in- crease of the low, i.e., Verrnont, again stands at roughly one—third of the high, i.e., Maine, the average compounded rate of annual increase for Vermont of 7% measures more than one—half of Maine’s 13.5. The regional average is 9.5%. The salary for the experienced Principal Civil Engineer rises little each year compared to the two entry level positions. The state of lowest increase for the position, Massachusetts, averages only -P.6% and the state of highest increase, Connecticut, averages only 12%. The regional average is a mere 6%. SANITARY ENGINEER PERCENT INCREASE IN BASE SAL?,RY FROM 1976 TO 1979 BY STATE I I $1S,IflS n9( j L - - - L IS4ILZ yi$1L90 ( : AIi’g.yTlc 1 M.SC I £TATES) .1PC .. 1 1.14. 111. O4T I . —22— ------- t 1 T L uri S ZQST Ifc IN EASE F 1 To 1 ( x : * 4Q.YflC TER L EASED L OFFI OF P€. P 9CP L CML EM ’EE wr Dt ASE IN PASE SALARY F 1976 To 1 ) BY STATE P S. $12 1*4 $ l3, 16 3L N.H. 1.1. V i i. G1 4 I AVG. 104 CT S3, i 1 1 RftIFL L ,. ( x : AMLYTIC 4T 1, B.&SED 4 !L&P L OFF1 PE I€. PV G €NT) H.H. R.I. VE ’tx (T REGi 4 I ksG. 44IGH riioi CT t 1 (LcW $77 (u yr $1O, 57, W I’ —23— ------- The Importance of Federal Funding in Support of Region I State Envi ronnent Agencies The importance of Clean Air Act §105 and Clean Water Act §106 grant funding to Region I states cannot be understated. The allocation figures for program grants indicate that CAA §105 funding now repre- sents 64.32 of total appropriation for state air programs in Region I. This compares to a 40.5% average of federal share for state air programs outside Region I. Clean Water Act 4106 funding to Region I state water programs is higher (40.0%) than the average for all other states (34.4%); however, the difference between Region I average and the average federal contribution for all other states is only 5.62. FEDERAL FUNDING AS A PERCENTAGE OF TOTAL AIR & WATER PROGRAM FUNDING Range Average Air* Region I States 61.92—73.9% 64.3% All Other States 19.02—76.5% 40.5% Wa te r** Region I States 15.62—62.1% 40.0% All Other States 15.62—82.12 34.4% *Air figures represent FY ‘79 allocations **Water figures represent F? ‘80 allocations —24— ------- REVIEW OF STATE INTERVIEW HIGHLIGHTS The forces of inflation are severely eroding re- sources available to support state agency program efforts: costs continue to push upward; salary and fringe benefit rates have grown; rent, travel, equipment and supply prices have risen; and expendi- tures on energy—related items such as heat, electri- city and transportation have sky—rocketed. As a consequence of these conditions, states are wary of accepting new programs and are reluctant to expand existing programs. 0 All Region I states are attempting to limit the growth of state government spending. The Governors of Maine, Vermont, and New Hampshire have pledged not to increase state taxes. In Connecticut and New Hampshire, the political climate remains unfavorable to adoption of state income taxes. If these conditions continue, the effects of inflation on agency programs will be exacer- bated as the the rate of state expenditure growth slows. 0 While in general the New England governors and legis- latures are not involved in program priority setting, they do have input into the process through careful scrutiny of agency requests for additional staff, tra- vel funds, and capital purchases. Proposed adoption of new agency programs will be subjected to intensive review. Because they face fiscally conservative legislatures which are resisting growth in the size of state government, a difficult burden Is placed on the environmental agencies to prove that more staff or new programs will contribute immediately to environmental Improvement and direct public health benefits. 0 In the Region’s smaller northern states of Maine, New Hampshire and Vermont, program administration is just barely manageable given resources currently available. Many administrative positions have been eliminated, and these functions now must be performed by program personnel. This deliberate stretching of staff re- sources necessarily takes time away from actual pro- gram responsibilities. Agencies in these states, in particular, can be expected to have difficult times in the very near future. As is well known, there has been a dramatic shift in public attention in recent years away from tradi- tional air and water pollution control programs to new areas of concern: hazardous waste management, pro- tection of groundwater, and energy—related matters. State agency personnel are being shifted to handle these new problems at the expense of older programs. In some cases, hazardous waste staffs are being formed —25— ------- with personnel who had worked in solid waste manage- ment, in oil spill prevention and cleanup, and in air and water programs. Where they exist, groundwater protection programs are being handled by personnel who either worked in state S208 programs or in traditional water pollution control programs. In the larger New England States of Massachusetts and Connecticut, more time is being spent on coal conversions, synfuel pro- posals and other energy—related air pollution control activities. In short, resources are not coming from program surpluses, but rather from program areas which states consider to be of lesser importance. 0 The present shortage of funds and the prospect of re- duced emphasis on solid waste at the federal and state levels suggest that hard times are ahead for state solid waste programs. Federal funding for solid waste programs is decreasing, and the states are reluctant to pick up the tab. Many states are diverting solid waste per- sonnel and funding into more urgent and visible hazar- dous waste management. More state and federal funding for hazardous waste is anticipated. o The most recurrent theme heard in Analytic Center visits to the states was not that any one EPA program or priority was responsible for the severe resource pinch felt by the agencies. It was, rather, the incre- mental addition of new federal requirements, the new insistence by EPA that the states comply with old and new requirements, plus mid—course changes of approach on the part of EPA that created hardships. On a cu- mulative basis, these additions and changes were the most painful and frustrating from a state resource standpoint. Particular distress was expressed over the fact that the federal government was not support- ing new demands with additional funding. —26— ------- STATE STRATEGIES FOR DEALING WITH INFLATION AND FISCAL PRESSURES In response to the pressures of inflation and resource constraints, the New England States are intensifying their program priority efforts. They are focusing available resources on the more short term aspects of environmental quality problem response and the immediate protection of public health at the expense of longer term activities. 0 Nearly all of the Region I states have institution- alized annual ZBB—type program priority setting to cope with the problem of resource scarcities. While informal discussion of program priorities takes place within the New Hampshire and Connecticut environmental agencies, Maine’s Department of Environmental Protec- tion assembled a team of management experts from the University of Maine to review all of the agencies’ activities, and an annual review of priorities will be undertaken by agency personnel. The Massachusetts Department of Environmental Quality Engineering is pre- paring a comprehensive management study with the assis- tance of outside consultants. 0 Agencies will carefully evaluate labor intensive ac- tivities to determine what contribution they make to direct environmental quality improvement. Reporting requirements are being de—emphasized and delays can be expected. Long term planning will suffer and SIP— related work may well be untimely and/or of poor quality. Agencies are cutting back on travel in order to stretch resources. Some agencies have had their mileage allow- ances reduced by gubernatorial order. Expanded moni- toring and inspection requirements are taxing limited staff and laboratory capabilities. The stat.es are be- ginning to conduct monitorIng and inspections on a more selective basis. They are focusing their efforts on sources that historically fail to meet compliance sched- ules and are also reducing the frequency and thorough- ness of the inspections that are made. In doing so, the states are resisting federal directives to visit all major pollution sources on a regular basis. 0 Agencies are choosing to engage in activities that show measurable, concrete and immediate results in order to demonstrate the importance of these activities as a part of overall state government operations. There is con- siderable resistance in some Region I states to adopting state Prevention of Significant Deterioration programs despite the availabliity of federal incentive monies. Those states which have not taken on NPDES are reluctant to do so because no additional federal funds are avail- able to alleviate the costs of its administration. The §106 grants are regarded as an entitlement and do not take into account the fact that some states have taken on NPDES and others have not. —27— ------- o Many states complained of the high purchase and opera- ting costs of sophisticated monitoring and other analy— tic equipment. They are also concerned about the cost of paying highly trained personnel to operate the equip— ment. For these reasons, some state have delayed sched- uled equipment purchases or are insisting that EPA pay for them. • As a means of responding to pressure from EPA, elected officials, the public, and their own sense of priorities, some state agencies have transferred existing staff from traditional air and water pollution duties into new priority program areas, particularly hazardous waste man- agement. As a consequence, the traditional programs suf- fer. Some officials complained of declining public in— erest in, and support for, the more traditional solid waste and air pollution activities. This strategy of resource shifting will continue if funding for the new program areas does not increase fast enough. • In some states, agencies are not hiring to capacity in order to stretch available funds. A loose hiring freeze is in effect in Maine and all replacement positions in Massachusetts must be approved by the legislature. Al- though this means greater burdens are placed on existing staff, the agencies are saving on salaries, benefits, and travel expenses. —28— ------- SUGGESTIONS AND RECOMMENDATIONS On the basis of the Region I Analytic Center’s findings in connection with the inflation study, a number of recommendations and suggestions are offered below: EPA Regional Offices may be well advised to determine which state agencies are most strained financially at this time and consider the program priorities the states have Set for themselves. EPA program officials should identify program activities that are essential and those that might receive less emphasis given re- source constraints at the state level. For example, if the states are allowing paperwork and reporting to slide, EPA should determine what information is neces- sary and how it might be obtained by consolidating reporting requirements wherever possible. Monitoring requirements should be examined to determine to what extent, if at all, data collection could be reduced without sacrificing the effectiveness of related en- vironmental activities including permitting, modeling, and enforcement. Dialogue between EPA and the states should begin to determine where resources should be directed. This may require some “hard bargaining” between the states and EPA so that both state and EPA priorities are properly addressed. The State/EPA Agreement and grant agreement processes may be the best vehicles for accomplishing this result. o In view of the high purchase and operating costs of analytic equipment, the Region and the states should explore the possibility of inter—state sharing of laboratory equipment and analytical capabilities. Vermont, Name, and Connecticut expressed interest in such an inter—state approach to hazardous waste and toxics testing needs. Sharing or consolidating services may help the states realize economies of scale. The Region I Analytic Center is now studying the possibility of such an approach in New England. o Where appropriate, Headquarters might afford the Re- gions more autonomy and flexibility in dealing with client states during periods of fiscal constraints. The states believe that the Regional Offices are in the best position to deal with the particular problems of individual states and are most sensitive to their needs. The states remain mindful of the importance of consistency in the application of national standards, but feel that the centralization of more and more authority in Headquarters leads to delays and some- times inappropriate responses to state conditions. —29— ------- o More attention should be given by EPA and the states to the resource implications of the 205(g) delegation. Several states complained that re- vised requirements mean more is demanded of the states under a delegated mode than was required of EPA prior to delegation. It is also possible that more total (State/EPA/COE) resources are needed during the 2 to 3 year transition period than before or after full delegation. During the transition period, as EPA staff move from being project managers to being program managers, many new duties are required. Developing, negotiating, and executing delegation and Corps of Engineer agreements, developing and conducting training courses, and overview and evaluating duties detract from project management activities and put a greater burden on state staffs. It is also possible that substantially more total resources will be required after full delegation than before. • In addition, funding of the Clean Water Act §106 should be evaluated as to adequacy. The states felt that the freeing up of Clean Water Act §106 money as a result of construction grants delegation was illusory. The grant amounts and level funding pat- tern of the §106 program together with additional state work loads and new EPA priorities have put severe pressures on state water pàllution control efforts. This is particularly true in smaller states and especially Vermont which administers the NPDES program. It was urged that EPA examine its funding approaches under sections 205 and 106 of the Act. • Whereas funding increases in the §105 program have been substantial and the small Region I states have benefited from the new funding formulas in the 1977 Amendments, the air programs in the larger industrial states of Connecticut and Massachusetts appear to have funding deficiencies. The states should complete a needs survey similar to the needs assessments prepared for the water programs. Such a survey could reveal the extent of the disparity between funds pro- vided through the §105 grant program and funds actually needed to comply with all program requirements. • As was indicated earlier, the most persistent message conveyed by state agencies’ officials was their genuine frustration at the increment’al addition of new federal and state demands made on them in the last few years. While no single requirement seems too burdensome in ------- and of itself, the cumulative effect of more and more responsibilities is severe. In evaluating ongoing programs and in developing new or modified requirements, EPA and the states should consider the resource—intensiveness of program requirements imposed on hard—pressed state environmental agencies. 0 EPA should consider adoptir re complete and uni- form grants systems. An integrated approach to work plan development would make it easier for the states and EPA to track and, where appropriate, to adjust state program activities. Such systems could also result in more efficient program feedback from the states and the Regional Offices to Headquarters. Better information on state conditions would help improve responsiveness of all parties. Existing sys- tems and reporting requirements should be examined to eliminate items that are no longer useful. 0 Consideration should be given to making financial incentives available to states that accept delega- tion of EPA programs. 0 EPA should carefully review all reporting require- ments applicable to the states so that unnecessary and/or duplicative reports can be eliminated. The states should provide a specific identification of which reporting requirements they feel are overly burdensome or unnecessary. EPA should advise the states on how reporting data is used. The states, for their part, should realize that reporting in- formation is essential to make the case for adequate budgets and sound national policy initiatives. —31— ------- THE EFFECTS OF INFLATION AND FISCAL PRESSURES ON CONNECTICUT’S ENVIRONMENTAL PROGRAMS Brian Morrison Analytic Center Management Division EPA, Region I ------- STUDY OVERVIEW The Environmental Protection Agency’s (EPA) Region I was concerned that inflation and fiscal pressures might significantly erode the quality of the New England States’ environmental pro- grams. An investigation of the financial constraints faced by Connecticut indicates that, to some extent, this concern may be justified. While fiscal hardship in Connecticut has not been as severe as in other states, growth in both State and Federal funding for environmental activities has slowed in recent years, and the prospects for more rapid growth seem small. Notably, salaries are consuming an increasingly larger share of the State’s environ- mental monies, leaving proportionally less of the budget for the purchase of essential equipment and services. Inflation and fiscal constraints are acknowledged by Connecticut environmental officials as factors contributing to the difficulty of preserving environmen- tal quality in the 1980’s. Despite these financial problems, there is no sense of an im— pending budget crisis in Connecticut. The leaders of the State’s Department of Environmental Protection (DEP) seem confident that, were inflation and fiscal conservatism the only obstacles they faced this decade, the State’s environmental programs would emerge slightly curtailed but intact. Their problem, they state, is that manageable financial impediments are being made unmanageable in part by Federal imposition of procedural requirements, which, to Connecticut, seem detrimental to achievement of the State and Federal goal of a healthy and clean environment. State officials feel further pressured by the gradual tighteu- lug of environmental quality standards mandated by Federal legisla- tion, arguing that the implementation of stricter standards and expanded program requirements should be accompanied by a growth in Federal aid to help meet those requirements. The following re- port explores the concerns of both parties and offer s some sugges- tions on dealing with the problem of financial pressures coupled with constantly expanding Federal requirements. CONNECTICUT’S FISCAL AND ECONOMIC ENVIRONMENT: AN OVERVIEW The budget data gathered over the course of the study shows that recent nominal growth in the Connecticut State budget has been considerable. In both FT ‘79 and FT ‘80, the total budget rose approximately 11—12% over the previous year. (See Figure A, Page 14) In constant dollar terms, however, budget growth in FT ‘79 and FT ‘80 was only about 4% and 2%, respectivelY, a rate of growth which, given the increasing demand for government services in Connecticut, is considered inadequate by many State officials. This sense of lagging growth is exacerbated by the provisions of the pending State FT ‘81 budget, which in near—final form this May allowed for only 3% nominal growth in funding for most State agencies. Frustratiflg was an adjective often applied in dis- cussing the current budget situation. CT — 1 ------- The primary source of this frustration is the structure of Connecticut’s revenue system. Given the State’s concern with minimizing government debt — by law, the budget submitted by the Governor to the State legislature must be balanced — State spending is rigidly tied to State revenues. In recent years, Connecticut’s revenue system has been unable to generate the funds necessary to support desired levels of spending. This inadequacy is largely attributed to the absence of a State income tax. While the need for an income tax is recognized, imposition of such a tax is highly unlikely. The State, therefore, depends on a 7 1/2% sales tax on most consumer goods (except food) for over one—third of its revenues. The State also relies on a corporate income tax, which provides about 10% of its revenues; a wide range of excise taxes, license and user fees, and gambling revenues completes the picture. The inadequacy of the current revenue structure may be exacer- bated by an additional factor which will clearly affect future State spending. In a recent court ruling, Connecticut was ordered to increase fundfng of primary and secondary schools by $500 million over the next four years, a sum corresponding to about 18% of the current State budget. Clearly, complying with this edict will impair funding of other activities, including environ- mental programs. In light of this situation, Connecticut environ- mental officials anticipate no substantial growth in environmental funding for several years. Despite these financial problems, few State officials ex- pressed great alarm at Connecticut’s fiscal situation. This may be because of the chronic nature of the revenue shortage in the State; a lack of funds seems simply to be business as usual in Connecticut. In addition, the State legislature is actively seeking ways other than an income tax by which to raise State revenues and has demonstrated its willingness to rai’se taxes by recently levying a 1/2% increase in the sales tax. Perhaps most important, however, is the good health of the Connecticut tax base. Connecticut’s unemployment rate now stands at 4.7%, far below the national figure, as growth in the State’s defense and high technology industries has spurred the economy. This economic growth should boost State revenues from the corporate income and consumer sales tax. THE CONNECTICUT DEP: FISCAL PRESSURES Connecticut’s Department of Environmental Protection (DEP) consists of three divisions, each headed by a deputy commissioner: the Central Office, which performs administrative and support func- tions for the Department; the Division of Conservation and Protec- tion, which protects and manages State forests, parks, and open spaces; and the Division of Environmental Quality (DEQ) which plans, coordinates, and administers the State’s antipollution programs. DEQ accounts for a relatively small proportion of the DEP budget; CT — 2 ------- its $2.7 million in FY ‘80 current expenditures (expenses excluding capital outlays and payments to local governments) represents only 15% of DEP’s $14.36 million budget. However, because it administers many Federally—backed environmental programs, it seems likely that DEQ claims a large share of DEP’s Federal funding, which totaled over $6 million in FY ‘80. Evidence of the Division’s dependence on Fe- deral funds is given by DEQ’s personnel figures: of the 239 posi- tions authorized for DEQ in FY ‘80, 53% were Federally funded. DEQ’s State funding, as represented by current expenses, has grown at about the same rate as the overall State budget. Annual growth in current dollars has averaged almost 14% since FY ‘75, and real annual growth has approached 6% (see Figure A). Growth has slowed in recent years, however, with real growth in F? ‘80 reaching only 1%. Further, the Governor’s recommended budget provides only a 7% nominal increase in DEQ funding, a rate which translates to a real dollar decrease in the division’s budget. The effects of slower budget growth have been exacerbated at DEQ by the Division’s increasing personnel Costs. Cost—of—living increases, raises negotiated in collective—bargaining agreements, and a reclassification of engineers’ pay schedules have joined to push the share of DEQ’s current expenses devoted to personal ser- vices from 72% in F? ‘79 to an estimated 78% in F? ‘81. This trend is expected to continue, since a recently approved collective—bar- gaining agreement provides State workers with 7% salary increases in each of the next three years. These increases are a major concern for DEQ unit directors; they consistently cite higher personnel costs as the clearest inflationary threat to the Division’s opera- tional capacity. Given DEQ’s dependence on Federal monies to fund more than half of its full—time positions, salary increases could consume a signi- ficant portion of the Division’s Federal grants. Program managers consider this a particular burden in light of.recent decreases in Federal funding for Connecticut’s basic air and water programs, and in light of increased Federal requirements regarding those programs. The combination of factors outlined above Lead DEP officials to describe recent State and Federal financial backing as “sub- sistence level.” Still, DEP Commissioner Stanley Pac is confident that, with the continued support of the Governor and key legisla- tive leaders, the Department will successfully manage its programs over the fiscally tight period ahead. Nevertheless, there is some indication that DEP’s legislative support may be eroding, with a few legislators this year informally questioning the need to retain delegation of Federally—mandated environmental programs. Further, as the financial situation becomes more difficult, DEQ officials have begun to feel the pressure to cut activity in some program areas in order to maintain sufficient effort in others. In response to this pressure, several unit directors plan to take a close look at their programs during development of the F? ‘82 budget, deter— mining whether and where cuts need be made. CT — 3 ------- STATE AND FEDERAL ADMINISTRATION OF PROGRAM GRANTS DEQ unit directors indicate that both the Division and the leg- islature take expected Federal grants into account in formulating the State budget. Once the State budget is passed, the program managers have little flexibility in the use of State funds. There is greater flexibility with Federal grants, however, which are de- signated for use on a program rather than on a particular line item; Federal money can usually be spent on any item or activity within the program. There is even some flexibility across programs in the use of Federal grants; a shift of this type generally requires EPA approval, but is a possibility which Connecticut hopes to take advantage of (see Water Programs). Overall, DEP officials favor the flexible provisions of Federal grant specifications and would resist any EPA attempt to expand the earmarking of funds, although they want clear priority guidance. While flexibility in the use of Federal funds was considered a positive factor in dealing with a tight State budget, the DEP’s Bureau of Administration cited at least three aspects of the ad- ministration of Federal grants which makes coping with limited funds more difficult. Of prime concern was the long delay in the advice of allowance” between the start of the Federal fiscal year and receipt in Hartford of written EPA approval of program grants; this delay in the “advice of allowance” can last for three months. Upon receipt of written approval, DEP can set up a Federal receiv- able account and run its programs by borrowing from the State against that account; without such approval, DEP cannot borrow State funds and must juggle its books to keep programs running. The Bureau urged EPA to give resolution of this problem high pri- ority. Second, the Bureau complained of inconsistencies from program to program and year to year in the regulations governing the State’s ability to carry program funds over from one year to the next. DEP requested a clearer and more consistent policy on carryover. Third, DEP officials noted their frustration with the one—time supplemental allocation in the §105 grant which targeted certain items and came so close to the end of the fiscal year. It was hard to obligate quickly, and was difficult to plan for or use effectively. WATER POLLUTION CONTROL Connecticut’s water programs have a reputation for being well managed and effective. The wealth of experience and manage- ment capability developed since the early 1970’s makes Commissioner Pac confident that the Water Unit will continue to function ef- fectively in the 1980’s. The Water Unit has already encountered some funding shortages. As Figure B shows, Federal support for basic water planning, moni- toring, and enforcement activities, funded under Section 106 of the Clean Water Act, has declined steadily since FY ‘76. This erosion in funding has not been fully compensated for by recent State support. Figure B also illustrates that, when inflation CT — 4 ------- is taken into account, the real decline in both State contribu- tions and Federal §106 funding is severe, constituting about a 207. decrease in real funding from F? ‘75 to F? ‘79. Coupled with the Water Unit’s rising personnel costs — only 80 of 104 authorized positions could be funded in FY ‘80 — this decrease in funds could obviously affect the Unit’s performance. One activity which may clearly suffer because of a lack of funds is ambient water quality monitoring. The new FY ‘81 budget cuts monitoring funds by 70%, leaving enough money to maintain little more than a token surface water monitoring effort (sampling sites could be reduced from 41 to 4). While the monitoring program may be bolstered by a contemplated shift in DEP funds, the likely loss of some monitoring capacity could hurt the State by undermin- ing the base for other Water Unit activities. For example, a fail- ure to collect sufficient background data would limit the State’s ability to justify enforcement actions In court; it might also slow development of the mathematical models needed to establish standards for the Total Maximum Daily Loads (TNDL) and Advanced Wastewater Treatment (AWT) programs. In 1973 DEQ’s Water Compliance Unit accepted delegation of the National Pollutant Discharge Elimination System (NPDES) permit pro- gram. Despite its tight budget, the Water Unit does not intend to return delegation of NPDES to EPA. The permitting program has received adequate funding in recent years, and the DEP contends that the benefit of speedy permit processing by the State far outweighs the cost of administering the program. While NPDES does not pose a problem for Connecticut, DEP is concerned that the grant it receives under Section 205(g) of the Clean Water Act, intended to pay for the administration of muni- cipal waste treatment facility construction grants, may prove inadequate. The problem arises because of the structure of the 205(g) grant, which provides the State with five years of con- struction grants administration, the sum equaling 2% of the State’s total construction grants award. This sum may be more than adequate ifl the program’s early years, when the administra- tive workload is low, but might not meet costs in the program’s fourth and fifth years, when more construction projects are underway and the administrative burden increases. In noting their concern, DEP officials touched on the possibility of returning program delegation to EPA. When questioned closely, however, they did not seem willing to relinquish control over the roughly $50 million in construction grants funds currently administered under 205(g). While the potential inadequacy of 205(g) funding has alarmed DEP’s budget personnel, current generous funding of that program is regarded by the Water Unit as a resource which could help off- set the decline in §106 funds. As noted, 205(g) support may be more than adequate in its early years. This may be the case in Connecticut where the Water Unit presently calculates it would need 30 people to run the construction grants program in FY ‘81, whereas CT - 5 ------- initial projections based on EPA program experience and anticipated congressional appropriations indicated 42 slots would be necessary. Given the 205(g) surplus and the shortage of §106 funds, the Water Unit plans to shift 205(g) funded personnel to §106 activities. Such a shift may be permissible, provided the State has assumed substantial responsibility for administration of the construction grants program. The Water Unit intends to meet with Region I to seek EPA approval of the proposed shift. An additional State concern regarding the construction grants program is the long delay often encountered in Federal processing of project applications. DEP noted that the delays both raise administrative costs and exacerbate the effect of inflation on construction costs. They stated that because a Federally—supported facility can take so long to build — six to seven years in some cases — and involves such elaborate reporting requirements (three separate grant applications are required over the course of the project), that municipalities are reluctant to assume the required 10% share of construction costs. Instead, the municipalities have turned to a State—funded construction program which requires that they pay 30% of construction costs, but which can process a grant application in two to three months and have a facility on line in two years. As evidence of the municipalities’ dissatis- faction with the Federal program, DEP noted that only two grant applications had been received by May of 1980. Given this situation, the Water Unit sees a clear need for reform of the federal grant application process. (Ed. note: Subsequently, the state has obligated all F’! ‘79 monies and virtually all of its F’! ‘80 monies.) Under Section 208 of the Clean Water Act, the Federal Govern- ment funds the development of plans to manage nonpoint sources of pollution (i.e., erosion, stormwater runoff). Connecticut looks on these management planning funds as a potential source of relief for its hard—pressed §106 programs. DEP’s attitude toward §208 is clear: enough planning has been done; the tIme has come to imple- ment plans and to divert §208 funds to more productive areas. Since §208 is administered by an “inter—regional” rather than a State body however, the State has no authority to make such a shift. Further, with EPA funding already being phased out by 1983, a substantial diversion of §208 funds is unlikely. The State’s attitude toward the Clean Lakes Program, funded under Section 314 of the Clean Water Act, is less clear. Connec- ticut received its first allotment of §314 funds in FY ‘79 and has just begun to classify lakes according to type and environmental quality. Commissioner Pac did indicate that the lakes program might be de—emphasized should programs with greater health impact require funds. The Water Unit director, however, said that he would be reluctant to give up the program because of its visible impact on Important recreational opportunities and its general white—hat nature. Given the Water Unit’s tight budget, the Unit director was clearly concerned with the decline in Federal §106 funds and State CT - 6 ------- contributions, particularly since — to meet Federal water quality standards — new and costly TDML and AWT programs must soon be undertaken. An even greater source of frustration, however, seemed to be increasingly demanding Federal requirements such as: public participation; source compliance evaluations; non— compliance reports; and regulations governing monitoring and sampling. These latter problems reflected the water director’s impatience with what he regards as unnecesary and counterproductive bureaucratic procedures which eat into his already limited budget. His greatest concern in coping with a tight budget was that EPA quickly eliminate any nonessential requirements. AIR POLLUTION CONTROL During the early and mid—1970’s, Connecticut’s air programs geared up quickly and, as the result of aggressive leadership, laid claim to half of Region I’s clean air funds. As Figure C shows, however, Federal support of the State’s basic air planning, monitoring, and enforcement activities, funded by Section 105 of the Clean Air Act, declined considerably from FY ‘75 to FY ‘77 as Region I redistributed §105 monies to other New England States. Nominal Federal funding has risen since FY ‘77 and, coupled with increased State funding, has helped to offset the FY ‘76 and FY ‘77 cuts. In constant dollars, however, total §105 funding in FY ‘79 was still about 20% below the FY ‘75 peak. The Connecticut Air Unit keenly feels this reduced support and characterizes its present budget as subsistence level. Again, however, the major source of the Air Unit’s frustration is not a tight budget per Se. While personnel costs are rising, staff has declined from 105 to 75 over the last five years, and some monitoring and testing equipment needs to be replaced, the Unit believes that critical aspects of existing programs could be maintained with the present level of funds. The problem, the Air Unit contends, is that EPA program requirements have expanded without an accompanying growth in Federal dollars. The lack of increased support is felt severely in Connecticut since, because of its inability to meet Federal air quality standards related to mobile source pollutants, the State must soon implement two Federally—mandated programs: an automobile Inspection and Maintenance (I&M) program, and a carbon monoxide (CO) hotspot monitoring system. As mentioned previously, EPA has been concerned that Connecticut might refuse to implement an I&M program. This con- cern has eased as the Connecticut legislature recently loosened its past restrictions on the allowable cost of the program. The Department of Motor Vehicles is now negotiating an I&M contract with a private firm and expects that the program will be imple- mented on schedule. DEQ may be less willing, however, to implement the CO hotspot monitoring program, which would measure and record CO levels in areas of high traffic density. The problem, according to the Air CT — 7 ------- Unit, is a lack of additional Federal or State money to administer the program, hire personnel, and buy monitoring equipment. The Air Unit director suggested that because additional funds are not forthcoming, DEQ would closely review program requirements before agreeing to this sanctionable SIP requirement. The Air Unit also indicated that it would seriously consider refusing EPA’s Prevention of Significant Deterioration (PSD) program. Under PSD, emissions from new or expanded industrial facilities would be regulated to ensure that pollution from those facilities did not appreciably diminish air quality in areas which had attained Federal air quality standards. Once again, DEQ is reluctant to take on the program, although it will lose federal dollars if it doesn’t. In determining how to manage the air program under a tight budget, officials in the Air Unit indicate that they would continue to respond to EPA requirements for programs over which EPA holds sanctions. The threat of sanctions appears to be a real one to Connecticut’s acceptance of the I&M program and could possibly influence the State’s decisions on CO and PSD. Like the Water Unit, the Air Unit indicated that environmental monitoring would be reduced if budget pressures increased. Cuts might be made in the frequency of inspections, the number of sites inspected, and the depth of reporting on monitoring activities; computerized monitoring might be also reduced. While expansion in EPA program requirements is the major con- cern for the Air Unit, the section also voiced frustration with procedures which raise the workload on an already hard—pressed staff. Most of these concerns centered around the State Imple- mentation Plan (SIP), a Federally—required document which details the State’s air program activities, plans, and all the regulations. For example, the State has recently initiated a program whereby firms which have reduced fuel consumption, thus decreasing daily sulfur emissions, will be granted variances allowed them under State law. EPA must now decide whether every variance granted under the trade—off program constitutes a SIP revision. If EPA rules that each variance is a SIP revision, the State would have to amend its SIP and seek EPA approval for the entire air package every time a variance is given. This process can be a long one. The message from the Connecticut Air Unit is thus similar to that voiced by the Water Unit: inflation and fiscal complaints are problems, but in and of themselves are manageable. A far greater concern is the expansion of Federal requirements without an accompanying increase in Federal funds, imposing a burden on the States which exacerbates existing financial constraints. RAZARDOUS WASTE PROGRAM As is the case across the country in dealing with the hazardous waste issue, the Connecticut hazardous waste program CT — 8 ------- faces an enormous problem: a complete inadequacy in funds, equipment, and personnel. The issue is not one of inflation or fiscal constraints, but one of gearing up to cope with a newly recognized environmental threat. Until EPA hazardous waste regulations go into effect (October 1980) and until substantial Federal funds for hazardous waste clean—up become available, Connecticut cannot begin to adequately deal with the hazardous waste problem. Connecticut formally began work on the hazardous wastes issue last year with the formation of a Hazardous Waste Unit. Because of the current lack of Federal or State money for hazardous waste activities, the 22—person staff for the Unit was drawn from other DEQ programs. The Hazardous Waste Unit borrowed the Water Unit’s oil and hazardous spills team, some Solid Waste Program personnel, and the part—time services of one Air Unit staffer. - In its first year, this makeshift Unit identified an initial list of 3,000 sites where hazardous waste might be found. These sites should be inspected and tested for possible dumping problems. The inspec- tions are barely underway. Connecticut’s experience with two hazardous waste dumping incidents gives some indication of the tremendous financial strain hazardous waste activities could eventually place on State environ- mental programs. In 1979, about $670,000 was spent to clean a site in Plainfield, the money for the clean—up coming via an emergency act of the legislature. In this instance, DEP was able to recover in court the cost of clean—up from the individual responsible and intends to pursue similar action in the future. In many cases, however, it may be impossible to determine the parties responsible for the dumping of hazardous wastes or to collect reimbursement from those responsible for the clean—up. Such may be the case this year as a $100,000 clean—up effort has already been undertaken in Beacon Falls. With potentially another clean—up needed in Windham, the Hazardous Waste Unit has already used half its clean—up funds. Despite the present lack of funds, DEP Commissioner Pac is confident that hazardous waste activities will soon receive expanded Federal support, primarily because a hazardous waste superfund” is currently under Congressional consideration. Pac also believes that the Connecticut legislature will give significant funding to the mounting hazardous waste effort, especially for the purpose of emergency clean—up. He indicated that DEP will be increasingly aggressive in dealing with the hazardous waste problem and stated that BE? would apply for delegation of hazardous waste source permitting authority as soon as EPA regulations governing that program are finalized. As fur- ther evidence of State support for increased control over hazar- dous wastes, he noted that the legislature had granted a State com- mission the authority to site a hazardous waste processing facility in Connecticut; at present, the State has no hazardous waste pro- cessing facility. CT — 9 ------- Pac did voice some concern with the cost of testing for the presence of hazardous wastes, noting the financial burden of buying the necessary equipment, hiring skilled technicians, and running the tests. He noted, however, that no New England State had fully established a hazardous waste testing capability and suggested that each State could save a great deal of money if there were a regional rather than a State hazardous waste testing facility. TOWARD A STRATEGY FOR THE 80’s A quick study of Connecticut indicates that the financial pres- sures facing New England’s State environmental programs arise not only from inflation and fiscal constraints but also from a growth in Federal procedural and program requirements. While the information summarized here falls far short of that needed to de- velop a strategy for dealing with so broad a problem, it does suggest a few basic steps leading to a strategy and highlights areas requiring further analysis. Clearly, the issue of increased program requirements and growing financial constraints will not be resolved in this initial attempt. The problem seems likely to remain a key one for the Region throughout the coming decade. The tight budget situation would, of course, be readily eased by Increased Federal funding. Since such funding may not become available (with the possible exception of the hazardous waste program), the following suggestions focus on ways in which EPA could work with the States to determine program priorities during lean budget years. Other suggestions discuss ways in which EPA might help the State cut costs while maintaining program activ— vities. Finally, the study presents a set of questions which EPA might pursue in learning how to cope with the combined problem of financial constraints and increasing program requirements. Many of the recommendations are open—ended. Still, they begin to focus attention on critical policy areas. 1. §105 and §106 REVIEW In Connecticut, the environmental programs most affected by financial pressures and expanded program requirements are those funded under the basic air and water grants — §105 and §106. Con- stant dollar funding for both program areas in FY ‘79 was down about 20Z from F! ‘75 levels, and both grants must fund new pro- grams like I&M (Start—up costs only), PSD, TMDL, and AWT. As these new programs are implemented and State salaries rise, the strain on §105 and §106 is likely to grow in severity. To deal with the problem, EPA Region I needs to closely re- view and evaluate its §105 and §106 programs. The Agency must determine the priorities to be assigned different program acti- vities, deciding which are essential and which, in lean budget years, can be de—emphasized. In particular, EPA should carefully review its air and water quality monitoring requirements to deter— CT — 10 ------- mine the extent to which those activities can be reduced, recogn- izing that Connecticut will probably give monitoring lower priority when money is tight. A cost—benefit analysis of certain procedural requirements would clearly be useful; while benefits may be diffi- cult to quantify, cost figures giving the number of workyears ex- pended on different program activities should be readily available from State Agency accounting data. The review outlined above should first be done internally, within EPA ’s annual zero—based budgeting process, so that the Agency has a clear sense of its inter— and intra—program priorities. Later, however, it would be essential to integrate EPA priorities with those of the States. This could be done through two existing processes: the negotiation of specific EPA grant agreements or of the “State/EPA Agreement.” At present, EPA grant agreements clearly specify the activi- ties a State will undertake upon receipt of a federal grant, but do not rank those activities in order of priority. Generating such a ranking during negotiation of the grant agreement would seem to be one clear way in which the State and EPA could begin a dialogue on program priorities. A process of this sort begun already in Region I would give EPA a greater voice in State use of Federal funds and greater knowledge of State priorities. The State, in turn, would more clearly understand what activities EPA considers important. Use of the grant agreement procedure is attractive because the process already deals with programs in a high degree of detail and involves program managers who would have the authority to negotiate priorities. The State/EPA Agreement is a document which lists in detail a set of 12 to 20 projects given high priority by the State and EPA for the coming year. Often, projects included in the Agree- ment are those requiring a high degree of cooperation between a State and EPA. Because it is an established means f or setting joint priorities, the process surrounding development of State/EPA Agreement provides a potential forum for an extensive program review. The scope of the State/EPA Agreement is so broad, however, that it seems better to use this mechanism for focusing on major State/EPA priorities, reserving any detailed priority setting for the better—focused and less public grants agreement process. 2. SURVEY OF PROCEDURAL REQUIREMENTS Connecticut officials consistently cite expanded procedural requirements within existing programs as a major drain on already limited resources. The limitations of this study, unfortunately, prevented deeper exploration of exactly what requirements had been added to programs and were most burdensome for the State. Given the importance of this issue, further study is warranted. 3. REGIONAL LAB Establishment of a regional laboratory facility for the test— CT — 11 ------- lug of hazardous wastes is one clear way in which Connecticut and other New England States could cut future costs without cutting programs. As Commissioner Pac noted, the lack of hazardous waste testing facilities in most States, the high cost of equipment needed to test hazardous substances, and New England’s small geo- graphical size make a regional facility a logical economizing step. The facility could also be used to run tests on toxic air pollutants such as asbestos, further extending savings. The Region I Analytic Center is now exploring this possibility. If, like Connecticut, the other states are willing to use and help pay for a regional facility, EPA should assume a coordinating role and move quickly to work with the states in developing detailed plans. As a tenative suggestion, it might be possible to incorporate a regional hazardous waste lab into the existing EPA laboratory in Lexington, Massachusetts. 4. CONSTRUCTION GRANTS PROCESSING There seem to be no obvious suggestions for speeding up Region I processing of grant applications for the Municipal Waste Treatment Facility Construction Program. Again, this study was unable to delve into the details of the construction grants applications process, and hence can only address the problem in general terms. Given Connecti- cut’s concerns, however, a review of the procedural requirements for the construction grants program may be in order. This review could involve a cost—benefit analysis of the various processing stages, including as a major cost factor the role played by processing delays in driving up construction costs. 5. QUESTIONS EPA MIGHT FURTHER EXPLORE — Should the phasing out of Federal support, currently planned for 1983, be accelerated so that §208 money could be shifted to §106 programs? — What are the reasons for maintaining 4208 funds? — What are the reasons for EPA’s current policies re- garding carryover of Federal funds? Are these poli- cies as confusing as Connecticut claims? If so, what remedies exist? — What causes delays In the processing of construction grants? What techniques — such as, systems for track- ing the progress of an application or evaluation of personnel based on speed of processing could be em- ployed to revise productivity? — Should EPA’s categorical grants system be revised? Given the predilection on the part of the States like Connecticut to use program money wherever it is most needed, would it be more efficient to provide an in- tegrated environmental grant rather than categorical grants? What would implementation of such a system cost EPA in terms of program control? CT — ------- This last question is obviously a matter for analysis deeper than that provided here. It is a useful question to ask, however, in that it illustrates both the breadth and fundamental nature of the problems examined in this report. Clearly, these issues are far too large to be dealt with completely in a short study. While it has been possible to identify some key areas of concern and suggest ways of addressing those concerns, further work is needed. It is unlikely, however, that further research would alter the basic message contained in this report, a message voiced repeatedly by Connecticut officials: “We can handle inflation; we can main- tain our key programs; we may even, with a little push, take on new programs; but if money gets tighter and EPA keeps asking us to do it all, vell...then we’d both better sit down and get our priorities straight. CT — 13 ------- FIGURE A CONNECT I CUT STATE — FU 1DED EXPENDITURES OF THE ENVIRONflENTAL QUALITY DIVISION DEPARTMENT OF EN 1 RO ENTAL PROTECTION (CURRENT EXPENDITE RES ONLY: EXCLUDES PAYMENTS TO LOCAL AND NON-LOCAL GOVERNMENTS AND CAPITAL OUTLAYS) CURRENT uz 2.0 DOLLARS 17% 36% 1.5 10 -J •_t 1.0 0.5 FY75 FY76 FY77 FY78 FY79 FY80 (ESTIMATE) CONSTANT 1.5 1972 DOLLARS 4% 2% 27% 1.O. 11% — -J — 0.5 FY75 FY76 FY77 FY78 FY79 FY80 (SOU1CE: ANALYTIC CEN?ER I,, BASED ON FIGURES FROM THE GOVERNOR’S BUDGET. STATE OF CONNECTICUT) S Percentage. indicate change f tea the previous year CT — 14 ------- FIGURE B CONNECT I CUT CWA §106 WATER POLLUTION CONTROL EXPENDITURES C CURRENT AND 1972 CONSTANT DOLLARS ) 110 /‘ \..• / •: •. •.. STATE - CURRENT $ • •O.75 FEDERAL — CURRENT $ C l , STATE - 1972 $ 1 ± 0.5 FEDERAL - 1972 $ 0 ,25- I I FY1975 1 * 19752* 1977 1978 1979 (SOURCE: ANALYTIC CENTER I. BASED ON FIGURES FROM EPA FINANCIAL STATUS REPORTS) 1* Estimate FT 1975 2 Corrected for S quarter fiscal year for federal grants. CT - 15 ------- iL L K L CO ECT1 CUT CAA § 105 AIR POLLUTION CO TR0L EXPENDITURES 1.0 0.5 FY 1975 1976 1977 19781* 1979 STATE — LUKK .NI FEDERAL - 1972 $ (SOURCE: ANALYTIC CENTER I, BASED ON FIGURES FROM EPA FINANCIAL STATUS REPO TS) 1* Corrected for S quarter fiacal year for federal grant. (CURRENT AND 1972 C0 ST.A T DOLLARS) 2.0 1.5 C ,, -J -J 4* FEDERAL — CURflENT $ STATE - 1972 CT — 16 ------- APPENDIX THE BUDGET PROCESS A review of DEQ programs during development of the DEP budget request is the primary mechanism by which the division sets program priorities. While DEP does not use a formal zero—base budgeting process, an informal discussion of program priorities does take place within DEQ, particularly within the division’s Air, Water, Solid Waste, and Hazardous Waste Units. Later in the budget pro- cess DEP Commissioner, Deputy CommIssioners, and Unit Directors discuss program priorities, primarily within rather than across division boundaries. Connecticut establishes a budget annually, its fiscal year running from July 1 to June 30. The major steps followed by DEP in the budget process are outlined below: JUNE DEP receives forms and guidance from the Office of Policy and Management (OPM). The guidance gives no dollar targets, but may suggest the number of positions the department should plan for. The DEP Bureau of Administration assists DEP Unit Directors in developing budget requests by providing past and current budget information. Unit Directors develop a budget request which would meet all of their program needs, taking into account EPA require- ments and expected Federal support. JULY—AUGUST The Bureau of Administration analyzes the Unit Director’s requests, discusses the rationale for the request with the Unit Directors, and reviews these figures with the DEP Commissioner and Deputy Commissioners. DEP establishes its program priorities at this time. AUGUST The Commissioner and Deputy Commissioners meet with the Unit Directors to question the latters’ requests and determine the final budget request. DEP generally requests the level of funding neces- sary to meet all its needs, even If that request clearly exceeds OPM guidelines. SEPTEMBER The DEP budget request is finalized, signed by the Commissioner, and submitted to OPM. OCTOBER 0? ! ’ ! reviews the rationale for budget requests with the DEP CT — 17 ------- Commissioner, Deputy Commissioners, and Unit Directors. NOVEMBER OPM submits a tentative budget recommendation to the Governor. The budget is organized by Agency and line item, but not by program DECEMBER The Governor reviews the tentative budget and projected revenues for the coming fiscal year. DEP and OPM officials meet with the Governor i t t developing the final budget recommendation. JANUARY OPM finalizes the Governor’s budget recommendations. FEBRUARY—APRIL The legislature’s Office of Fiscal Analysis reviews the Governor’s budget recommendations. MARCH—APRIL The Senate and General Assembly Appropriations Committees hold budget hearings at which DEP officials testify. DEP fre— quently requests that the legislature increase the level of department funding recommended by the Governor. MAY The legislature passes the amended version of the Governor’s budget. DEP has strong allies in the Senate Majority Leader, Speaker of the Assembly, and members of the Appropriations Committees in both houses. Characteristically, the DEP budget recommendation by the Governor is increased by the legislature. JULY The budget goes into effect. The lack of a more formal priority—setting procedure than that carried out in the DEP budgeting process makes it difficult to identify the criteria DEP as a whole would use in cutting or protecting financially threatened programs. Discussion of likely program priorities is therefore presented in the sections on specific program areas. It is useful to note, however, that Connecticut reviews budget priorities in the summer, after the spring ZBB review at Region I. This conflict in schedules must be kept in mind in organizing any joint State/EPA effort at setting program priorities. CT — 18 ------- THE EFFECTS OF INFLATION AND FiSCAL PRESSURES ON MAINE S DEPARTI(ENT OF ENVIRONMENTAL PROTECTION Norman Willard Beverly Roehrig Analytic Center Management Divi sion EPA, Region I ------- BACKGROUND The Maine Department of Environmental Protection (DEP) is charged with responsibility for administering the State’s air and water pollution control programs, its wastewater treatment program, the regulation of solid and hazardous wastes and the carrying out of lakes restoration projects. It is also involved in coastal resources management and coastal energy facilities. Pesticides and safe drinking water matters are the principal responsibility of other agencies in Maine. The DEP includes up of a Bureau of Air Quality Control, a Bureau of Water Quality Control and a Bureau of Land Quality Control. They contain, respectively, 25, 106 and 25 employees. A new Bureau dealing with oil spills and hazardous wastes, to be operational in the fall of 1980, will be staffed by existing personnel from the Agency. The budget for the DEP over the last five years is depicted in Figure 1 of this summary. Appropriations for the entire Maine State government for the same period are shown in Figure 2. DEP expenditures of federal and State monies in two principal program areas, air pollution control and water pollution control are found in Figures 3 and 4. Maine’s unemployment rate has climbed from six and one—tenth percent in 1978 to eight percent as of March of 1980. Llnemploy— ment rates in the State exceeded eight percent in the years 1975 through 1977. Maine has an income tax and a five percent State sales tax. THE BUDGET PROCESS The budget of the State of Maine is prepared on . a biennial basis. Although there is provision in law for •a supplementary appropriations process to deal with budget matters that may arise during other than the normal year of budget preparation, this process has not been invoked in the recent past. The State is currently operating in the first quarter of the second year of its two year budget cycle. The Governor’s Office sets the State’s budget preparation pro- cess in motion by transmitting a basic guidance package to all state agencies and departments. The guidance typically contains general targets for such items as projected percentage increases for ren- tal of office space, utility costs, etc., and percentages increases, if any, that agencies may expect to have recommended to the legis- lature by the Governor’s Office. (For example, a two percent in— crease in funds for DEP.) In about August, each State agency be— gins work on its own budget proposal, to be submitted in November to the Governor’s Office. The agencies’ proposals are based on the guidance materials, past budget appropriations, discussions ME - 1 ------- with the Governor’s Office and estimates of Federal grant monies anticipated. Each Bureau Director within DEP develops resource projec- tions for the upcoming two—year budget period. Although both the Governor and the legislature actively exercise their authority to set staff numbers (in the case of DEP on an individual Bureau ba- sis), and thus maintain control over the size of State government, Bureau Directors are given the flexibility by their Commissioner to plan resource allocations and program initiatives for their own portions of the Agency’s budget document. There is little inter—bureau discussion at this point, but the Commissioner meets with each of his Bureau Directors to shape the final form of the DEP’s overall budget package before it is sent on to the Governor’s Office. Historically, State agency and department administrators in Maine have enjoyed considerable freedom to prepare their budget requests with the boundaries discussed above. To date, neither the Governor’s Office nor the legislature has involved itself in programmatic decision making by Agency officials as preparation of the DEP budget proceeds. According to Commissioner Warren, however, this may change if budget conditions in the State con- tinue to worsen. Typically, the Governor’s budget request to the legislature Is not program specific. In the case of DEP, the legislature reviews such line Items as wages and salaries, contracts, capital expenditures, travel, and rent as proposed by Individual Bureaus comprising the Agency. All matters pertaining to major capital purchases, expansions of Agency functions including proposed staff increases and new programs are highlighted as such in the budget and receive more careful scrutiny in the legislature. The Governor’s budget for the State is presented to the legislature in January, and by law the legislature must pass a balanced budget by no later than June 30. The DEP has been well regarded in the legislature over its 7 year history because of its record of sound financial and program management. The Commissioner and his budget officer are usually called upon to testify before budget committees in the legislature. The Agency’s budget as submitted to the legislature tends to emerge virtually intact, and existing staff at DEP have never been Cut. DEP has a measure of flexibility in making internal adjustments with funds appropriated for agency operations: up to ten percent of appropriations for personal services, capital and miscellaneous Items such as travel can be shifted among Bureaus with the approval of the Governor’s Office. Changes of more than ten percent must be approved by the Legislative Finance Committee. Agency officials were comfortable with this amount of latitude, at least for the pre- sent time and under existing circumstances. The present Governor of the State of Maine, elected in November 1978, has been through only one complete budget cycle with the legis lature, and is pledged to no tax increase this year or in 1981. The ME - 2 ------- legislature, too, is intent on keeping increases in State spending to a minimum. A number of factors support DEP Commissioner Warren’s descrip- tion of the State’s and his own Agency’s budget situation as “lean” and likely to grow tighter. State workers unionized last year and won a seven percent pay increase that took effect in June of 1980. A “loose” hiring freeze is now in effect in State government, making the task of hiring new staff more difficult. If more experienced senior staff leave the Agency at this time or if new programs have to be staffed, Agency programs may suffer more acutely than if the freeze were not in effect. Rent and utility costs are continuing to rise and the new higher reimbursement rate for State government workers using their own vehicles for business—related travel will account for larger shares of available State resources. In addi- tion to resource pressures such as these that will be felt through- out Maine State government, the DEP does not expect that Federal grant monies that are essential for the operations of the agency not increase significantly in the near future, and certainly not at rates sufficient to keep pace with inflation. Near the end of F? ‘79, division heads in the Agency, together with a consulting team from the University of Maine at Orono, com- pleted a comprehensive management and development review that pri- oritized all services of the Agency. A ZEB—type process of self— appraisal is expected to be repeated on an annual basis within DEP in late summer; the process will clearly be of value to the Agency as it prepares its’ budget proposals each year. OVERVIEW OF PROGRAMS DEP officials expressed serious concern about present budget conditions and the effects of these conditions on program opera- tions. Commissioner Warren sees increasingly difficult times ahead for the Agency in terms of State and federal funding needed to run a comprehensive and effective environmental protection effort. For this reason, he has already directed his Bureau Directors to under- take a ZB3—type review of program activities to establish program priorities for the Agency and to plan for the future. One outcome of this review is an Agency movement toward public health oriented goals: hazardous waste management, groundwater pro- tection and general toxics regulation will be the priority issues for DEP as resource constraints continue to worsen. This means that program activities in the Agency that are regarded as less immediately important to the achievement of measureable and concrete anti—pol- lution and public health—related objectives will be the first to be de—emphasized or dropped. At this time, the water pollution control program and solid and hazardous wastes programs appear to be in greater difficulty from a financial perspective than the air pollution control and construction ME - 3 ------- grants programs. The gradual drying up of federal CWA Section 208 funding has been seen for some time, and efforts will be made to shift staff assigned to this area into non—point source related activities in the water pollution control program if monies are available. While more support in coastal management, wetlands and lakes restoration would be welcomed, it is not expected, and if antici- pated further tightening of the Agency’s budget occurs, personnel will be shifted from these activities if vacancies occur elsewhere in the DEP organization. As a general matter, DEP officials seem intent in doing all that they can to retain existing staff. When vacancies occur or should new positions become available, they may not be filled imme- diately in order that monies may be used by existing staff, albeit with an increased workload. Agency officials can be expected to reduce DEP activities that are particularly time, travel and labor intensive wherever possible. It has also been decided that moni- toring and inspection activities will be performed on a more selec- tive basis in the future, with historical problem sources of pollu- tion becoming the main focus of attention. AIR POLLUTION CONTROL Figure 3 shows DEP’s expenditures of federal and state funds on air pollution control activities over the last five years. As a result of new allocation formulas incorporated in the 1977 Clean Air Act amendments, Maine’s share of CAA §105 funds jumped in 1978. In addition, the Agency received supplementary federal monies in 1979 from funds that lapsed in another EPA Region. Despite the availability of these additional funds to support the air pollution control program, Agency officials are beginning to feel a resource pinch. There was concern expressed, for example, about the additional financial and personnel needs associated with the PSD program; more people are needed to administer the program, but the legislature may be hesitant to enlarge the size of the Bureau even if more money is received from federal sources. The acquisition of sophisticated monitoring and laboratory equipment will be slow because of its high purchase price and the cost of hiring personnel to operate it. As a matter of general strategy, in fact, the Air Bureau does not always hire to capacity so that it can stretch available funds. This is partly due to staff size limits imposed by the legislature. The NESRAPS and NSPS programs are not viewed individually as too burdensome from a resource standpoint, but upcoming salary and wage increases will make their management more costly. Some officials thought that EPA should have worked harder with 0MB and Congress to have CAA §105 federal grant funding increased. DEP pressed NESCAUM to lobby on its behalf though, and some success was had. The Agency objects to the earmarking of CAA §105 monies by EPA of it limits the Agency’s flexibility in carrying Out its program in Maine. Specific activi- ties that have suffered in the air program thus far have been moni— ME-4 ------- taring functions, modelling work and SIP preparation. Agency efforts on reporting, hydrocarbon RACT documents and air regula- tions will slip or be allowed to slip as the resource situation becomes more severe. In the meantime, DEP must attend to new State priorities: participation in the development of a new coal policy for the State and energy matters generally. These activi- ties divert resources from the more traditional air program. Coupled with pressures such as these that are having an impact on air pollution programs, the Air Bureau Director sees the contin- uing imposition of new and altered federal requirements as reaching the point of diminishing returns”. Continuing changes in EPA re- quirements for reporting, equipment, modeling and quality assurances are a source of deep felt frustration for Air Bureau personnel. From an overall perspective, conditions for the Air Bureau seem just manageable at this time. Program administration over the next one to two years will become increasingly difficult if present trends continue. HAZARDOUS AND SOLID WASTE In the last session of the legislature DEP was granted broad authority to regulate hazardous wastes, but this new authority was not accompanied by a State appropriation. The three person hazard- ous waste staff at DEP is supported by a $93,000 federal RCRA grant and a 20% State match. Despite these constraints, the Agency is moving toward applying to Region I for interim authorization to ad- minister the federal hazardous waste program. Once such approval is obtained, DEP expects additional federal funding. It is also optimistic about securing State funding for the program in the next budget. The Agency seeks to use federal Clean Water Act grant monies to support its efforts in this area to the extent that the hazardous waste problem in Maine is adversely affecting groundwater. Some DEP officials would like to see Congress consider shifting a portion of the massive construction grants monies available to the States into hazardous wastes programs. DEP has used a portion of its federal solid waste grant monies under RCRA to develop a Statewide solid waste management plan and an open dump inventory. EPA §208 monies were also used to develop the management plan and related groundwater studies. But a State bond issue to implement the Agency’s plan was defeated. Despite a $100,000 State contribution to DEP’s solid waste program, an active citizen interest in modern sanitary landfills and the fact that five communities are interested in developing waste—to—steam energy facilities, a shortage of necessary funds and the prospects of a reduced emphasis on the federal levels on solid waste matters all suggest harder times ahead for DEP’s solid waste program. ME-5 ------- WATER POLLUTION CONTROL Figure 4 shows DEP expenditures of federal and State monies on traditional water pollution control activities (other than wastewater treatment facilities) over the last five years as well as projections of Agency needs in this area for the period 1981 through 1984 as outlined in Maine’s “needs assessment” report filed with EPA in the fall of 1979. As a general matter, DEP’s water pollution control programs are in more difficult financial straits than its air pollution control programs. In a transmittal memorandum to the State Budget Office which accompanied the Department’s budget submission for 1982-- 1983, DEP Commissioner Warren indicated that because of declining federal grants in real dollar terms coupled with increased program requirements, “significant reductions in tWater Quality Control Bureau] personnel will be required unless grant adjustments are made by EPA”. In actual dollars, the Agency has received fairly level amounts of CWA §106 grant monies from EPA over the past five years. Clean Water Act §208 water quality planning monies are expected to dry up in about three years time. One of the intended benefits of the State receiving delega- tion of the construction grants program was the “freeing up” of CWA §106 federal grant monies that could be applied to traditional water pollution activities. According to Maine officials, however, the “freed—up” money has not been sufficient; it was estimated that virtually all §106 Federal monies could be used cover only salaries by the end of 1980. Because of the conditions discussed above, the Bureau is pre- sently undergoing an intensive and comprehensive review of each of its activities and associated resource demands. In order to make what they view as the best use of available resources, Water Bureau officials are not hiring to capacity. All personnel in the Bureau engaged in O&M work have been consolidated in a new division to focus Bureau efforts in areas that bring the best’returns in terms of water quality improvement. This consolidation move alone has improved compliance by water pollution sources from 60 to 86 percent, according to State officials. Visits to discharge sources have been and will be reduced principally to sources that histori- cally have had difficulty in meeting standards and in staying on compliance schedules. Consent decrees will be used wherever feas— ible to avoid costly and time consuming litigation as a means to resolve water pollution problems. NP DE S Region I EPA has been encouraging DEP to apply for delegation of the NPDES permit program, but DEP officials are reluctant to accept it. They offer the following reasons for their position: — Maine presently operates a State water pollution control permit program that is more comprehensive in its jurisdictional coverage than NPDES. ME-6 ------- — Several more staff people would have to be hired and no additional federal money is available to support new staff. — Paperwork and reporting requirements would increase. — Taking on the federal permit program would not result in improving the water quality in Maine. (It should be noted that EPA and DEP share responsibility for permitting discharges.) DEP forwarded to EPA what it regards as the essential ingre- dients of an NPDES program that it could administer with minimal resource drain and that it feels would be substantially equivalent to the federal program. Water Bureau personnel expressed concern about ther federal requirements that they feel will be difficult to administer given existing and projected budget conditions: pretreatment may be too costly and difficult for communities to manage; compliance evalu- ation reports are too numerous; BAT and zero discharge may not be appropriate for Maine; and the water classifications system is too burdendsome. Sophisticated analytic equipment is felt to be too expensive and the time required for the performance of actual testing protocols is considered to be too great to be truely useful given current and anticipated workload demands. SUMMARY AND RECOMMENDATIONS Recent events and developing conditions in the State of Maine have combined to produce significant pressures on the pollution control and abatement efforts of the Department of Environmental Protection, and, itt the eyes of DEP officials, the outlook for the near future looks more troubled. In important measure, the financial difficulties which DEP is and will be confronting are due to matters originating at the State level. The unemployment rate in Maine is at a high level and is likely to go higher. Although the rate of inflation may well have peaked during the first quarter of calendar year 1980 (at about 21.2 percent on an annual basis) and is now declining, neither State nor federal sources of funds to support DEP activities is likely to keep pace with inflation, A fiscally conservative legislature is in- tent on limiting growth in both the size of the State government and its expenditures. Maine’s Governor has promised no tax increases for 1980 and 1981. These factors alone make prospects for real in- creases in State funding for DEP programs remote. The loose hiring freeze in effect in Maine State government will slow the hiring re- placement or any new staff positions that may be authorized. State salaries for engineers are not competitive with those of private sector. Travel, rent and utility costs continue to mount and recent increases in salaries won by government employees will all cut more deeply into DEP and other State agencies’ budgets. Of particular concern to DEP over the long run is the need to replace laboratory equipment and computer facilities, of which are viewed as critical NE - 7 ------- to Department functioning. It is on the basis of these events and conditions and on pro- jections for the near future that DEP officials have begun the process of careful examination of program activities and manage- ment decision—making to determine what functions are essential from their vantage point, which ones are resource intensive and which ones will be de—emphasized in coming months as conditions worsen. There are ways in which EPA can be actively responsive to the management issues confronting DEP, and in light of the fact that priority setting has already begun, EPA may be well advised to keep careful account of developments in Maine. The most recurrent theme voiced by DEP officials and perhaps the source of their greatest frustration with EPA is the incremen- tal addition of new or altered program requirements imposed by the federal government. It appears to DEP that program officials in EPA are unaware of the squeeze being experienced by State environmental agencies: limits are being imposed on the growth in size of State agencies, and State and federal support for State efforts continues to slip in real dollars. In response to these pressures, slippage, delay and avoiding meeting these requirements is already occuring as a matter of deliberate decision. For this reason, existing federal require- ments should be analyzed carefully to identify program priorities and requirements that are more essential than others to the ful- fillment of quality improvement in evironmental conditions. EPA should be aware of the expense to smaller states of highly sophis- ticated monitoring and analytic equipment which, although offering more precise scientific data, requires skilled operators and is time- consuming. The value of new requirements for quality assurance is appreciated by Agency staff, but its resource—intensive nature presents problems. Changes in testing procedures and reporting requirements also impose burdens on DEP. Agency personnel expres- sed interest inter—state approach to testing and sample analysis equipment needs for the New England States. EPA should not be surprised if some deedlines for State sub- missions are missed or if the quality of certain reports deterio- rates, for DEP personnel will be making conscious decisions on activity priorities. For this reason, EPA officials may be well advised to enter into direct discussion with agency program per— sonnel at the State level in an effort to reach some understanding, if not agreement, on proper activities for attention under condi- tions of fiscal, time and staff constraints that are sure to grow more acute in the near future. EPA should also expect positions to be filled at a slow pace or not at all because: (1) engineering positions are not competi- tive with the private market, (2) a loose hiring freeze is in effect in Maine, and (3) DEP’s hiring is limited by staff level ceilings imposed on them by the legislature. ME - 8 ------- While DEP acknowledges the need for national consistency, EPA’s responsiveness and flexibility by to the needs of individual states (and those of the Region generally) will make the Agency’s task of dealing with fiscal, political, administrative and environmental con- ditions both easier and more effective. (It should be noted that Maine officials also expressed the need for EPA to provide them with more guidance on program priorities.) DEP officials would like to see the development of better means to measure program successes beyond mere numbers reporting. It was suggested that 0MB personnel, for example, re—evaluate the need for state agencies to inspect all major sources of pollution in a given period during times of resource constraints; the focus of attention should be the remedying of persistent problem sources of pollution. CONCLUSIONS Maine’s Department of Environmental Protection appears to be on the edge of a period of general fiscal austerity. While small increases in State and federal funding are foreseen, they will not keep pace with the pressures of inflation. The incremental addition of new Federal program requirements while not individually impossible to deal with, cumulatively have begun to take their toll overall on the Agency’s ability to deal with environmental problems in a truly comprehensive, in—depth manner. Management has predictably and sensibly responded by carefully examining all activities of the Agency in order to establish priorities for the future. While morale appears good, a sense of mounting frustration and concern was communicated. Top officials are concerned about fiscal and therefore programmatic, conditions confronting the Agency and have begun the belt—tightening process. An EPA partnership approach embracing active support for DEP will become increasingly important over the coming months and years. ME - 9 ------- FIGURE 1 MAINE LEGISLATIVE APPROPRIATIONS FOR THE DEPARTMENT OF ENVI RO!’!MENTAL PROTECTION CURREN T $ 76 77 78 79 80 81 (SOURCE: Analytic Center I, basedon figures provided by DEP) L4 3 2 C ’) -J $ 1 0 FY 75 ME — 10 ------- FIGURE 2 MAINE’S TOTAL STATE BUDGET APPROPRIATIONS FY 1975 1976 1977 1978 1979 1980 (SOURCE: ANALYTIC CENTER I, BASED ON FIGURES PROVIDED BY MAINE DEPARTMENT OF ENVIRONMENTAL PROTECTION) 600 500 L O0 300 200 100 0 C/) -J -J CURRENT $ qb .,_-.— 1972 $ 1981 ME — 11 ------- FIGURE 3 MA I NE CM 105 AIR POLLUTION CONTROL EXPENDITURES STATE-CURRENT $ . FEDER.AL-1972 $ 0 1979 (SOURCE: ANALYTIC CENTER I, BASED ON FIGURES FROM EPA FINANCIAL STATUS REPORTS) New for u1a for f.d.ral CAA grants 2 Corrected for S quarter fiscal year for federal grants OO CURR T AND 1972 CONSTANT DOLLARS ‘T r... C,, C . ,, = 44 300 200 100 0 .STATE-1972 $ FY1975 1976 1977 1978 1 2* ME — 12 ------- FIGURE 4 1 1$ 1. 0. 0. MAINE WA §106 WATER POLLUTION CONTROL EXPENDITURES (CURRENT AND 1972 CONSTANT DOLLARS) U, -J 4 * 0. 0 FY1975 (SOURCE: ANALYTIC CENTER I, BASED ON FIGURES FROM EPA FINANCIAL STATUS REPORTS) 1 Estimate FT 75 2 Corrected for S quarter fiscal year for federal gr a 3’ State share in FY 7R included S576,269 Maine Loas a .t und match to offset reduced §106 State share which was used for §208 program State match TATE-CURRENT $ $ $ 1977 1978 1979 ME — 13 ------- THE EFFECTS OF INFLATION AND FISCAL PRESSURES ON MASSACHUSETTS’ ENVIRONMENTAL PROGRAMS Hasan Usniani Analytic Center Management Divis ion EPA, Region I ------- OVERVIEW — THE ENVIRONMENTAL LANDSCAPE Massachusetts has the characteristic environmental problems of a major industrial state. It has had to clean up its rivers, clamp down on air pollution by its industrial and transportation sectors, renovate old sewage facilities, meet new standards and build new treatment plants for its wastes. In such areas as cleaning up its rivers and in restricting pollution of air by major industries, its efforts have been quite successful. But even as the corner is turned in older pollution—control programs, new problems of pollution keep surfacing, or older ones ignored in previous efforts now need immediate attention. In the air quality field, the regionwide effort to convert to coal as a a major energy source (Brayton Point Power Plant is an example), requires the ability to predict the full dimensions of particulate and other emission problems. Dealing with these pro- blems means a major investment of modeling, planning arid other analytic skills on the State’s part. Motor vehicle related pollu- tants such as carbon monoxide and ozone are the other continuing threat to clean air. The passage of enabling legislation last year by the State, to implement an auto inspection and maintenance program by 1982, is going to require expenditure of new funds. Meanwhile, the on—going monitoring of enforcement activities with respect to major and minor industrial pollutors in the State must continue. In the water area, most rivers which were once extremely polluted, have been, or are well on their way to being, restored enough to support fish and aquatic life and permit swimming. One big challenge is the clean up of Boston Harbor into which sewage from combined sever overflows is discharged occasionally, as well as sludge from wastewater treatment facilities. Upgrading the existing sewage treatment facilities and controlling the sewer overflow and storm runoff to deal with the Boston Harbor problem is a complex arid expensive undertaking. There are also local sewage treatment questions around the State needing resolution. The biggest issue on the State’s current environmental agenda is “hazardous waste . Most of the high technology industries in Massachusetts, as well as hospitals and research laboratories, produce this waste in significant volume. Massachusetts so far lacks the necessary recycling, treatment and disposal facilities necessary to care for these waste materials. Since illegal dumping has already contaminated the water supply of at least 26 communities and can, in the future, cause irreversible damage to the State’s groundwater supplies, immediate action to deal with this problem Is being called for from all sides. More State resources will inevitably be channelled into this through the Hazardous Waste Division set up within the State’s Department of Environmental Quality Engineering (DEQE). MA - 1 ------- Other environmental concerns relate to the development of wetlands (the Commonwealth seeks to closely regulate development both to protect home buyers and to protect wetland areas for their inherent value). There are also fears of oil spills from offshore drilling around George’s Bank. that could harm the rich fishing areas and severly affect tourist trade to beach areas. A recently appreciated danger is posed to Massachusetts’ lakes through the phenomenon of acid rain. As this acidic precipi- tation can cause severe damage to fragile lakes, the Commonwealth may face expensive (and not always possible) post rain clean—up efforts. THE COMMONWEALTH — BUDGET SITUATION The major source of revenue in Massachusetts is a state in- come tax yielding 50% of total revenues and a 5% sales tax yielding 20%. The Commonwealth also relies upon a corporate income tax to provide 12%; a range of other taxes on motor fuels, alcoholic beverages, cigarettes, etc. complete the revenue picture. It is important to note that Massachusetts has gone through a very painful budgetary crisis in the last 5 years. In Fiscal Year 1976 (7/1/75—6/30/76), the Commonwealth was faced with the largest current budget deficit of any state in the nation. Mean- while, the economic base appeared stagnant and eroding and unem- ployment was 40% above the national average and rising. A de- clining tax base had led to sharply reduced tax revenues, but anti—tax sentiments would not permit any large increase in the tax rate. Yet the State constitution required a balanced budget, a job made more difficult by the fact that one—third of the bud- get was fixed by law and could not be reduced. A number of drastic steps were taken to deal with the pro- blem. The State implemented a hiring freeze and eliminated thousands of permanent positions through attrition. It postponed expenditures on some programs and undertook an intensive review of budget items. It also made attempts to rejuvenate the State’s economic base, while at the same time cutting assessments on counties and localities. Finally, it required most agencies to operate at or below previous levels of funding, despite inflation, and make them absorb all costs of the Collective Bargaining Agree- ment (negotiated with State employees in 1977) within those budgets. The Commonwealth’s budget did move into the black in FT ‘78 but the tight rein on expenditures has continued since. Despite the fact that currently the State’s economy is in much better shape than even the national one*, total budget expenditures have increased only *(The unemployment rate in Masachusetts is currently 6.8% while the national average is 7.8%.) MA-2 ------- nominally and agency expenditures even less so. In constant dollars, the total State budget has increased by only $12 million in the last l years. Agency expenditures have grown by only a total of 11.6 percent (less than 3 percent annually) from 1975 to 1979. When it is considered that 85% of all agency expenditures go for Human Ser— vices and Education and that overall some new programs must have been added over this time period, Agency budgets may not have in- creased at all even in nominal dollars. If 8 — 10% is taken as the average annual inflation rate during this period, such policies represent quite a substantial cut in agency budgets in real dollars. ENVIRONMENTAL AFFAIRS — BUDGET SITUATION : Environmental Affairs, at 2% of the total State budget and 3% of all Agency expenditures, is not a large Agency. Furthermore, its departments handle not only EPA—related responsibilities, but also responsibilities which at the Federal level are considered the domain of the Department of the Interior and Agriculture. All EPA—related programs exist in the Department of Environmental Quality Engineering (DEQE), with the exception of the Bureau of Solid Waste which is in the Department of Environmental Manage- ment (DEM), and Pesticides which is in the Department of Food and Agriculture. DEQE was created in 1975 by consolidating most EPA—related programs into one department. The following chart demonstrates that DEQE funding from the State remained fairly stable at $5.3 to $5.4 million during 1976, 1977 and 1978 but jumped to $6.9 million in 1979 partially due to the addition of a $0.7 million appropriation for hazardous waste. Clearly then, the total DEQE expenditures have not kept pace with inflation although they seem to have done no better or worse than other agencies in general. Considering the fact that DEQE has taken on a number of new programs during this time period, the situation, even in nominal terms, begins to look worse. DEPARTMENT OF ENVIRONMENTAL QUALITY ENGINEERING GENERAL INFLATIONARY EFFECTS For background information, it is important to remember that DEQE was created in 1975 the same year in which the most restric- tive budget (in terms of expenditures) in recent Massachusetts history, was introduced. Hence, the Department started out lean and in FY ‘76, ‘77 and ‘78 received almost level funding from the State. As the State budgetary situation has improved, funding for DEQE did increase somewhat in ‘79 and indications are that appropriations will be even higher in FY ‘80 and ‘81. Through extensive effort, DEQE Commissioner Cortese was successful in obtaining 40 new positions from the State Legislature for this coming fiscal year (26 in hazardous waste and the others spread around) which reflects a high degree of support for the environ- ment despite difficult budgeting times. The Commissioner feels he would need 700 to 800 positions to do everything required by MA-3 ------- SSACHUSETTS BUDGET - DEPART11E 4T OF ENV I RONMENTAL QUALITY ENGINEERING TOTAL FEDERAL A STATE CURRENT A 1972 CONSTANT DOLLARS FY 76 TO FY 79 $ KEY: CURRENT E 1972 _______ $ (SOURCE: ANALYTIC CENTER I. COMMONWEALTH OF MASSACHUSETTS. BUDGET INFORMATION) 7.0 6.0 5.0 ‘4.0 3.0 2.0 1.0 ‘I, -J -J 4, F”76 FY77 FY78 FY79 MA — 4 ------- the State and Federal government. With the Department currently authorized at 450 employees (2/3 state and 1/3 federal), the Commissioner’s ideal growth seems unlikely in the future. Personnel recruitment and retention for DEQE are a nightmare. The department is hampered by an archaic civil service system, veterans preference problems, unusually burdensome paperwork re- quired by the State before filling authorized positions, and salaries which are not competitive in Massachusetts. Salaries of engineers and skilled support personnel in the private sector in Massachusetts have gone up dramatically within the recent past, swelled by inflation and by both the needs of the State’s high technology industry and the demands of the environmental consulting firms located in Massachusetts. For example, an engineer who can obtain a starting salary of $17,900 with the New England Telephone Company, receives only $14,200 at DEQE. This accounts for both a high turnover and a high vacancy rate. In the Air Program, for example, 20 — 30 percent of funded staff positions have remained unfilled at most times in the past few years and the situation is currently worse in the Water Program. DEQE has been forced to compound its personnel problems by using consulting firms to clear the work backlog created by understaf— fing. These consulting firms have, in turn, hired DEQE engineers by offering high salaries to carry out this lucrative and growing business. In order to improve the competitive position of the State in hiring and maintaining staff, one official suggested that EPA could offer more local educational financial support to the em- ployees of state and local environmental agencies. Educational institutions could benefit from environmental curriculum develo- pment and a fellowship program could provide an incentive to em- ployees in state and local government for obtaining needed and beneficial advanced training and/or advanced degrees. tlnderstaffing in DEQE has, ih turn, fed into a paperwork back- log. There is a stongly expressed feeling that EPA is requiring unnecessary reporting for new and existing programs (SIPs are cited as an example). Clearly, with limited staffs, each employee is forced to assume a large paper workload and divisions sometimes ignore or delay the filing of reports which they feel EPA does not need. Another area demonstrating strong inflationary effects are the fringe benefit and indirect costs charged by the State’s office of Administration and Finance to Federal grants received by DEQE. Fringe benefits rates are 28.8% , up from 24% in 1979 and the in- direct cost rate is 9.5%, up from 6.39% in 1979. These sums mean that 38 out of every grant dollar given by EPA to DEQE is designated for these areas. DEQE also faces increases in transportation costs, including fuel and vehicle maintenance, which increases inspection charges MA - 5 ------- substantially. As a result of these increases, fewer routine inspections, more limited monitoring, and less routine analytic work for communities can be completed. There is also a general concern in DEQE both about under- taking Federal programs that may become State funded programs in the future and about accepting new programs that are not funded. For example, the State is thoroughly evaluating the advantages and disadvantages of assuming delegation of NPDES and PSD respon- sibilities because of resource considerations and other program needs. In the past, DEQE and divisional priority setting had been accoc plished on an “ad—hoc” basis. This year a “Program Plan” has been required of all divisions. This new effort to develop a man- agement and control system may not yield significant savings at first. But, by making possible the better development of program priorities and resource utilization, it may be able to offset inflation—induced and other cost increases in the future. WATER POLLUTION CONTROL Massachusetts water pollution control programs have long en- joyed strong political support. As the following chart indicates, in spite of this support, State contributions to the S106 water pollution control program have remained level at $1,009,582 since 1975 while Federal appropriations have fluctuated slightly upwards. Total water pollution support for the Commonwealth in 1976 was $2,138,450 which rose to $2,321,450 in 1979 for a current dollar growth of 81. In 1972, constant dollar terms, however, this represents a decrease from $1,572,389 to $1,304,185 in 1979 — a drop in purchasing power of 17%. The Massachusetts Division of Water Pollution Control, however, recently received delegation of 205(g) Construction Grants Administra- tion funds. Because of the large dollar amounts iathe construction grants program, Massachusetts officials perceive a real need to ac- celerate the process by which grant dollars for the construction of treatment facilities are obligated to grantees. Delays raise admin- istrative costs and exacerbate inflation’s impact on construction costs. The State also expressed concern over the frozen Fl ‘80 construction grant funds. This deferral in construction grant monies, according to Massachusetts officials, has added 8% to the cost of facility construction within the past six months alone. The Massachusetts Division of Water Pollution Control has 239 authorized positions — 102 State funded and 137 Federally funded. Currently, the Division has approximately 99 vacancies. Many of these vacancies exist because of the newly acquired 205(g) delegation, but the Division experiences the same hiring problems felt throughout DEQE — Civil Service constraint8, time consuming hiring procedures, veteran’s preference, and low salary levels. The Division also experiences a 40% turnover rate of new employees which further com- plicates the staffing process. MA — 6 ------- MASSACHUSETTS CWA 1O6 WATER P0LLUTIO ! CONTROL EXPE JTURES (CURRENT AND 1972 CONSTANT DOLLARS) FEDERAL-CURRENT $ 1. 14 l.3• 1I0 STATE — CURRENT $ o.g. 0.3 0.7 1% FEDERAL-1972 $ STATE - 1972$ 0.6- 0.5 I I I I FY’75 1976 * 1977 1978 1979 1980 (SOURCE: ANALYTIC CENTER I, BASED ON FIGZRES FROM EPA FINANCIAL STATUS REPORTS) Corr.ct.d for 5 quarter fiscal year for federal grants -J -J 4* MA — 7 ------- Although the §106 program has received some funding relief because of 205(g) monies, the Water Division perceives it will still experience shortfalls in funds for emergency response, basin planning, and monitoring activities. In addition, the Division is considering all aspects of accepting the delegation of the NPDES program because of the resources needed and other program demands. (i.e., The State feels it needs a groundwater discharge permitting program.) One official commented it would take between $3 million and $5 million per year to provide a groundwater program in Massachu- setts. Groundwater programs are much more difficult than surface water, as determining the extent of subsurface testing required is complicated. For example, the Commonwealth has made one attempt to do an underground investigation at the Stepan Chemical site. The underground testing program consumed 18 months instead of the scheduled 9 because of the time consumed in negotiating permissions to drill testing holes. This raised the cost of the project to $120,000 from the allotted $80,000. Even with this expenditure of time and money, the Division is still not sure of the extent of the subsurface problems in the Stepan site area. The Clean Lakes (314) program in Massachusetts has not been large, although it could become much more important if the “acid precipitation” problems increase. However, most of the federal funds used for funding personnel in this program will terminate in April 1981 which will force the State to seek alternative funding sources or terminate the program. AIR POLLUTION CONTROL The Massachusetts Division of Air Quality Control has many com- plex problems. More ad hoc issues such as coal conversions and acid precipitation” have consumed a large portion of work years. The program with 175 authorized positions has 81 state—funded posi- tions, 94 federally funded, and usually has 20—30 vacancies. Staf- fing in the air program, already made difficult by the problems mentioned previously in this report, is further aggrevated by the fact that transportation specialists and planners are particularly hard to hire. A dearth of graduates in traditional engineering schools with air pollution expertise, as well as a lack of candidates with training in transportation planning, complicates the problem. Qualified candidates, when they are available, are rapidly hired by high—paying environmental consulting firms in the Boston area. Be- cause of these high vacancy rates, the Air Program must, in turn, look to consultants to accomplish their work. A further staff drain to the Air Divisin is the loss of four department engineers, on loan this year from the air program to the hazardous waste effort. In the chart on page 10, which depicts §105 Air Pollution Control expenditures, one notes that an increase of 80% in Federal §105 grants from 1975 to 1979 realizes a more modest 32% overall increase in 1972 constant dollars. Similarly an 83% increase in State contri- butions to the air program shows only a 33% overall increase in 1972 constant dollar terms. When one considers the substantial growth in in Air Program requirements with the 1977 amendments, the 33% increas? MA-S ------- over five years may not be adequate. The air program also experiences the same indirect charges (9.0) and fringe benefit charges (28.87) on Federal grants mentioned previously. In addition, in FY ‘80, the §105 grant furnished $56,000 in a receipt account to provide funds for the Commissioners Office Activities in support of the air program. Due to increasing costs, a request for $208,000 for the Commis- sioners office has already been received for FY ‘81. The Division copes with a high vacancy rate, increased grant charges, the loss of key staff to hazardous waste, additional responsibilities from the 1977 Clean Air Act amendments, and new responsibilities required for energy and acid rain efforts in a variety of ways. The following are a few examples: — Lead SIP and TSP secondary standards are considered very low priority. — PSD and New Source Review will not receive immediate attention although these efforts may move to a high priority by next year. — Monitoring cannot be reduced, but the air program has moved to consolidate and improve its monitoring network. — Enforcement actions are limited because staffs are too small to: enforce regulations on the books, do plant visits, complete plan reviews and permitting and respond to general nuisance complaints. New hydrocarbon regulations are complex and the State is moving slowly to enforce the regulations. Major source reviews and stack tests are also limited. — New energy regulations promulgated in Massachusetts require more and closer scrutiny of small sources. As the Air program has little hope of enforcing their old regulations in all cases, these new regulations exacerbate the problem. — CO Hotspot is also a low priority effort and Massa- chusetts has refused to deal with it during the SIP process. — The I&M program approved by the legislature, still has no funding from the Commonwealth and, for a variety of complex reasons, might not be in the starting block by January 1982. Another concern of the Air Division related to the earmarking of 5105 funds for special programs. The Air Division experiences some carryover monies in §105, principally due to delays in getting the I&M program advanced. The Division suggested that the process MA - 9 ------- MASSACHUSETTS CAA 1O5 AIR POLLUTION CONTROL EXPENDITURES (CURRENT A 1972 C STANT DOLLARS) Pi’ 79 (SOURCE: ANALYTIC CENTER I, $ASED ON FIGURES FROM EPA FINANCIAL STATtS REPORTS) 1* Corrected fQz 5 quarter fiaca year for federal grants 1.7 1.5 1.3 C l) 4* 1. FEDERAL - CURSENT STATE CURRENT $ .5 $ Pi’ 75 STATE 1972 $ FY76 P1 77 — 10 ------- of writing program plans when substantial sums are earmarked for special program as they are in the §105 program, could be more effective and tighter if grants were awarded for two years rather than one. HAZARDOUS WASTES The Hazardous Waste Division was organized within DEQE in December of 1979. The Division originally received no money from state sources, and was staffed by borrowing individuals from other programs. For example, four Department Engineers from the Air Division serve as regional co—ordinators for de— veloping the hazardous waste program plan. The wetlands director is preparing hazardous waste regulations and a water pollution planner, a shellfish expert, and an attorney from water supply have been moved to Hazardous Waste. Twenty six positions autho- rized by the legislature for the hazardous waste effort will provide additional staff by later in 1980 when the Commonwealth will file for interim authorization of its hazardous waste pro- gram. The Commonwealth must dispose of 37.5 million gallons of hazardous waste generated by local industries, but still does not have an approved hazardous waste treatment facility. Recently, Massachusetts enacted a new hazardous waste siting law which con- tains neither local veto power nor state mandate. Instead, a formal negotiating process between developer and community is established and, if necessary, a system of arbitration developed if and when a developer proposes to build a hazardous waste dis- posal site. As the citizens of most Massachusetts’ cities and towns are opposed to having a hazardous waste facility in their community, the siting process may be a long and difficult one. This presents a particular dilemma, as environmental officials view hazardous waste as both a management systems problem and a regulatory problem, with the former being the more important focus of effort. Facilities need to be in place if efforts to halt midnight dumping practices are truly to succeed. Regulation, in their absence, would do little. The Commonwealth will probably have from 400 to 600 uncontrol- led sites, which potentially contain some concentration of hazardous wastes, the largest number in New England. Because its industry is old, municipal and private landfills as well as backyards have been used as dumping areas for years for wastes from electroplating, paper manufacturing, tanneries, and chemical industries. For example, some sites in Woburn have been used to dispose of what are now con- sidered to be hazardous wastes for some 150 years. The hazardous waste effort in Massachusetts, as elsewhere, requires tremendous analytical support, special safety and labora- tory equipment, and highly trained staff. Officials expressed concern that Masssachusetts laboratory facilities may not be able to cope with the expected demands. Existing laboratories may be unable to do the testing of samples from uncontrolled sites and are insufficiently staffed for peak periods. MA - 11 ------- THE BUDGET PROCESS For background information, it is useful to become acquainted with the budget process in Massachusetts w-here the fiscal year be- gins on July 1.. Formal budget preparation for the next fiscal year begins in July. No budget targets are established, but requests for priority programs originate from the seven division directors to the DEQE Commissioner. Each division chief makes a presentation before the Commissioner and the Deputy Commissioners, and the Budget Officer. The first requests include numbers and a narrative describing the rationale behind priority programs. Negotiations between the Commissioner and the division directors last until mid—August. The DEQE request is submitted on September 5 to the Secretary of Environmental Affairs. The Secretary holds hearings on Agency budgets in mid—November and submits his recommendations to the Governor on December 1. The Governor presents his budget to the legislature within the first three weeks of Janaury. The Boston Globe described in detail the Massachusetts budget process in, “How a State Budget Gets Passed”. The article is attached. Federal grant monies are factored in at the beginning when each division compiles its budget request. Details of grant re- quests are not sent directly to the legislature. However, the legislature must sign off on any grant request above $100,000. It generally does so without pause when sums under a million dollars are involved. By statute when sums of a million dollars or more are involved, as occurred recently with the 205(g) delegation, the grant request must be presented to the Ways and Means Committee of the legislature. CONCLUSIONS - — DEQE has followed a strategy of retaining the main elements of all programs in favor of a strategy of concentrating resources on a few items. It has chosen to move resources from the better funded programs to the less well—off, rather than expanding those receiving more Federal funds and drastically cutting or returning to EPA those which the State was not adequately funding. It is clear, however, that new developments are already facing a rethinking of the existing strategy. While the return of delegated programs to EPA seems unlikely, new priorities in DEQE may not be in con- sonance with priorities set by EPA Headquarters and reflected by the sums in EPA’s funding categories. — New development in both the “second—generation” of pollution problems surfacing in Massachusetts and in more complex and resource— intensive requirements being imposed by EPA in its older and some- time—to—be delegated programs put substantial pressure on DEQE. The second generation” pollution problems are Thazardous waste”, “acid rain” and energy—conversion problems. Hazardous waste” is MA - 12 ------- imposing tremendous political demands for action and will require a major commitment of the highest quality analytic and management talents. Similarly, the “energy—conversion’ regulations are requiring an investment of modeling and analytic skills. More important, energy problems refocus the enforcement and monitoring efforts of the Air Division on stationary polluting sources just when the Division felt that it could turn its attention to mobile polluters. The acid rain problem again requires carrying out expensive studies to determine how to protect lakes and water supplies threatened by this pollution. — EPA should take a hard look at reporting requirements as the State agency is unlikely to continue submitting all the reports required now. It may be better for EPA to determine how necessary information could be gained from fewer, consolidated reports. The State, for its part, could assist EPA by indicating which reports it finds particularly burdensome and/or which reports the State feels may be of questionnable value. — Federal Grants from EPA are tied to specific outputs, (num- ber of inspections, etc.). When programs are initiated, grant funds may not be Out of line with program requirements. The re- source problems escalate as the years pass and funds remain the same (thus decreasing in buying power) and yet the outputs are not re—evaluated. The State suggests that EPA and the State should work together to determine the most efficient use of scarce State and Federal resources to achieve effective program goals and not direct substantial efforts to the completion of routine tasks. Instead of layering requirements on top of requirements, EPA and the states could seek to determine if program needs have charged and If new approaches might be more effective. The state suggests ‘that some examples of programs which could benefit from this con- sideration are: enforcement inspections for air and water, com- pliance monitoring, and the sampling and analysis of water distri- bution systems. — The state also suggested that it could be more effective and document problem sources more accurately If it could stop monitoring all major sources once a year and concentrate Its effort on mon- itoring problem sources several times each year. MA - 13 ------- - ‘- kovi a state buc.ç’c ccs rassed - _(T - : jo€. :.:’- • - - --. - --- . - ---- , .- -— _ I—- _ - w _ 5— - . ,1 / - - — — - — a - , -, , / E- t — / — - - — 1 / . d L / - -- - • -..‘ - - - - - - : . .- ... ¶ -- .— > u”—”.D; - — - - • ,,.sá f - f -. - ,- - — ii -. (I / — - — __7 / / /7 - -- - /. ‘ 7 -: :. . - ; The state budget: Start to finish By tAUZ Gisbe &aff Each July I - or therna ds - the go ’- eenment at Masoachusetts w s the be at a : whme only aA o rvance is * bu1 State House rite In which the governor affixes his signatwe to * unØe. h y piece at ls1aUøn. the state budget. a fat document thet Is the blueprtnt for the way billions of tax ) dollars wil! be spent during the net fisoni z. wr c- erlends from July 1 toJww 30. The ptepsrat i the maso*ve spend- log plan is a ne er -enthng pr Even be- fore the governor a ns one budget ante Law. state olnicisis alr dv are putting together prvl4rntnary spenduig reeommendatisns for the following fi l r. Pleres how the peo s worU Onsing mcli aimmer the various state agenci put together their funding ye- quceta for the tiara! year 12 months down the ro The always 1 ie r i s ate - piled on multicolored (a-ma known as ratnbew shorts. which are vv1ded by the state &sdget umu in the exeeuuveOt- tire of Administration and Finance. hi Seotember. mcli statt agency onido copseaat Us ralnbu. sheet.s to its own Cabi- net iee etari-. the Ways and Mm.ns i tor at the House and the Senate. the Budget Bures i and the Legislative imIt- tee on Pt x Audit and Overstg’in. lii October. (he socretariats. under w ich the individual state agencies afl. bold ub& heartep on the . s ly attended only by rep. entauvol ol vail- mis interest geot . By the end at October. the s tarists. m ach as Human Servlun. Environmental Affairs. and Edurauon Aaalrs. file their spending r mniendsticeas with the Office at Administration arid Finaree. The etarist r imendaDom are ived from the agenc rn uesis. but mev tably are dra.st llv -ea. ni as ev1 nne1 by the r tt remark atone key budget offi- daI 1IelI. we dotit psy any attention to what the agencies my they n . Theyre always tat%aUng their figusva - Once the senetariat mmidat is s ctt the eaecuLive Office at Admtntstr*- Lion and Finance, the governors cud bud- get arm, the governors budget erpmis he- n the I l uinetuntrig that will im.dt in the govcrnors final budget propr L The diort tnvc ves getting the various budget r uesta in line with the other aide of the financial huger - tax revem and federal By January. the Administration and Finance Office has compiled .s Anal money uest$ In * d .unerat known as House 1. arid the governor then aibmits lt to the Leg- Islature for Its apprvira l While AdnilnIstratlon and Finance has i preparing the governors proposed budget. the stalls of the House and Senate Ways and Means Committees she have !i x .rthlng agency and money The House Ways and Means Committee. which has first crack at the budget. t the governors House 1 biadgee as a frame- work. Reviewing each at lJ e governors hundreds of budget rrcommendauons. which together add up to his administra’ Lions paItt the House committee ups spending here. reduces it there and, and so doing. signals the administration whether Its prlorn ate to line with those at the - - The committee also conducts public beatings at which members of the public and representatives of various r rrmt groups make a public pitch. Many of th psople she meet privately with committee Sometime in April the House Ways and Means Committee sends Its budget version to the floor of the House TradItIonally, the hatty xumeot is deba red. amended and pas by House members in an overnight marsUmn session. The final House product which ran be millions of dollars more or k s than what the governor proposed. is then sent to the Senate. where the pea-ma Is re tod. Once the Senate a-rrp’e:es action on the budget It is returned :o the House where membus Inevitably vute noi to cooDe with what the Senate has done to “their’ bud- get The I — .çmker and the Senate presi- dent then name a stx-member confetence committee, imially made up at the chair- man and vice chairman at the House and Senate Ways and Means Committees arid a Repubtirari minority a from each tham . - Th six, flanked by stall members who have been wa-king on their resectwe badgets for mont .s work out the final tie- tails at what eventuafly becvmes tie spend- tog bkeprtct for the net year. - The conference committee. where the fit cal 1981 budget Is right now, can take a few days — or several weeks — to work out a budget aceeptable to both houses. T :s y ihe prognosis Is for aw’. t ifere mittee action, since both House and nate chairmen have tn cated thac the sicris. private and puhllc.. haye been going “amicably.” - The product that comes out at the maP ference committee is voed on again by tie House and Senate members. But tba time Its a straight ‘up or down” te. wvJi sose de ate. but no amendments. Unless something is drastically citand from what went into the eonferene cog’ mittee. the budget Is rouUnely aixepted aol sent to the governor. - - The governor’s budget aides ona agan pore o the document. From this yes’leS comes a number at “line item vetos. natorial rejer-tion of individual ap ’ro9rW Lions with which the governor does agree. The governor has 1.0 days iii a this. li the Legislature Is still In ‘at tie mid of tIe 10 days. it ran ova-ride the gaier not’s hoe ILe vetos hy a two-tl’u - s Otherwise the appropriations are ed as the governor wishes. By this time, the ccoirrionweaJ i-S flacal year Is about to begin on Jul’- I. ‘ • tnultiblllion budget ready tofins . x government operations. And oil In a number at stui’-y St*i House rmans. penpie already are for ne r. — “ .. ;.;‘,. 4- / , ‘ 2.1. -: ‘ - £XPL4I ER MA — 14 ------- THE EFFECTS OF INFLATION AND FISCAL PRESSURES ON NEW HAMPSHIRE’S ENVIRONMENTAL PROGRAMS Janet Corcoran Analytic Center Management Divis ion EPA, Region I ------- OVERVIEW ‘The only way to save is not to spend.” So concluded a 1949 Manchester Union Leader editorial written in opposition to a state income tax proposal. In 1980, New Hampshire still does not have an income tax, and the traditions of fiscal conservatism and low taxes continue to prevail. After adjusting for population size and wealth, New Hampshire ranks 44th in overall state spending. Consequently, federal funds are particularly crucial to maintaining the state’s environmental programs. The bottom line with support for its en- vironmental programs is that the state cannot spend what is unwil— hag to raise. In 1978 and 1979, New Hampshire collected the lowest level of taxes per resident of any state government in the country — $283 in 1978 (compared with a U.S. average for state governments of $523 per person). The taxation system draws revenues from many sources. Taxes are levied on liquor, beer, and tobacco, rooms and meals, and revenue is received from the sale of sweepstakes tickets and grey- hound and horse racing. These sources brought $120 million into the State FY ‘78, or nearly 1/4 of the state’s budget. In addition, there are taxes on gasoline and business profits, highway tolls, and fees are levied on a variety of licenses and certificates. Despite demands for more services and a projected shortfall in state revenues of up to $25 million for FY ‘81, the political climate remains solidly against imposition of an income or broad—based sales tax. Any move toward an income tax has been avoided by governors and legislators alike. A noteable feature of New Hampshire’s environmental program is its administration by several different units. There is no umbrella environmental agency”. Rather, environmental responsi- bilities are divided among the Air Resources Agency, the Bureau of Solid Waste Management, and the Water Supply & Pollution Control Commi $ s ion. The Water Supply & Pollution Control Commission has primary responsibility under the Clean Water Act and the Safe Drinking Water Act to protect New Hampshire’s water resources. In 1978, New Rampshire became the first state in Region I to be delegated CWA 4205 construction grant responsibilities. The Commission has not accepted delegation of National Pollutant Discharge Elimination System (NPDES).* The Air Resources Commission and the Air Resources Agency were established in 1979 under the state’s air pollution control legislation. Prior to that time the air program was under the *In analyzing each of the state’s environmental programs, EPA and State Officials, as well as financial reports and budget documents, were relied upon for information. When asked to participate in this study; the Water Commission’s Director declined to do so. NH — 1 ------- control of the Department of Health and Welfare. The Air Resources Commission has nine members who are appointed by the Governor to terms of 2, 3 and 4 years. The Commission sets general air policy for New Hampshire and is charged with developing a plan for the state to curb its air pollution problem in time to meet the 1982 deadline. The 30 member staff of the Air Resources Agency has overall responsibility for implementing the state’s air program. Considered a rural area under EPA standards for auto—related pollutants, New Hampshire does not have to follow rules as stringent as those applicable in the more urban New England states. However, for the other pollutants the rules are the same. There are smog, CO, SO 2 and suspended particles problems, most prevalent in the booming southern tier of the State. Since the smog problem in the southern non—attainment region of the state is to a significant de- gree caused by transported emissions from out—of—state urban areas, New Hampshire will have until 1987 to meet the NAAQS standards. The Agency has accepted delegation of the NSPS program and has some NESHAP authority. In June 1980, New Hampshire temporarily revoked its PSD regulations until the final EPA regulations resulting from the Alabama Power decision are promulgated. The Bureau of Solid Waste Management is located within the Department of Health and Welfare, Division of Public Health Services. The nine member staff has responsibility for solid waste management, resource recovery, and hazardous waste programs. In response to a lack of hazardous waste treatment, storage, or disposal facilities in the State, New Hampshire established a hazardous waste management program in 1979. It is uncertain at this time how ultimate respon- sibility for the program is to be divided between the Bureau and the Water Commission. The Bureau has overall responsibility for solid and hazardous waste management and is in the process of adopting implementing regulations for its hazardous waste program with assis- tance under a RCRA technical assistance grant. The Bureau will be applying for interim authorization by the end 1980. The Water Commission’s involvement with hazardous wastes includes responsi- bility for protecting ground and surface water from contamination and conducting testing for the Bureau, which lacks its own facility. There is some question about the Commission’s capacity to meet the hazardous wastes sample analysis needs. In 1981, the New Hampshire legislature will be considering pro- posals to provide funds for the cleanup of identified abandoned hazardous waste sites and to establish a general cleanup fund fin- anced by a fee on generators. Legislation is likely to be intro- duced which would raise illegal midnight dumping” in the state to the status of a felony. THE BUDGET PROCESS New Hampshire prepares a budget biennially, and its fiscal year runs from July to June. The State is currently operating in the final quarter of the first year of its two year budget cycle. NH — 2 ------- The budget setting process begins in early summer, when general guidelines and instructions are transmitted from the Governor’s Office to the various departments. Generally, a department is in- structed to prepare its budget request in two columns: maintenance and change columns. The maintenance component is the amount needed to provide the same level of services, using the just completed fis- cal year as a base, and factoring in the projected rate of inflation. New or expanded program requests are set out in a separate “change” column. In contrast to the budget preparation process for FY ‘80 and F? ‘81, when departments were instructed by the Governor to “hold the line” and operate within the constraints of the previous fiscal year’s budget, they have been allowed to work with a 12% inflation rate for FY ‘82 and F? ‘83. The challenge of operating with a maintenance budget in the face of increasing costs and demands for services forced the de- partments to “prioritize” their programs. While no formal zero base budgeting process is conducted, informal discussion of pro- gram priorities does take place within each department. Support for essential programs comes from the maintenance column, while those programs lower in priority are placed in the change column. The budget request will cover all program needs, taking into ac- count EPA requirements and expected federal support. In September, the Departments foward their budget requests to the Governor. (The Air Resources Agency, separated from the Depart- ment of Health & Welfare in 1979, will submit its own budget request as an independent agency.) Until his Budget Committee formally con- venes, the Governor has the opportunity to examine budget requests, and may have a department reconsider any unusual or extravagant figures. The formal process of review begins in early December when the Departments present their requests to the Budget Committee. The Com- mittee includes members of the Governor’s staff, a representative of the Comptroller’s Office, and the Chairmen of the House Appropriations andthe Senate Finance Committees. In 1978, the newly elected Governor broadened the committee makeup to include other legislators serving on the Appropriations and the Finance Committees. The focus of the review is on total budget requests rather than on particular program elements. Department Commissioners or Division Directors may be called on to testify and justify their requests. (In 1980, the Director of the Bureau of Solid Waste Management may also be called on to testify on the politically seastitive new budget issue of hazardous wastes.) By the end of December the Committee com- pletes its review and develops the final budget recommendation, which the Governor submits to the legislature. By law, he must submit a balanced budget by February 15. The New Hampshire legislature convenes on January 1. The Gover— nor’s recommended budget is received by the House Appropriations Com- mittee. Department officials are again called on to testify at hear’- lags and have another opportunity to “plead their case”. Because NH - 3 ------- the budget is presented in terms of line items rather than programs, the committee examines total funding levels rather than specific programs and priorities. While the legislature normally does not get involved in program priorities, its extensive scrutiny of requests for additional staff or travel funds is an important indirect influence on priorities. Al ]. department expenditures of federal funds must receive legislative approval. In April, the Chairman of the House Appropriations Committee submits a budget bill to the House. Public hearings will be held to solicit additional legislative and public comment. Amendments to the House budget bill, will be made at this stage. In May, the budget goes to the Senate Finance Committee which holds its own departmental and public hearings. Amendments to the House version of the budget may be made. If necessary, a conference committee will be convened in June to iron out any differences be- tween the House and Senate versions of the budget. The final measure is returned to the Governor in June for his signature. There are several frequently employed methods by which adjust- ments can be made in the budget. They include the following: 1. The legislature may convene during the off year and auth- orize an appropriation or add a program (while there was specula- tion this procedure might be employed to provide funds for hazard- ous waste cleanup, it was not resorted to). 2. An agency’s line item may allow for carrying over funds from year to year. This mechanism is agency specific. (The Air Resources Agency is exploring the possibility of carrying FY ‘80 funds over into FY ‘81.) 3. When revenue shortfalls occur, an Advisory ,Budget Control Committee can make reductions in funding so as to balance the budget. 4. There is a contingency fund available to the Governor’s Council. SOLID WASTE MANAGEMENT & HAZARDOUS WASTE PROGRAMS While the Bureau of Solid Waste Management has always operated with severely limited resources (see Figure- 2) inflation, conserva- tive attitudes on state spending, diminishing federal solid waste funds, and broader responsibilities for the hazardous waste program are challenging the Bureau’s continued effectiveness in managing the state’s waste programs. While the Bureau’s budget has grown from $33,000 in FY ‘76 to $92,489 in FY ‘79, and federal funding has increased from $12,425 to $69,670 (see Figure 3), most of the additional funds have been spent on salaries. (See Figure 4a). In F! ‘79, 71% of the Bureau’s budget was spent on salaries. NH - 4 ------- About two—thirds of the staff positions were federally funded. (See Figure 4b). Sixty—one percent of federal assistance received by the Bureau in FY ‘79 was spent on salaries. The Bureau Director characterized present budget conditions as “hurting”. He fears the announced phaseout of federal solid waste management grant funds may jeopardize the New Hampshire program. In addition, assuming the State will receive interim authorization of its hazardous wastes program, funding and staff are likely to be diverted from solid waste management. Though the Bureau is uncer- tain about state and federal funding for solid wastes, it is certain that with less federal aid the open dump inventory cannot be coi ipleted in one year. The Bureau has relied extensively on federal funds to supple- ment Its three state—funded staff positions. Six of the present nine—member staff are temporary full—time workers funded under a RCRA grant. The Bureau is seeking legislative approval of four more federally funded positions. The bulk of the Bureau’s $200,000 FY ‘82 budget request consists of salaries for new positions. In 1981, the Bureau’s staffing squeeze will be aggravated by the expansion in its hazardous wastes responsibilities. While the Director feels his staff could administer both the solid and hazar- dous waste programs, effective operation in his view would require twenty people, twice his present staff size. Despite the uncertainty over staff size, the Bureau intends to apply for interim authoriza- tion of its hazardous waste program by the end of 1980. While the state is hesitant to fund new positions in the Bureau (see Figure 4b) and existing staff may be slighted from solid to hazardous wastes, there is also a reluctance to approve federally funded positions. This posture stems from consideration of overhead costs, fringe benefits, and even the prospect of “overcrowding” if the staff were expanded. The Bureau Is receiving help via a RCRA technical assistance panel to develop state hazardous waste regula- tions. Through this arrangement, EPA provides a state or local government with a team of contractors to assist in solving solid and hazardous wastes problems. This process is an important sup- plement to the Bureau’s limited staff capacity. The heightened public interest In and awareness of the hazar- dous waste issue may result in more favorable treatment of the Bureau’s budget request by the Governor and the legislature. The Bureau anticipates extensive oversight of its program priorities for FY ‘82 and FY ‘83. In spite of extremely limited resources, the Bureau will con- tinue to do “as much as it can” by reallocating federal funds, shifting personnel, and restricting travel and equipment expendi- tures. During the 1981 legislative session, measures will be intro— NH — 5 ------- duced seeking funds for the cleanup of known hazardous wastes dumping sites, as well as for the creation of a general cleanup fund, to be financed by a generator’s fee. The state legislature may respond to the hazardous waste clean- up problem by passing enabling legislation which could give a town the legal authority to intervene and cleanup local sites. While the Governor feels the towns should share in the cleanup costs, the Bureau noted the towns lack the technical staff and equipment necessary to handle local sites and clearly cannot absorb the exorbitant cleanup costs, often exceeding the town’s entire budget. The prospect of energy and raw materials shortages and the tighter restrictions on waste disposal will fuel the already sub- stantial statewide interest in resource recovery. While most of the present efforts are strictly local, such as an agreement entered into between the University of New Hampshire at Durham and 12 com- munities to provide the school with steam, EPA technical assistance grants are funding several feasiblity studies throughout the State. AIR POLLUTION CONTROL The Air Resources Agency characterizes its budget as “adequate’. From FY ‘75 to FY ‘77, New Hampshire’s air program received steady Federal support under Section 105 of the Clean Air Act (see Figure 5). In FY ‘78 New Hampshire benefited from a new EPA formula for distribution of Section 105 monies (under the 1977 Air Amendments, all states receive a minimum 0.5% of total national §105 grant amounts) experiencing a 43% increase (33% increase in constant dollars) in federal funding over FY ‘77. Overall, there.has been about a 83% increase in nominal total funding from FY ‘75 to FY ‘79. When inflation is taken into account, FY ‘79 §105 funding is only 33% above the F? ‘75 level. Despite this trend in federal support, the Agency feels federal assistance has not kept pace with the steady growth in the §105 pro- gram requirements. Coupled with inflation, the limited commitment of state resources (see Figure 6) and conservative state attitudes on spending, the Agency feels its air program will experience serious setbacks if federal assistance is not increased. As Figure 5 indicates, there has been a steady commitment of state funds to the air program. In real dollars, the state’s share in FY ‘79 was only 8% above FY ‘75. State aid peaked in FY ‘78 and the Agency does not anticipate any substantial increase in state funding. These trends were attributed to the decline in public awareness of and interest in air pollution. Publicly and in the political arena, hazardous waste is the Thot” environmental issue. Facing a projected budget deficit of $20—$50 million in 1981, and demands of social services programs, the state legislature is likely to give priority to the more immediate and visible hazardous waste problem. As it begins its first full—fledged budget process, the Air Resources Agency is uncertain how it will fare before the Budget NH - 6 ------- Committee and the Legislature. Like the Bureau of Solid Waste, Air anticipates extensive oversight of its’requests for additional travel equipment, and particularly staff funding. Even where total federal funding is available for new positions, the state may be reluctant to approve them as it fears getting “stuck” with a program if federal funds dwindle. The Agency’s director will argue that with inflation, additional state funding is required for it to fulfill the state’s responsibility to carry out federally mandated programs. The Agency maintains that proper administration of the federal air program requires proper financing of each component. It is not the individual program requirements per se as much as “the mass” of federal requirements which are draining the Agency’s resources. The expanded monitoring elements of 1977 air amendments (2 to 6 pollutants, 19—28 sources) were cited as an example. The monitoring is expensive, ties up personnel, and requires substantial travel and equipment allowances. (The Agency is currently restricted by a state—ordered 10% reduction in gas consumption level and a 12,000 mile travel limit.) Because New Hampshire considers data collection the base of all its other air pollution control efforts, the Agency will continue to give priority to monitoring, reallocating staff and funds from other areas when necessary. The Agency’s staff is also straining to comply with the “numer- ous, time—consuming” reporting requirements. Questions were raised about the value of the reports and there was substantial criticism of the lack of federal feedback. Given the Agency’s attitude toward the paperwork” and its assessment of many of the reports as meaning- less, paperwork will most likely be allowed to slide as staff will be directed to engage in what Agency officials believe are more important activities. While the Agency maintains its public participation and con- sultation programs are “current”, it questioned the value and effectiveness of these requirements. The Agency does not have the resources to devote to modeling. While it feels the federal requirements may be useful for planning purposes, there was criticism of using modeling as an enforcement or regulatory tool because “there was too much room for error”. The Agency was not supportive of a regional computer data base and at present restricts its data gathering so as to meet its air needs. As a consequence of the number of demands placed on the Agency, its Director has been forced to “set his own prioritieS”. Agency resources are allocated to the top priority programs (monitoring) while other programs are allowed to lapse. While there is no flexi- bility in shifting state funds allocated on a line by line basis, the Agency has more leverage with its federal funds. The Director commented, “There is no problem with shifting funds, the money moves according to need”. The Director depends on manipulating federal funds to sustain his top priority programs, and was critical of the earmarking of §105 funds for “special pet projects”, as displaying an insensitivity to state needs. NH — 7 ------- The Agency trys to maintain a full boat, preferring to shift funds and personnel as its priorities dictate, rather than reducing total staff size. While salaries are slightly lower than in the private sector, there are rarely vacancies and the Agency has experienced no difficulties in filling openings with qualified individuals. At present, there is no threat of returning any programs to EPA. The Agency depends on its flexible use of federal funds to maintain the program priorities it has set for itself. There is a real threat of refusing to accept any new programs. While the Agency does have some NESHAP authority, the state’s PSD regulations were revoked by the Air Pollution Control Commission in June, 1980. While the state has accepted delegation of NSPS the program has not strained Agency resources as only about 10 cases arise every year. CONCLUSIONS Federal grant is and will continue to be, crucial to admin- istering New Hampshire’s environmental programs. Strong political pressure to keep state spending low and dimin- ished public interest in and awareness of the air program suggest the Agency will continue to receive from the State only its mainten- ance budget, adjusted for inflation (see Figure 5). In FY ‘78, the state’s share of the Agency’s total budget was 43%, declining to 31% in FT ‘79. Like the air program, the state’s solid waste program is not a top state priority. Though the Bureau will seek additional state— funded staff positions in its F! ‘82 and FY ‘83 budget request, like the Air Resources Agency, this request will be subjected to extensive scrutiny by the Governor’s Budget Committee and the legislature. While the Air Resources Agency experienced a 15.75% average an- nual increase in federal funding from FY ‘75 to F! ‘79, in constant dollars the increase was only 9%. In addition, the Agency complained that with additional program requirements and inflation, federal fund- ing is inadequate for effective administration of the air program. The Bureau of Solid Waste also noted the need for additional federal support for effective administration of the hazardous waste program. Inflation and fiscal pressures have forced both the Air Resource Agency and the Bureau of Solid Waste to put their programs in priorit i order. Both Directors stressed that with limited resources their Agency does what it cane, by diverting staff and funds to essential programs, and letting paperwork and reporting slide. The Bureau will continue to look to EPA for staff funding (see Figure 4b). The federally—funded staff positions will become even more important as the Bureau’s hazardous waste program goes into operation and must be upgraded to achieve full authorization within two years. The Agency stressed it has not responded to bribe or incentive NH - 8 ------- grants designed to encourage state acceptance of new delegable pro- grams, such as PSD. There is a need to explore ways of structuring new programs so as to overcome state reluctance to assume responsi- bility for them. For example, New Hampshire has accepted delegation of NSPS (New Source Performance Standards). As there are only about 10 cases of new or substantially modified industrial plants in the state annually, the program is neither a financial nor an adminis- trative burden for the Agency. Also, while there are nationwide standards for new sources which a state accepting NSPS responsibil- ity simply adopts, under the PSD program the state was involved in a long, complex process of establishing its own regulations. The Agency wants assurance of continued federal funding of new special programs” and encouragement that the program fits into the state’s priorities for its air program. Due to the inflexibility of state funds, the Agency called for continued flexibility in the use of federal funds and more sensi- tivity to state program priorities when federal funds are earmarked. EPA should consider the impact of dimInished federal funding for solid wastes on the Bureau’s ability to complete the open dump inventory. Unless more federal aid is received, the Bureau will not be able to finish the inventory within a year. Given the Bureau’s Bureau’s uncertainty as to state assistance for the solid or hazard- ous waste program, continued flexibility in shifting federal funds is also crucial for the Bureau. If the state is reluctant to fund additional solid waste staff positions, RCRA technical assistance will be an important resource for the state as it attempts to upgrade its hazardous waste program to achieve full authorization. The uncertainty over organizational responsibility for the hazardous waste program between the Bureau and the Water Commission should be resolved so that federal. assistance is directed to the appropriate unit, and the capacity and needs of the Bureau in order to achieve full authorization (i.e., testing facilities) can be better addressed. NH - 9 ------- FIGURE 1 NEW HA PSH1RE 1fl’ t ” ’ “ !! T! ’ rr p n rii V! T’I LP P% .LU LUi1LJI L JI U\UL A .i LiU (CURRENT AN 1972 CONSTANT DOLLARS) F’ ’ 19751* FEDEP L 1JRS ENT $ FEERAL 1q72 $ 1979 (SOURCE: A$ALYTIC CENTER I, IASED OW FIGURES FROM EPA FINANCIAL STATUS REPORTS) 1Est aate FT 1975 2 Corrected for 5 quart.r fiscal year for federal grants 2.0 -J -J STATE—CU ENT S • ‘ STATE— 1972 1976’ 1977 1978 NE - 10 ------- FIGURE 2 70 60 50 L O 30 20 10 NEW HA PSH1RE SOLID WASTE PROGRM EXPENDITURES (CURRENT AND 1972 CONSTANT DOLLARS) FEDERAL-CURRENT $ _. — FEDERAL—1972 $ ‘ “.STATE-CURRENT $ STATE-1972 $ * Pt’ 1976 1977 1978 1979 SOURCE: ANALYTIC CENTER I, BASED ON FIGURES PROM EPA FINANCIAL STATUS REPORTS) * FY 1979 was the first year SCRA Subtitle C hazardous waste funds were available to the States. NH received $34,000. C,, C,, ‘I . .— NH — 11 ------- FIGURE 3 NEW HA PSH IRE BUDGET FOR THE EUREAU OF SOLE WASTE (I CURREt4T DOLLARS) 100 90 80 - STATE SHARE 70- 0 50 - FEDERAL SHARE sri. _ - ‘V 0 ’ 30- “0 10- - ---I I _ __ — Pt’ 1975 1976 1977 1978 1979 (SOURCE: ASA YTIC CENTER I. BASED ON FIGURES FROM EPA FINANCIAL STATUS REPORT5) • FT 1979 was the first year RCRA Subtitle C hazardous waste funds were available to tbe states NB received $33,936 NH — 12 ------- FIGURE 4a EW HAMPSHIRE BUREAU OF SOLID WASTE MANAGEi1E T-SALARIES Z OF TOTAL BUDGET 71% 71% 90- — 80 70 60 50 40 “ SALARIES 26% 30 - 20 1 - _- -- _ FY 1976 1977 1978 1979 FIGURE 4b BUREAU OF SOLID WASTE M NAGE11ENT SALARIES 70 60 STATE 50 40 - 30 - FEDERAL SHARE 20 F l 1976 1977 1978 1979 (SOURCE; ANALYTIC CENTER I, BASED ON FIGURES FROM EPA FINANCIAL STATUS REPO-RTS) NH - 13 ------- FIGURE 5 NEW HAMPSHIRE CAAI 105 AIR POLLUTION CONTROL E.XPE DITURES (CURRENT A D 1972 CONSTANT DOLLARS) STATE-CURRENT $ 1980 (SOURCE; ANALYTIC CENTER I, BASED ON FIGURES FROM EPA FINANCIAL STATUS REPORTS) 1 Corrected for 5 quarter fiscal year for federal grants 2 New forsula for federal CAA grai ts. C ,, C,, FEDERAL CURRE.I1T $ kOO 300 200 100 0 FEDERAL- 1972 $ • •‘• ‘STATE-1972 $ FY 1975 1976 1977 1978 1 2 1979 NH — 14 ------- FIGURE 6 NEW HA! PSHIRE CM 105 AIR POLLUTION C0 TR0L EXPEND TUR .S (IN CURRENT DOLLARS) 500- STATE SHARE , 300- 0 200 FEDERAL SHARE 0 100- FY 1975 1976 1977 ‘ 197 2* 1979 (SOURCE: ANALYTIC CENTER I , BASED ON FIGURES FROM EPA FINANCIAL STATUS REPORTS) 1’ New formula for federal CAA grants 2’ Corrected for 5 quarter fiscal year for federal grants NB — 15 ------- THE EFFECTS OF INFLATIONS AND FISCAL PRESSURES ON RHODE ISLAND’S ENVIRONMENTAL PROGRAMS Gary Verdon Analytic Center Management Division EPA, Region I ------- OVERVIEW This report considers the impact of inflation on expenditures for pollution abatement and control in Rhode Island. It also examines trends in funding for those expenditures. As a preface to the discussion of inflation and trends, descriptions of the state’s economy, government organization and budget process follow. Rhode Island’s manufacturing industry contains a large non- durable good component in which jewelry and textiles stand Out. The jewelry and textile industries impact the state’s economy greatly and recent drop offs in the two industries contribute to a greater than regional average unemployment rate in Rhode Island. Recent 1980 unemployment figures hit 7 percent. While no figures specify the state’s inflation rate, that rate stands high enough to sign- ificantly effect the state’s economy. Inflation and unemployment significantly impact Rhode Island’s two major sources of tax revenue, sales tax and income tax. Infla- tion increases sales tax receipts as the prices of goods and services climb. Income tax receipts also increase due to inflation as sala- ries rise. Unemployment hurts Income tax revenues particularly as Individuals’ incomes drop. The sales tax is at 6 percent on consumer goods and service excluding food and clothing among other Items. The Income tax piggybacks on the federal income tax at a rate of 19 percent. By law, the state can’t Increase expenditures by more than 8 percent in any given year. Human Services represent the largest ex- penditures and capture approximately three—quarters of all spending. Most spending on environmental control in the state appears in the Department of Environmental Management’s Division of Regulation. Rhode Island divides its State government into large units called departments named according to the area each administers. This paper primarily discusses the Department of Environmental Management (DEM) and also involves the Department of Health, the Department of Transportation, and the Department of Administration. Each of the various departments include several divisions. The units of greatest Interest for us in DEN are the divisions handling pollution abatement and control which include the media program areas. Management of the various units goes as follows: Department Directors, Assistant Directors; and Program Chiefs. RI — 1 ------- The insert shows the organization graphically. GENERAL ORGANIZATION OF RHODE ISLAND STATE GOVERNMENT I ____ I I DS9tt at of at t .nt of D.pazta.itta Health LT.r:: .:j_ _______ I _____ _____ I D vjgjo of Otbat Di ona Ditectoc foc Wat.g. of the D t.cto c. Heculetton Supply Health Dpartaent _ __ Li __ DLvi.1 af (Division Of) kit He*out .. end azjcdoqi Waste THE BUDGET PROCESS Rhode Island’s fiscal year begins July 1. and ends June 30. In order to gain approval by the legislature before the fiscal year begins, consideration of a budget starts at the department level approximately one year prior to its actual effective date. For example, work for the 1981—1982 (FY—82) budget begins in late June, 1980. At that time, the state budget office transmits pro- jections on cost of living increases in wages and the Governor’s targets for overall Increases in expenditures to the Department of Environmental Management (DEM). RI — 2 ------- The Assistant Director for Regulation and the media program chiefs in the DEN combine these parameters with expected merit raises to first generate projections on salaries. Regarding non— salary expenses, in late July the assistant director, program chiefs, and the principal accountant use totals for the fiscal year just ended to derive estimates for the budget. In August, that same group considers which activities the regulatory division should perform and the appropriate level of activity to accomplish the divisions’ goals. After setting the dollar amounts to that activity level, the assistant director submits his budget proposal to the Director of DEM in late August. The Director of DEN responds to the proposal by setting a cap on the divisions’ budget in September. The divisions use a zero based budgeting process to set priorities on expenditures and to pare the proposal down to meet the lid. Now in mid—September, the divisions enter a two—level negotiating process. At one level the program chiefs negotiate with the Assistant Director for Regulation for the inclusion of expenditures they need to make. The second level involves negotiations between the Assistant Director and the Director concerning the budget which the Assistant Director brings from his discussion with his program chiefs. This negotiation process requires several iterations of the lid setting, priority setting and inter—divisional negotiation processes. Following completion of negotiations between the Director and all his Assis- tant Directors, the Director submits the department’s budget proposal to the budget office on approximately October 1. During November, the budget office returns the department’s budget with cuts. The Director of DEN then sets new limits on the Assistant Director for Regulation’s divisions to which the divisions respond with further iterations of the processes discussed above. In mid—December the department delivers its final budget to the office of the budget which in turn processes the information to allow the Governor to consider and transmit the final budget to the legislature the first week in February. The legislature typically takes up the budget in late April or early Nay, toward the end of their session. Usually the legisla- ture passes the budget substantially as presented. The importance of negotiation comes through the budget pro- cess. Each successive round of negotiations gets more difficult. The program chief—to—assistant director negotiations involve less “hard sell” than the assistant director—to—director negotia- tions and the djrector—tobudget office requires still more “hard sell” of the proposal. Since each repetition of the lid setting/priority setting process involves more fine tuning than the preceding round, this process magnifies the difficulty of the budgeting/negotiation process as it nears final completion. The budget process recognizes the existence of federal funds, but cannot reflect exact amounts of federal support due to timing constraints. These constraints exist for two reasons: RI — 3 ------- 1) the Rhode Island fiscal year begins three months before the federal fiscal year and 2) the budget process starts so far ía advance of federal budgeting. The constraints result in ambiguity and conservative estimates in the budget on federal support. RRODE ISLAND BUDGET PROCESS Late June Budget Office sends anticipated Cost of Living Increase and the Governor’s speci- fic target to DEN and the assistant director for regulation. Early July Media Programs estimate salary and fringe benefits Late July Assistant Director for Reg ilation, media program chiefs, and principal accountant project non—salary expenses. August Assistant Director for Regulation finalizes first draft budget set at a somewhat opti- mistic request and submits budget to the Director of OEM. September Director of OEM sets a lid on the divisions’ requests. The Divisions’ prioritize expendi- tures making some reductions and negotiate for the level it believes is needed with Director of DEN. October Director of DEN submits department’s budget to office of the budget. November Office of the budget returns the budget with the level DEN must meet. Director of DEN sets a new lid on the divisions and priorities set again followed by negotiation with DEN budget set. December DEN delivers final budget to the office of the budget. February Governor releases budget to the legislature April or May Legislature adopts a budget July 1 Budget effective EXPENDITURES This discussion will consider the State Budget for environ— mental control expenditures in three categories: 1) current and minor capital; 2) construction; and 3) debt service. Current and minor capital expenditures include all outlays except capital RI - 4 ------- expenditures for construction and the debt service for the bonds which finance that construction. The construction category covers principally the building of wastewater treatment facilities. Debt service refers to the payment of principal and interest on the construction bond financing. Those persons interviewed at DEM suggest salary and fringe benefits create the most pressure on current and minor capital expenditures in the budget. The salary pressure comes from two sources. First, a wage increase—budget cap squeeze exists. The push from the bottom in the squeeze follows the upward pressures for annual salary and fringe benefit Increases negoti- ated through collective bargaining. The push from the top comes from a budget expansion cap of 8 percent set by the Governor and the legislature. As wages continue to increase independent of the cap, state wages and fringe benefits become a larger percent of budget outlays. One official says salaries and fringes now constitute about 5 percent of the total 8 percent increase each year. The second source of salary pressures on state expenditures relate to accounting practices. The state accounting practices require that employees must be wholly supported by state appro- priations or wholly supported by federal grants. Since federal grants don’t rise to cover the salary increases of the employees paid solely from federal funds, federal monies must be shifted from other expense areas to cover the increases. This intensi- fies the salary pressures on federal funds. Beside pressures from salaries, the officials interviewed voiced general concern over the resources required for reporting. New requirements do not necessarily lead to better pollution abatement and control, but to the burden of informing federal authorities of their activities. Construction expenditures receive separate consideration in the state budget and don’t appear in the budget with current and minor capital or debt service expenditures. Therefore, the construction expenditures do not create any tradeoffs with other line items the way personnel does. However, the general statement coming from the Interviews is construction funds are limited. The debt service payments on construction do appear in the budget with current and minor capital expenditures. This treat- ment of debt service forces tradeoffs between debt service cover- age and other outlays. Since debt service must be paid and grows each year due to continued construction, the cap on the budget leads debt service to limit other outlays. Some indications suggest debt service will soon become a separate budget account and relieve this pressure. RI — 5 ------- REVENUES The bulk of money coming from the state and federal govern- ments comes directed to certain types of expenditures. Flexi- bility to use funds for other than designated purposes remains limited, particularly for federal funds. No special forms of taxation or other sources of revenue exist to support current and minor capital outlays; all state funds come from general revenue. As mentioned earlier, state funds fall under a cap which creates pressure from salaries. One way the Assistant Director for Regulation meets the pressure comes from federal carryforward monies. The carryforward results from underspending the federal allotment in recent years and federal authorities agreeing to spread the unexpended funds over several years. In essence, the assistant director hired fewer people several years ago than the budget permitted and took the extra money to meet increases for existing employees’ salaries and fringes. This practice allowed the departments to help relieve salary pressures over the last three years while re- fraining from layoffs. However, this current year will finish the carryforward money. Officials in OEM disagree to some extent on the desirability of program specific federal funding. Those supporting program grants say such funding limits inter—program conflict; proponents of consolidated grants seek the flexibility that form of funding fosters. The state receives federal construction money for sewage treatment plants through the Municipal Waste Treatment Facility Construction Grants Program. One interviewee calls federal funding inadequate. The state pursues a capital development program to support its share of construction costs. In the program, state voters receive an appeal for a bond issue every two years through a referendum. The receipts from. the bond issues support the construction program. When issue receipts exceed construction outlays, the state office of the budget retains the difference. However, DEN must still pay debt service on the bonds with no credit for the unexpended receipts or any interest earned on it. As mentioned in the budget process, timing conflicts exist between state and federal budget cycles. These conflicts not only create ambiguity in budgeting, but may either limit DEN’s revenue or DEN’s ability to spend that revenue. DEN submits a budget request for special federal funds October 1 but won’t get the award until February. A division can spend state money in anticipation of federal money but can’t increase spending in the special area until the federal award comes through. When the award comes, the state releases increased fund, but the state fiscal year ends in June and doesn’t leave enough time to spend all the special funds. RI - 6 ------- Figure 1 shows current dollar expenditures on environmental concerns in Rhode Island have been rising at an average annual compounded rate of 18.2 percent. The steepness of the total current dollar expenditure lines between 1976 and 1979 reflects a period of rapid growth in funding during which support rose an average of 26 percent per year. Breaking the total into state and federal dollars suggests that the rise in neither source had a particularly large impact on the total. However, the trend does display some increase in federal funding as the state share and federal share lines get closer together reflecting the federal share’s expansion from 23 percent in 1975 to 33 percent projected for 1981. 100 0 FIGURE I As an aside, funds for environmental control in the state budget have risen slightly as a percent of the total state budget. However, the level still remains very small, on the order of .5 percent. AIR POLLUTION CONTROL The Division of Air Resources employs 23 people, 8 of whom work in the State Health Department laboratory. Officials of DEM characterize the level of federal funding in air as adequate 600 500 RHODE ISLMD ESUMTE ACTUA(. AND PRcJE.T XPEND!Tu ES F R L (CURRENT AND 1972 CONSTANT DOt..LARS) 200 $ FY1S7S 1976 1977 1978 1979 i so i sf $OV*Cl. U<?IC C1?tR 1. • CD OS ?IOV1U rtOS II $?*T1 SODGIT) RI — 7 ------- to support a good air program. Figure 2 shows the total §105 funding for Air Quality to be growing significantly both as measured by current dollars and constant 1972 dollars. During the period from 1975 to 1979, current dollar funding rose by an annual compounded 16.56 percent while constant dollar funding rose 7.85 percent. The largest increase in any single year occurred in 1978 when con- stant dollars rose 29.6 percent over 1977. Figure 3 makes clear that the increase in 1978 came from elevated federal spending which climbed 62 percent in constant dollars and 67 percent in current dollars. State funding remained level and thus fell slightly in constant dollar terms. The increase in federal funds corresponded to the addition of the 1977 amendments to the Air Act. Along with the dramatic increase in 1978 in federal support, figure 3 illustrates the general trend for climbing federal funding. In fact, prior to 1976—1977, the state’s level funding exceeded the federal con- tribution. Regarding specific parts of the overall air program, offi- cials at DEM do not support the planning and modeling requirements promoted by EPA. A feeling exists that developing the State Im- plementation Plan constitutes a burden which falls heavily on a small state like Rhode Island and misspends resources. The Chief of the Air Program prefers measures like New Source Per- formance Standards (NSPS) to maintain tight control and obviate the need to model. He finds the monitoring program sufficient to ensure compliance with standards. Our interviewee states Rhode Island does not have a Preven- tion of Significant Deterioration (PSD) program. The City of Providence represents the only non—attainment area, and only in ozone and CO. Monies contracted through the State Department of Transportation support an Inspàction and Maintenance Program (I&M) to address the problem. The program chief notes that much of Rhode Island’s ozone problem comes from other states and therefore lies beyond DEM’s control. Public Participation efforts show great promise. DEM handles public participation program by program and shows good success in the air programs in disseminating information and gaining support. Public participation also brings business and private environmentalists together to resolve differences and build mutual understanding concerning air pollution problems. RI - 8 ------- 700 600 500 ‘400 300 200 RHODE ISLAND FIGURE 2 CM § 105 AIR PO LUT1ON CONTROL EXPENDITURES OF STATE AND FEDERAL FUNDS (CURRENT AND 1972 DOLLARS) LUXRtNI $ FIGURE 3 FEDERAL-CURRENT $ FEDERAL-1972 $ STATE-CURRENT $ .STATE-1972 $ 1975 1976 1977 1978 1979 (SOURCE: ANAL.TTIC CENTER I, RASED ON FINANCIAL STATUS REPORTS) Corrected toc S year quarter fiscal year grants 500 400 - 300- 200- 100 RHODE ISLAND CAAi 105 AIR POLLUTION CONTROL EXPENDITUIIES (CURRENT AND 1972 CONSTANT DOLLARS) 1975 1 76 1977 1978 1’ 2 1979 (SOURCE: ANALYTIC CENTER I, RASED ON FIGURES FROM EPA FINANCIAL STATUS REPORTS ) 1 Corrected for S quarter fIscal year for Federal grants 2 New foraula for federal CAA grants v) 1 1972 $ C,, U, = ,0’ RI — 9 ------- WATER POLLUTION CONTROL The Division of Water Resources operates with 32 employees. Unlike the air program, the water program suffers a shortage of funds according to the DEN interviewees. This division encounters particular difficulty from the salary pressures dis- cussed earlier: pressures for increases in salaries and bene- fits faced caps on state support plus slowly increasing federal §106 support from 1975 to 1979 (and a decrease in 1980) As two thirds of the Water Division’s employees are on federal accounts, state appropriations are strained to allow for salary increases for those employees. For three years the carryover account monies from §106 enabled the Water Division to cover salary increases. As mentioned earlier, however, all carryover monies will be spent after this year. Figure 4 traces the level of §106 funding for Rhode Island. During the 1975 to 1979 period total current dollar funding rose an average 5.9 percent. However, total real dollar funds dropped by 7.8 percent. The figures dramatize inflation’s impact and reflect caps on state support and the drying up of real federal monies which pushes support of the program to the state. While the trend over the period shows increases in both the totals for expenditures, looking at state and federal figures separately in figure 5 highlights the impact of federal support. State funds increase only 22 percent over the period, averaging a mere 5 percent per year. As the chart illustrates, current dollar increase constitutes a net reduction in real dollar funding. Perhaps the most significant feature of the state figures is the level nature of current dollar funding. From 1976—1978 state current dollars hover around $240,000. There- fore, increases come only in the 1975—1976 and 1978—1979 periods. The level of federal funding sharply contrasts that moderate pattern and adds volatility to total nominal funding over the 1975—1979 period. Although nominal federal funding Increases 27.5 percent (an average of 6.26Z annually) over the period, it fluctuates widely dropping 28 percent from 1975 to 1976 thea increasing at an average annual rate of 33.1 percent from 1977 to 1979. Total current dollar funding exhibits similar fluctuation demonstrating the impact of federal dollars on the funds available to Rhode Island to run the state’s water program. State officials suggest that staffing costs tied to meeting existing and new federal requirements make §106 funding inadequate. Federally imposed activities questioned by state officials include: 1) certain maintenance of effort actions on which state officials place a lower priority than EPA; 2) negotiations for the SEA and other planning activities perceived as not cost effective by DEN; and 3) certain testing and basic monitoring considered excessive by DEN (discussed later). Given the lapse of the carryforvard monies, DEN now reluctantly will accept 205(g) delegation to avoid a defi- cit next year. The infusion of 205(g) money frees up an estimated $143,400 of which $128,000 will go to cover a potential deficit. RI — 10 ------- FIGURE 4 CURRENT $ •_ , 1972 $ 900 800 700 C ,, 600 U, = 500 400 FY1975 1979 (SOURCE: ANALYTIC CENTER I, BASED ON FIGURES FROM FINANCIAL STATUS REPORTS) Iuuu RHODE ISLAND CWA ! 106 WATER POLLUTION CONTROL EXPENDITURES (CURRENT AND 1972 CONSTANT DOLLARS) 1977 1978 Corrected for S quarter fiscal year for federal grants RI — 11 ------- RHODE ISLAND CWA 106 WATER POLLUTION CONTROL EXPENDITURES FIGURE 5 FEDERAL-CURRENT $ FEDERAL-1972 S STATE-CURRENT $ STATE-1972 $ (CURRENT AND 1972 CONSTANT DOLLARS) 700 600 500 LeOO 300 200 100 1975 i 1976 2 1977 1978 1979 (SOURCZ: ANALrIC CENTER I, 3ASED ON FIGURES FROM EPA FINANCIAL STATUS REPOR”S) 1’ Estiaat. FT 1975 2’ .Corrected for S quarter fi ca1 year for federal grants RI — 12 ------- If Rhode Island had not accepted 205(g) delegation., it would have started laying people off in the water program. DEN’s staff expect the 205(g) funds to give §106 activity relief for only one year after which the personnel requirements for the program will exceed federal funding. Our respondents say a combination of funding shortages and difficulty in securing staff will create vacancies in 205(g) admin- istration which one can infer will reduce effectiveness in the pro- gram. Questions exist at DEN concerning 1) the need to increase staffing by 14 to cover 205(g) and 2) the ability of the division to maintain positions because of the aforementioned problems with sup- porting federally funded positions. The division did not take the National Pollutant Discharge Elimination System (NPDES) delegation. It does not draft permits or handle legal problems although the division does flag violations. Given no additional money for accepting delegation, a shortage of staff and funds stand as DEM’s reasons for leaving NP.DES delegation to the future. The clean lakes program is limited in scope. The state budget office doesn’t allow the matching funds required to expand the program. Currently, that office allocates only .2 percent of a work year to the program. DEN does not administer §208 planning directly, but receives some §208 monies from the Department of Administration, State Plan- ning Office, the §208 agency for Rhode Island. DEN now provides money to the Statewide Planning Program for 303(e) basin planning. However, this outflow to Statewide Planning might terminate in the future and the planning taken in—house at DEN because of deficiencies in §106 funds. The public participation program of the Division of Water Resources is not as large as that of the Division of Air resources due to limited funds. The assigned staff is overw9rked, depending on student interns for assistance, due to both-DEN and EPA inspired activities. DEN officials hold three general concerns not highlighted above. First, monitoring requirements tax the available staff and laboratory capabilities. Less frequent, more specifically planned monitoring comes forth as one suggestion for bringing relief. Second and related, demands for laboratory support are increasing. DEN contracts its laboratory work to the Health Department which seeks more money for the increased work load. Third, DEN judges reporting requirements to EPA excessive. Officials believe federal support increases the burden staff must shoulder to report progress and activities. HARARDOUS WASTE / Hazardous Waste has become the center of much activity in recent years in Rhode Island. That activity includes passage of RI — 13 ------- the 1978 Hazardous Waste Act, identification of uncontrolled dumping areas for hazardous waste, administration of a manifest system, and search for a site for a licensed hazardous waste dumping area. The state also is busy in cleaning up uncontrolled hazardous waste sites in the state. This effort requires additional funding, $3 million which might come from a bond issue which will be taken to the taxpayers in a special referendum. The proposed federal superfund is perceived as essential for support of the clean up effort. In order to handle hazardous waste more effectively, hazardous waste was added to the Division of Air Resources. This reorganiza- tion allows 6 air engineers to be trained in hazardous waste and to share time in that area. A need exists for 4 more people in the area. Officials interviewed hold some hope that the public concern for hazardous waste control will translate to more state money for that area while EPA money has been short. While existing equipment is in good shape, demands on it overload it. Additionally, testing capabilities contracted to the Health Department laboratory face back—ups behind water supply tests of groundwater. CON CL US 10 NS This look at Rhode Island illustrates the problems which EPA can anticipate in states and which may require changes in policy at the national level. EPA can expect that state residents facing inflation may react with limitations on taxes and expendi- tures such as Proposition 13. These limitations often will translate into small or no increases in current dollar spending for environmental control which holds a relatively low priority in many States. This forced level funding hurts staffing severely because environmental control activities are labor intensive and costs per worker constantly rise. Setting a freeze on hiring as a measure to control government costs affect environmental control activities particularly hard, although the State of Rhode Island would, prefer not to use that tactic. The labor intensity of environmental control merits considera— tion for making explicit expansion in federal funding to reflect the pressures for increases in salaries and benefits. As discussed earlier, Rhode Island’s accounting system accentuates the deficiency in coverage of such increases. An alternative to the explicit ex- pansion for programs is to level fund them but to allow states to carryover money so they can plan their staffing better. If Rhode Island is a typical example, it would appear that states viii not now fund programs in such a way as to meet federal expectations and goals. Rather, the state will depend upon EPA to deliver the funding required to bring a program up to expecta- tions, part iculary given program—specific funding. Program—speci- fic funding may put too little money in one program while another program receives enough funds to operate comfortably. Shifting RI — 14 ------- the money from one program to the other might foster a better total program, however, individual programs could be hurt in the process. In Rhode Island, the §106 program and §105 program show that relationship between an underfunded and a more adequately funded program. State funding in both stands relatively constant and both show sizable increases in federal support. However, state officials suggest the needs for operating the water (S106) program make total funding inadequate. Shifting money from air to water might improve the water program with only controllable reduction in the air program. Although disagreement exists on the advisability of such consolidation of grant monies in Rhode Island, the kinds of problems inflation causes for program—specific funding in Rhode Island illustrates the merit of going to consolidated grants nationally. DEM does perform one pooling of resources by combining air resources and hazardous waste management, however, this combination holds promise only while the funding for air remains comfortable. Given the rapid increase in activities relating to hazardous waste, the effectiveness of the combination could be rather temporary. Other areas of possible change follows. First, as mentioned previously, members of state government find reporting requirements onerous. This suggests the need for more general reports which require less time to complete. Combining general reporting with consolidated grants lends a loose control system on use of federal funds but actually offers the potential for cost effective use of funds on pollution abatement. Second and also concerning reporting, the §105 and §106 Financial Status Reports vary significantly and make comparisons between the two programs impossible. Therefore, no detailed analysis can be performed on the disposition of these two large sources of funds. We recommend standardizing the reports to include identical reporting of expenses, e.g., salaries and equipment and budget categories. Last, questions exist concerning the cost effectiveness of regular, periodic monitoring. Consideration of less frequent, more strategic monitoring merits attention at a national level. RI — 15 ------- APPENDIX Notes to Figures 1—5 ±j : The Expenditures for Environmental control described by this figure inélude the total expenditures for the following budget units: the Division of Water Supply in the Department of Realth, and the Assistant Director for Regulation, Division of Water Resources, Division of Air Resources, and the Division of Land Resources in DEN. Construction capital outlays do not appear in the totals because of the long term scope of the expendl.tures versus the one year time horizon of the other accounts included in the total. The totals include some non—pollution control expendi- tures which cannot be backed out easily. They don’t include some pollution control expenditures which couldn’t be isolated e.g., 4208 funds in the Office of State Planning in the Department of Administration. Figures 2 and 3 : The change of the fiscal year reporting period from a July—June year in 1977 to an October—September year in 1978 created an interim quarter as part of FT ‘78 funds. To remove the extra quarter, PT ‘78, totals were adjusted by multiplying them by 80%. That reduction negated the linear extension of the four quarter year performed to fund the interim quarter in FY ‘78. Figures 4 and 5 : 4106 funds experienced an interim quarter in FY ‘76 creating a five quarter period. Just like the §105 FT ‘78 funds, the 4106 funds were reduced to 4/5’s of the reported figure. RI — 16 ------- THE EFFECTS OF INFLATION AND FISCAL PRESSURES ON VERMONT’S ENVIRONMENTAL PROGRAMS Jane Now-ak Analytic Center Management Division EPA, Region I ------- OVERVIEW The Vermont Agency of Environmental Conservation (AEC) is re- sponsible for the State’s natural resource planning, operations and programs. One quarter of the Agency’s budget is specifically devoted to environmental programs (i.e., air, water and solid waste management). The remaining budget is allocated among forest, parks, recreation and fish and game programs. The environ- mental programs are administered by the Agency’s Department of Water Resources and Division of Environmental Engineering, which together employ 70 full time professionals in eligible programs. Delegated Safe Drinking Water Act responsibilities are carried out by the Vermont Department of Bealth. The EPA funded pesticides program is administered by the Vermont Department of Agriculture. Figure A illustrates State and Federal spending for Vermont’s environmental programs over the past four years. Asindicated, the total authorized budget for the Department of Water Resources and the Division of Environmental Engineering has risen during this period, primarily due to increases in Federal grant awards. Despite this rise in funding, however, the Agency is currently operating on one of its leanest budgets ever. Water and solid waste management programs appear to be suffering most, while the air program holds steady with increased Federal funding under the Air Act amendments of 1977. The Agency attributes its present budget squeeze to economic pressures that have led to a conservative fiscal swing in the State legislature, to increased Federal program requirements, to the overall impacts of inflation and to the energy crisis. With pros- pects dim for significant increases in State funding, the Agency looks to increased Federal funding and/or greater program flexi- bility in order to maintain viable environmental programs. BUDGET OVERVIEW Vermont’s total State budget has grown over the past five years from $350 million in FY 1975 to $477 million in FY 1979. This represents an annual growth rate of 6 percent. The budget is expected to increase by about 6 percent through FY 1982. In constant dollar terms, however, the available budget actually decreased by 0.7 percent annually thereby leaving fewer resources with which to operate State programs. The State derives about 60 percent of the total budget from its sales and income taxes (Other State funds include highway assessments, gasoline taxes, fishing licenses, etc.) The sales tax has remained steady at 3 percent since its inception in 1969. The income tax, on the other hand, is tied to the federal tax schedule and so has shifted with Congressional amendments. Re- cently, Vermont took direct action to further relieve the State income tax burden by lowering the proportional rate of taxation. In 1973, the State tax was set at 28 percent of the federal rate; In 1979, the rate was lowered to 23 percent. The decrease was VT — 1 ------- triggered primarily by a surplus in State funds ($18.7 million in 1979). The deceptive surplus in Vermont’s recent budgets is partly explained by a decrease in unemployment (from 10.2 percent in 1975 to 5.2 percent in 1979) and a slow general rise in salaries which contributed to a net increase in revenues. More important, however, is the State legislature’s action to cap government size by refusing to approve new State Agency staff positions. Without position approvals, some agencies are unable to spend appropriated funds thereby contributing to the State budget sur- plus. The legislature has tried to avoid hidden costs associated with federally sponsored programs (fringe benefits, overhead, etc.) as well, as the possibility of assuming full funding responsibility if federal support is terminated. The legislature’s desire to protect the Vermont taxpayer may be well founded in that Vermont ranks fourth highest in State spending in the United States once population size and wealth are considered. The buffer which the legislature has tried so hard to pre- serve in the budget quickly dissipated this year. Preliminary State budget figures reveal that Vermont will run a $7.4 million deficit in FT 1980. The Governor’s office reports that tax revenues declined because of the national economic recession, a poor ski season (resulting in lower tourist dollars) and the recent tax relief measures at the State and Federal levels. The Governor does not plan to request an increase in taxes but rather has asked all State agencies and department heads to restrict spending to purchases essential to the life, health and safety of patients and inmates, and the protection of people and property. While the State budget declines in real purchasing power, the costs of State government continue to rise. This is seen, for example, in salaries for State employees. Vermont State salaries are traditionally lower than salaries in the private- sector and significantly lower than State salaries in the southern New England states. In an effort to close some of this gap and to respond to the immediate pressures of inflation, the legislature approved a series of salary increases over the past year (5 1/2 percent in July 1979, 6 percent in July 1980, 1 percent in September 1980). Salaries as a percentage of total environmental program budgets (water, air) have not increased, however, because the pay increases have been offset by growth in federal program support. Vermont’s environmental program budget has remained a steady 0.6 percent of total State budget appropriations over the last 5 years. This suggests that environmental protection has maintained a constant priority ranking despite competing pressures from social welfare programs. Until the legislature relaxes its control over new staff positions, however, the Agency of EnvironmentaL Conserva- tion will be severly limited in its ability to utilize available and potential funds. VT — 2 ------- THE BUDGET PROCESS The Vermont State legislature convenes formally on a biennial basis. Because of this arrangement, the Governor submits a two— year State operating budget for the legislature’s approval. The legislature typically concentrates on the first budget year only. In the second year of the legislative biennium, the Governor sub- mits a Thudget adjustment act containing recommended budget ad- justments for unforeseen program expenses and developments. The adjusted budget never deviates greatly from the original recommen- dation, but the changes can be important to program operations. The legislature has met in special session in every off—budget year since 1962 to vote a budget adjustment act, among other acti- vities. The Agency of Environmental Conservation’s budget setting pro- cess begins in early summer, approximately one year before the legislature votes on the formal budget request. The Governor initiates the process by sending each State agency Director or Secretary recommended targets and general instructions for pre- paring agency budgets. The targets are expressed in very general terms (e.g., an overall State budget increase of 6 percent). Only in rare cases where a particular problem has attracted significant public attention or where a program has implications beyond an individual agency will the Governor make specific budget recom- mendations. The Governor’s instructions outline standard procedures for establishing State agency budgets. In the past, agencies prepared budgets on the basis of their previous funding levels and their projections for continued State support. In the most recent budget cycle, however, the Governor changed this system and directed each agency to prepare three separate budgets assuming: 1. a 5 percent decrease over the previous budget, 2. level funding, and 3. a 10 percent increase over the budget. The process resembled zero based budgeting (ZEB) in that it forced agencies to identify and justify program priorities. The Agency of Environmental Conservation had little difficulty complying with the requirement because it had already used modified ZBB principles to sort out program priorities in past lean years. The Governor’s office is expected to retain the modified ZBB approach for F? ‘82—83 budgeting because of dim prospects for increased State revenues. Once the Secretary of Environmental Conservation receives the Governor’s budget target and instructions, he translates the target into actual dollars and divides the dollars among departments and divisions within the Agency. This division is based in part upon anticipated Federal funding and State match requirements. VT — 3 ------- Progratii—specific budgeting decisions within these targets are made by department and division managers in consultation with the Secre- tary. In September, the Secretary submits the composite Agency budget to the Governor. The Governor reviews the AEC budget proposal with other agen- cies’ budgets and anticipated State revenues. Since the Agency enjoys a favorable reputation as a reasonable and responsible organization, the Governor rarely finds reason to question the Agency’s budget. If the Governor does see the need to trim the AEC budget in order to balance the overall State budget, he will do so only after consulting the Secretary. Consequently, decisions regarding specific programs remain in the hands of the Agency. By December, the Governor completes his review and submits a recom- mended budget to the legislature. Since the State budget is presented in terms of line Items rather than programs, the legislature examines total funding levels rather than specific programs and priorities. However, the legis- lature may alter the Agency’s priorities by several means. First, the legislature may call upon the Secretary or program managers during budget hearings to report on matters of particular interest to individual legislators. For example, the legislature recently insisted that the Agency increase its efforts in the area of solid waste management. Consequently, the legislature appropriated funds in excess of the Agency’s original request. Second, although there are no staff ceilings per se, all new staff positions (even those totally funded with Federal dollars) must be approved by a special joint fiscal committee. In addition, receipt of all Federal funds must be approved by the legislature before the money can be accepted by any State agency. Through these oversight authorities, the legis- lature can curb an agency’s initiatives to expand program areas. Generally speaking, however, the legislature places primary attention on total budget figures rather than specific programs. The line item structure of the State budget provides some flexi- bility in the use of funds. Revenues appropriated from the general fund can be shifted among programs at the Agency’s discretion as long as State match requirements are met. Overmatch funds can be shifted among programs with related Federal goals (e.g., §106 plan- ning and §208 planning), but overmatch funds are so limited now that little latitude remains. Earmarked Federal funds, on the other hand, are a source of great consternation for the Agency. If the Agency fails to accurately project Federal funding, a program can be left with a serious shortfall. The Agency feels that a block grant ap- proach would facilitate more effective program management, especially during difficult financial times such as those the State currently faces. BUDGET CYCLES Although Federal and State funding has increased over the past five years in Vermont, the Agency of Environmental Conserva- tion feels it is operating within its tightest budget conditions VT — 4 ------- ever. Inflation was cited as a contributing factor, but the con- servative outlook of the legislature coupled with the continuing proliferation of more and more Federal program requirements were viewed as more important problems. In the past, the Agency was able to gain legislative funding support by requesting reasonable budgets and by appealing to basic public interest in environmental programs. Now, energy and human services concerns are competing for the allocation of limited State funds. The legislature is reluctant to increase State appropriations because it feels that Vermonters have reached the maximum level of taxation they can bear as noted earlier. Also, the legislature feels that the State government has grown to its maximum acceptable size. (Vermont currently employs 6,000 people to serve a total State popu- lation of about 500,000.) Consequently, the legislature is unwilling to approve new staff positions. On the other hand, the Agency is increasingly overwhelmed with resource intensive program requirements from the Federal government. Without increased Federal funding and/or greater flexibility in car— rying Out Federal programs, the Agency fears it may be unable to meet Federal program expectations. This, in turn, may place the Agency in jeopardy of losing Federal funds it now has. As to inflation, the Agency believes that the State budget could be stretched to offset inflationary impacts on State revenues but not on Federal revenues too. The Federal funding picture is expected to grow worse when delayed Proposition 13 sentiments reach Washington. The recent pay increases for State personnel have helped relieve inflationary impacts on staff paychecks, but the increases obviously do riot come close to the national and regional inflation rates. One might expect to see higher attrition rates as a result but for limited job availability and low salaries throughout the State in both the public and private sectors. The Agency coped with previous lean budgets b.y converting staff from full time status to temporary status, by asking staff to work overtime without pay, and by concentrating on required rather than recommended program elements. The Secretary has also eliminated most of his management staff relying instead on his program directors and commissioners as crises arise. Now that the Agency has ‘trimmed all the fat, the Agency feels It has no recourse but to scale down programs in an effort to maintain core staffs within each program area. The Agency’s strategy is based on a fear that once staff positions are lost, the Agency will never be able to rebuild programs With the legislature’s interest in capping or reducing State govern— nment size, it is unlikely that the special joint fiscal committee will approve new positions. - Despite the expectations of more difficult budget times ahead, the Agency appears reasonably confident in its ability to weather the storm without jeopardizing public health or basic environmental goals in the State. One way the Agency is compensating for limited EPA funds is by pursuing support from eleven other Federal sö urces VT — 5 ------- (e.g., Water Resources Council, Corps of Engineers, Soil Conserva- tion Service) with similar or related program goals. For example, the Agency is working with the Soil Conservation Service to imple- ment nonpoint source pollution controls developed under the 208 program and with the Corps on aquatic nuisance control. The Agency is also planning to forego costly and time—consuming laboratory analysis where it feels less sophisticated estimates will suffice. Monitoring, inspection of wastewater treatment plants and public participation programs will be reduced. Detailed assessments of alternative and innovative technologies will be omitted where conventional pollution control techniques appear to be adequate. Although not abandoned, the national 1983 water quality goals will not be achieved on time and work on the State Implementation Plan (SIP) for air quality may be delayed. As a final action to cope with inflation and overall budget squeezes, the Agency indicated that it would consider returning the delegated NPDES program and refusing new programs (hazardous waste management) initiated by the Federal government. It appeared, however, that budget conditions would have to become much worse before the Agency would exercise this option. The Agency would first expore all available means of streamlining the programs in order to meet substantive environmental objectives, if not all detailed procedural requirements expected to be followed by Federal grantees. REPORT ON SPECIFIC PROGRAMS — AIR POLLUTION CONTROL The Air Program in Vermont is faring well financially because of a recent change in Federal funding levels (see Figure B). Under the 1977 Clean Air Act Amendments, all States receive a minimum 0.5 percent of total SlOS grants. For Vermont, this represents a signi- ficantly greater sum than the State would have received on the basis of demonstrated need alone. Quite ironically, the general state of the economy has also eased potential budget burdens on the State programs. With less economic development, there are fewer new sources of air pollution to inspect and permit. Despite the office’s current good fortune, the Air Program Director indicated that the program could use 15 percent more money to conduct studies related to health aspects of air pollution, parti- cularly those that may result from burning of wood for home heating. The Director also sees the need to conduct more public participation programs as required under the law and to finance growing numbers of law suits stemming from the Prevention of Significant Deterioration (PSD) program. Perhaps the greatest problem facing the Vermont Air Program is not related to funding but rather to inflexible Federal positions on required program elements and procedures. The State legislature threatened to abolish the Air Program because EPA failed to approve a State Implementation Plan (SIP) revision that would allow a Bur- lington electrical generating plant to burn wood products as fuel. As far as the State is concerned, wood burning will always be accept— VT - 6 ------- able as long as wood constitutes a cheaper source of fuel than oil. The Agency is also annoyed with frequeatly changing Federal standards which necessitate costly equipment and methodology changes, plan revisions, public notices, etc., without significant improvement in environmental protection. WATER POLLUTION CONTROL Water quality has enjoyed traditionally high priority in Vermont because of recreation, tourism and farming interests. The State’s strong commitment to water pollution control is evidenced in the legislature’s willingness to match Federal pollution control grants with State dollars. Over the past five years, Vermont has received a steady level of Federal §106 grants under the Clean Water Act (see Figure C)*. The Federal funding level used to result in a State •overmatch which the Agency applied to §208 match requirements. But increasing in- flation and a steady growth in 106 program requirements have eroded the surplus and forced concentration on 106 work. If the legisla- ture’s conservative fiscal outlook, the current Federal funding level and inflation persist, the Agency feels its water program will suffer a setback. The Agency is particularly concerned that with §205 grant awards to the State, the Federal government may assume that Vermont has more 106 money to use on water monitoring, 303 planning, etc. Presently, the Agency has sufficient funds to carry out core 106 program requirements, though not to the extent the Agency would like. There are no funds for a groundwater program. More sophisti- cated laboratory equipment is needed to meet EPA’s standards for water analysis and quality assurance. Four to five more staff people are needed to conduct basic engineering and planning activities in the area of clean lakes and hydrology capacity studies. If 106 funding does not increase, the Agency predicts that its compliance monitoring program will suffer. The shrinking travel budget has already resulted in fewer facility inspections. Analysis and moni- toring of toxics in surface and groundwaters will be curtailed except where EPA can assume responsibility. Vermont’s 208 planning program is in particular jeopardy both because of shrinking 106 State overmatch and because of the antici- pated end of Federal 208 grants in 1983. The State is unlikely to fund program continuation because planning activities are generally discredited by the legislature. The Agency hopes to pursue imple- mentation of existing 208 plans through other Federal agency programs (e.g., nonpoint source pollution control under the Soil Conservation Service) and through remaining 106 money. The funding variation in 1977 was the result of an accounting error by the Agency of Environmental Conservation rather than an actual change in funding allotment. During 1976, the Agency anticipated more Federal revenue than it received. To compensate for overspending by the Agency, EPA provided extra funds in the following year. VT — 7 ------- Vermont assumed responsibility for construction grants adminis- tration in 1979. The Agency operates the program exclusively on the $400,000 minimum Federal grant provided under §205(g) of the Clean Water Act. When the State assumed delegated construction grant responsibilities, the Agency of Environmental Conservation projected a seven to eight percent inflation rate. But with infla- tion, the Agency expects the annual $400,000 Federal grant will result in a financial crisis shortly. According to one Agency spokesman, a funding crisis would not prompt the return of delegated responsibilities to EPA. Rather, the Agency would attempt to find more efficient, creative ways to administer the program. For example, the State may adopt the abbreviated facility planning approach already used in Region VII. The Agency has administered the National Pollution Discharge Elimination System (NPDES) in conjunction with a State water permit program since 1974. Twenty—five percent of Vermont’s NPDES program is financed through Federal §106 money, the remainder comes from State general funds. Therefore, the squeeze on 106 funds also di- rectly affects the permit program. According to an Agency spokes- man, the NPDES budget is not critical now but could become a serious problem if historical 106 funding levels persist. The Agency is seriously questioning marginal water quality benefits from the NPDES program vis—a—vis administrative and legal costs, particularly in view of the State’s own more comprehensive permit system. The Secre- tary of Environmental Conservation indicated that the return of delegated NPDES responsibility is a real possibility. SOLID WASTE MANAGEMENT AND HAZARDOUS WASTE PROGRAMS The Agency’s budget for solid waste management has remained steady for a number of years (see Figure D). The State program focuses on three major concerns: certification of sanitary land- fills, resource recovery through recycling, and control of the use of hazardous materials. The Agency will attempt to maintain current efforts in all three areas both because of need and because of in- terest on the part of the legislature, particularly in recycling. However, the Agency is becoming concerned about its ability to do so because of the announced phase out of Federal solid waste management grant funds. The State will not be able to replace Federal funding if it is expected to finance a hazardous waste program too. Neither will user fees work in Vermont because of very limited municipal and town funds. If the Agency has to divert solid waste management money into a Federally mandated hazardous waste program, the solid waste program may permanently close. The Agency claims that the hazardous waste program requires different skills from the solid waste management program (chemical/industrial focus vs. municipal focus). Therefore, a hazardous waste management staff would not be able to address solid waste management issues. Moreover, even if the Federal government changes its decision and funds both a solid waste and hazardous waste program, the Agency may be unable to maintain two staffs. Given the legislature’s position on curbing ,(state size, approval of additional VT - 8 ------- staff positions is questionable. RECOMNENDATIONS In view of current and anticipated budget crises, the Vermont Agency of Environmental Conservation offers the following recom- mendations for EPA action: 1. Grant integration : The Agency favors the proposed Act of Congress to integrate Federal grants into a block grant providing increased spending flexibility to the States. The Agency’s Secretary testified in favor of the proposal in Congressional hearings. The Agency’s major argument is that a consolidated grant would result in more efficient State management of limited resources by allowing a shift of resources between programs as needed. 2. Increased Authority to EPA Regional Office EPA Headquar- ters should concentrate on lobbying for increased funding, conducting research of national significance and establishing national standards where necessary. Regional offices on the other hand, should be given greater authority to oversee state and local implementation of national environmental goals (e.g., approval of State Implementation Plans). The proximity of Regional Offices to State problems and budget con- straints increases the probability of more sound management decisions that are more sensitive to local conditions and needs. More decen- tralized decision—making may also result in more timely decisions which, in turn, reduces State costs. 3. Centralized grants management : A Regional EPA grants coordin- ator should be appointed for each of the six New England States that comprise Region I. The coordinator should be thoroughly versed in all EPA grant programs (e.g., funding cycles, eligibility require- ments, reporting requirements). The coordinator should be given the authority to respond to grant matters that may arise to ease the burden of Federal red tape. 4. State/EPA (SEA) Agreements : The SEA provides an impor- tant management service for the Agency by supplying a forum for information exchange and negotiation between top level Federal and State administrators. The Agency recommends that the process remain simple, clear and free of cumbersome reporting so as to avoid bureaucratization. The Agency fears that if the SEA docu- ment and the SEA process become too complicated, responsibility for the agreements will be relegated to a staff function. With extensive staff involvement, the agreements will lose their significance as an effective management tool for top decision— makers at the State and Federal levels. 5. Regional technical services : EPA should sponsor analytic services or direct assistance for toxics analysis. More centralized laboratory services should be established for the Region to reduce equipment expenses for individual States. For example, one State might be responsible for all water quality analysis activities VT — 9 ------- particular laboratory service not available in—house, the State would contract with the appropriate laboratory in the Region. 6. Streamline program requirements : EPA should re—examine current program requirements that cause delays or are resource intensive. All unnecessary requirements should be eliminated or reduced. EPA should minimize reporting wherever possible when developing new programs. CONCLUSIONS The major problems facing Vermont’s environmental programs are not financial but organizational in nature. Each year, the Agency of Environmental Conservation consistently underspends its authorized budget. The reasons are limited Agency staff size and inability to transfer earmarked Federal and State match money between programs. EPA cannot change the legislature’s intention to cap State government size. Neither will increased Federal spending solve the problem. The greatest service EPA could provide would be to reduce Federal program requirements wherever possible and to allow more flexibility in the use of EPA funds. Streamlined requirements would lighten the burden on existing AEC staff. More sensitive review of State program outputs would eliminate expensive plan revisions and program delays. Greater flexibility would allow AEC to use Federal funds where they are needed most. Despite the Agency’s current difficulties, the creative manage- ment style of the Secretary and Commissioners should help pull the Agency through without jeopardizing the organization’s basic structure of environmental progress made to date. For exam ple, water programs will be cut back a bit with level 106 funding and the termination of 208 funds. This may affect the NPDES program temporarily because of reduced monitoring. But the State has a strong permitting program of its own which was in ex.istence before the Agency assumed NPDES responsibilities. With the State’s demonstrated commitment to water quality and extensive practical experience in this field, EPA should not fear more AEC discretion in carrying Out the NPDES program. Allowing the Agency to rely more heavily on judgment calls rather than advanced monitoring and analysis would help the Agency save time and money and still contribute to water quality protection. The first step for EPA Region I may be to take a hard look at program requirements vis—a—vis the State of Vermont. All unnec- essary requirements should be identified and eliminated where possible. All requirements that are necessary but time consuming and resource intensive should be re—examined to determine whether there are more efficient ways to achieve the desired ends. As a small State with a small staff, Vermont has been forced into efficiencies that other states may not have reached yet. The entire Region may learn from Vermont’s success in dealing with dif- ficult management conditions. VT - 10 ------- FOOTNOTE FOR FIGURE A The 20 percent increase in overall budget between FY ‘76 and FY ‘77 was mostly due to increased State funding in the 106 pro- gram and to new State funding in the solid waste management program. In FY ‘78, total funding increased much more slowly, mostly as a result of a one—time increase in 106 funds to adjust for a State accounting oversight. The 30 percent increase between FY ‘78 and F! ‘79 stems from a change in the Federal funding formula for air programs, receipt of 205(g) funds, and new Federal funds for the hazardous waste program. Actual expenditures by the Vermont Agency of Environmental Conservation deviate significantly from authorized expenditures. Each year, the AEC underruns authorized expenditures primarily due to problems in staffing (both because of attrition and the legislature’s reluctance to approve new positions). Occasional cancellation of contratual services and unforeseen efficiency measures can also reduce the Agency’s spending. VT — 11 ------- VE R 1ONT FIGt E A BUDGET FOR ENVIRON ”ENTAL PROGRPMS WITHIN TPE 1978 AUTHORIZED EXPENDITURES lg7g AGENCY OF ENVI P.O ENTAL CONSERVATION 3 O 2.5 2,0 30% 8% 1.5 20% FEDERAL SHARE STATE SHARE 4 1.0 0.5 FY 1976 977 VT - 12 ------- FIGURE A—I \IE M O T DEFLATED BUDGET FOP E VIPO E TAL PPO FP AS WITHIN THE AGENCY OF ENV J PON 1 ENTAL CflN EDVATI Th U972 CONSTANT DOLLARS) 2,0 — FEDERAL SHARE -J STA T E — SRARE 0 5 Fl 1976 1977 1978 1979 AtTRORIZED EXPENDITRES VT - 13 ------- FIGURE B VERtIONT CAAI 105 AIR POLLUTION CONTROL EXPENDITURES FEDERAL-1972 $ STATE-CURRENT $ STATE-1972 $ 1979 (SOURCEs ANALYTIC CENTER I, SASED ON FIGURES FROM EPA FINANCIAL STATUS REPORTS) (CURRENT AND 1972 CONSTANT DOLLARS FEDERAL-ORRENT $ C ’, 200 U) 100 0 FY1975 1976 • Corrected for S quarter fiscal year for federal grants 1978 VT — 14 ------- FOOTNOTE TO FIGURE C Increased Federal spending in F? ‘77 was due to an accounting oversight in the previous year. In F? ‘76, the State Agency anti- cipated more Federal funds than it received and consequently over— spent. To make up for this oversight, EPA provided a one—time funding increase in FY ‘77. The oversight may have been triggered by the change in the Federal fiscal calendar which extended F? ‘76 by three months. VT — 15 ------- FIGURE C 200 100 0 1 Eaticate ?Y 1975 2 Corrected for 5 quarter fiscal year for federal grants STATE-CURRENT $ FEDERAL-CURRENT S FEDERAL-1972 S 800 VEk 0NT C A! 106 WATER POLLUTION CNTROL EXPENDITURES (CURRENT AND 1972 C0NSTA T DOLLARS) 700 600 ‘I ) 500 = 303 ‘iOO STATE-972 $ 1’ FY1975 (SOURCE: ANALYTIC 2 1976 1977 1978 1979 CENTER I , BASED ON FIGURES FROM EPA FINANCIAL STATUS REPORTS) VT — 16 ------- FIGURE D VERMJNT SOLID WASTE EXPENDITURES (CURRENT AND 1972 CONSTANT DOLLARS) FEDERAL-CuRRENT $ STATE-CURRENT $ STATE-1972 $ 1979 (SOURCE: ANALYTIC CENTER I, BASED ON FIGURES FROM EPA FINANCIAL STATUS REPORTS) 80 70 5O C,) = =30 20 —---— FEDERAL-1972 $ 10 FY1976 1977 VT — 17 ------- THE GROWTH OF REQUIREMENTS & RESOURCE DEMANDS IN THE CWA §106 & CAA §105—FUNDED PROGRAMS PURPOSE State officials interviewed in connection with this study ex- pressed the view that federal Clean Water Act §106 and Clean Air Act §105 grant levels were not sufficient for them to deal ade- quately with the host of federal program requirements imposed by EPA. The charts on pages 9 and 13 of the Study Overview outline the growth of federal CWA §106 and CAA §105—related program requirements applicable to the states. They also attempt the difficult task of quantifying resource demands on state agencies associated with these requirements. This appendix explains the methodology used in preparing the chart s. SELECTION OF STUDY YEARS Both the Clean Water Act and the Clean Air Act were subject to major amendments in 1977. In the years prior to 1977, water and air programs at the state level were required to conform to in- creasingly more federal requirements as a condition for receipt of EPA grant monies. After the 1977 amendments to the Acts, federally imposed requirements on state air and water programs grew dramatically, and with them, resource demands. For this reason, and because more complete records were available, the fiscal years 1976 and 1979 were selected for study years to be compared and contrasted in the “growth charts. CAA §105—FUNDED PROGRAMS: THE GROWTH OF PROGRAM REQUIREMENTS The 1976 federal program included in the CAA §105 chart were gleaned from state—EPA grant documents, federal register entries, old volumes of the Code of Federal Regulations and discussions with EPA program personnel. The same sources were used to develop program requirement entries for the 1979 column, along with numerous EPA developed guidance documents designed to explain new require- ments associated with the 1977 Amendments to the Clean Air Act. A simple comparison of the entries for the years 1976 and 1979 shows the dramatic growth in federal requirements during this three year time period. It should be recognized, however, that the program requirement entries for the year 1979 do not include certain additional demands placed on state agencies that do not lend themselves to quantification. There have been shifts of regulatory approach on the part of EPA since 1977. The agency today aggressively encourages the states to take on new air pro— G—1 ------- gram activities and one official measure by Headquarters, in fact, of Regional performance is success in achieving this objective. EPA also is more insistent in demanding state compliance with federal program requirements. And for the first time, the 1977 Amendments authorized EPA to impose sanctions on recalcitrant states, an authority that is effective in encouraging the states to devote resources to program activities important to federal officials. CAA 5105—FUNDED PROGRAMS: RESOURCE DEMANDS At the end of each fiscal year, state agencies receiving CAA §105 grants are required to complete and file EPA—developed Financial Status Report forms. In the case of air programs, the Reports group resource figures in dollar terms under the three major headings of monitoring, enforcement” and planning. The 1976 Reports included a fourth heading for administration, but entries in this category were folded into the three previously mentioned headings after 1976. The Reports are not broken down further Into activity related units. Each year, however, state air agencies must estimate work years and dollars per activity in their grant application documents, based on what they expect to receive by way of state and federal resources in support of their operations. Although these application figures are consistently higher that actual expenditures as recorded in the Financial Status Reports, they nevertheless provided a basis, for use in the chart, for extrapolating breakdowns of expenditures per activity. The figures entered in the chart under the column resource expenditures”, therefore, were derived by extrapolating ratios to fit final Financial. Status Report expenditure totals. The figures in the charts show rather striking increases between 1976 and 1979 in expenditures on planning and monitoring. Enforce- ment figures do not show such marked increases; they have been fairly constant, especially when administrative costs are folded in. -. Finally, it should be noted that the figures record actual expen- ditures and shifting allocations associated with the growth in program requirements; they do not reflect what would be actually needed for the states to meet all requirements or to engage all activities at levels of commitment and performance officially expected by EPA. In the absence of an air program needs assess- ments” similar to those prepared by the states for their water programs, best case figures for resource demands necessarily remain subject to conjecture. CWA 5106—FUNDED PROGRAMS: THE GROWTH OF PROGRAM REQUIREMENTS The Clean Water Act 5106 program has not undergone fundamental structural change since it was enacted in 1972. As the 5106 chart indicates, basic program elements have remained constant over time. But this programmatic continutity reflected in the chart hides a proliferation of new requrements which may well C— 2 ------- be as demanding as those that were added to the air program after 1977. Since 1977, program requirements within each water program element have grown in number, scope and complexity as was revealed in the review of federal registers, EPA guidance documents and in discussions with various Region I water divi- sion program personnel. In addition, a number of responsibilities fall upon those indivi- duals who administer the Clean Water Act, which have had a rela- tively minor impact on the implementation of the CAA and RCRA. These responsibilities were identified in a November, 1979 state- ment by Douglas Costle as some 54 Federal laws and executive orders which must be complied with in any construction of a treatment facility”. In many cases the states are just beginning to encounter these responsibilities as they move into the Step 1 portion of the 205(g) delegation. Complying with the requirements of NEPA, MEE, WBE, the National Historic Preservation Act, Wild and Scenic Rivers Act, Fish and Wildlife Coordination Act, Clean Air Act, Resource Conservation and Recovery Act, Safe Drinking Water Act, any many others is very resource intensive. Substantive issues surface and must be resolved. In addition, the responsi- bility of implementing major Presidential policies such as the Small Community and Rural Development Policy, Urban Policy, Agricultural Land Protection Policy, National Water Policy, and Community Conservation Guidance requires the commitment of signi- ficant resources. CWA §106—FUNDED PROGRAMS: RESOURCE DEMANDS Water program accounting and reporting is far more activity—specific that that associated with the air program. And the existence of state “needs assessments” made possible an examination of “best case” estimates of resources needed to fulfill all federal program requirements. - The entries on the §106 chart under the column entitled “resource expenditures” were derived from linear extrapolations. The pro- portionate dollar and workyear breakdowns- per activity — “monitoring,” “enforcement,” “point source permitting,” “water quality planning,” “non—point source management,” “training,” “administration,” “public participation,” “municipal facilities construction” and “other” were culled from state expenditure estimates. After subtracting expen- ditures funded by §208 and 205(g) grants, each estimate was extrap- olated to fit its corresponding Financial Status Report figure. It should be noted that the 1976 figures included a separate cate- gory for “compliance 0 & H,” which accounted for some $1,441,185 and 80.2 workyears. In 1979, however, this category was folded into the other major headings. Adjustments were made to accomodate this fact by means of a “fold—in” ratio provided by the Region I §106 Office of Program Support. This ratio was used to correct for the artifically low original 1976 program element figures. G— 3 ------- As a result of very nearly level funding and shifting EPA priorities, some activities have become more resource intensive, while resources devoted to other activities have declined. For example, monitoring has risen in response to complex and costly new regulations, including quality assurance and toxics monitoring. Similarly, public partic— ipation and non—point source management have been given greater em- phasis since 1977, and thus have demanded more dollar and workyear resource expenditures. G—4 ------- INFLATION STUDY BIBLIOGRApgy SOURCES Adams, Marilyn, “State Year Ends With $7.4 Million Deficit,” The Burlington Free Press , July 4, 1980. “Ambient Air Monitoring Reference and Equivalent Methods,” 40 CFR 53. “Ambient Air Quality Surveillance,” 40 CFR 58. Anderson, Peter, “Vermont, New Hampshire — The Real Difference,” Boston Globe , June 22, 1980. “Annual Reports of the Council on Environmental Quality,” (1975—1979), United States Government Printing Office, Washington, D.C., 1975—1979. Arbuckle, J. Gordon, James, Michael A., Miller Marshall Lee, Sullivan, Thomas F.P., Watson, Thomas C., Environmental Law Handbook , Government Institutes, Inc., Washington, D.C., 1978. Associated Press, “Site in New Hampshire — is Eyed for Waste Plant,” Boston Globe , June 22, 1980. Barber, Walter C., (Director, Office of Air Quality Planning and Standards) “Guidance on SIP Regulation Contained in (CAA) S172(b)(9)(A),” Memo to Regional Administrators, November 1, 1978. Barber, Walter C., “Volatile Organic Compounds Emissions Inventory,” Memo to Regional Air Program Directors, November 3, 1978. Budget Recommendation of the Governor to the Great and General Court , The Commonwealth of Massachusetts, 1976, 1977, 1978, 1979, 1980, 1981. Carter, Jimmy and the Council of Economic Advisors, Economic Report of the President , United States Government Printing Office, Washington, D.C., 1980. “Clean Air Act as Amended, June 1974, The,” United States Government Printing Office, Washington, D.C., 1974. “Clean Air Act as Amended 1977, The,” United States Goverment Printing Office, Washington, D.C., 1977. Clean Water Act Showing Changes Made by the 1977 Amendments, The,” United States Government Printing Office, Washington, D.C., 1972. B—i ------- Costle, Douglas M., Memo From Douglas M. Costle regarding ‘Criteria for Approval of 1979 SIP Revisions’,” Memo to Regional Air Program Directors, February 24, 1978. Costle, Douglas M.,”Statement of Douglas M. Costle, Administrator, before the subcommittee of oversight and review committee on public works and transportation United States House of Representatives,” (unpublished) November, 1979. Coughila, Marguerite, “The New England Economic Summary, ” reprinted in “New England Economic Indicators,” Federal Reserve Bank of Boston, May 1980. Executive Budget, State of Vermont , Fiscal Years 1975, 1976—77, 1978—79, 1980—81. Governor’s Budget, State of Connecticut , Fiscal Years 1979—80, 1980—81. “Guidelines on Air Quality llodels ,,” 45 FR 20157, March 27, 1980. Hawkins, David C., (Assistant Administrator for Air, Noise and Radiation) “Checklist for Review of Transportation Portions of 1979 SIP Submissions,” Memo to Regional Administrators, October 17, 1978. Hawkins, David C., lmplementation of Reasonably Available Control Technology (RACT) on Hydrocarbon Stationary Services,,” Memo to Regional Administrators, February 2, 1970. Hawkins, David C., lnspections/Naintenance Policy,” Memo to Regional Administrators, July 17, 1978. Hawkins, David C., lrtternal Offsets for RACT Categories,” Memo to Robert L. Duprey, Director of Air and Hazardous Materials Division, Region V, July 3, 1978. Hawkins, David C., “Public Transportation Plan Required by Section l1O(c)(5) of the CAA, Memo to Regional Administrators, July 28, 1978. Helms, G.T., (Chief of Control Program Operation Branch, Research Triangle Park, North Carolina) “Question and Answers on 1979 SIP Revisions,” Memo to regional air program officers, October 11, 1978. Langner, Paul, Near the Stack, A Landscape Like the Moon,,” Boston Globe , June 22, 1980. Maine State Government Annual Reports , Compiled and edited by the Department of Finance and Administration, Bureau of the Budget, Otto W. Siebert, State Budget Officer, Published at Augusta, ME., 1974—75, 1975—76, 1976—77, 1977—78, 1978—79. 8—2 ------- Massachusetts Department of Environmental Quality Engineering, Ten Years of Environmental Progress in Massachusetts , (unpublished) 1980. New England Regional Commission, unpublished materials. New Hampshire 1977 Operating Budget , NH Laws of 1977, Chapter 600, c. 1977. New Hampshire 1979 Operating Budget , NH Laws of 1979, Chapter 434, c. 1979. Pokorny, Brad, “On the Other Rand, Frugal NH Officials Place Thrift First,” Boston Globe , June 22, 1980. “Prevention of Significant Deterioration Regulations,” 44 FR 67182, November 23, 1979. “Proposed Policy on Public Participation,” 45 FR 289R, March 30, 1980. “Report to the Congress by the National Committee on Water Quality,” United States Government Printing Office, Washington, D.C., 1976. “Requirements for Preparation, Adoption and Submittal of Implementation Plans,” 40 CFR 51. “Resources Conservation & Recovery Act of 1976, A Brief Look at Public Law 94—580,” sw—563, 1977. Rhoads, Richard C., (Director, Control Programs Develop- ment Division) “Cutback Asphalt—Acceptable RACT Regulations,” Memo to air program division directors, December 19, 1978. Rhoads, Richard C., “Regional Consistency for TSP Control Strategies and RACT,” Memo to Robert L. Duprey, Director of Air and Hazardous Materials Division, Region V, June 29, 1978. Rhoads, Richard G., “Vapor Recovery Regulations Required to meet RACT Regulations for the 1979 SIPs,” Memo to Allyn Davis, Director of Air and Hazardous Materials Division, Region IX , June 30, 1978. Rhode Island State Budget , prepared by State Budget Office Rhode Island Department of Administration, Fiscal Years 1978, 1979, 1980, 1981. Rhode Island Department of Environmental Management, “Rhode Island Water Pollution Control Plan FY 80,” (xerox). B— 3 ------- Rosinoff, Bruce, (Chief of Office of Water Programs Support, Region I, EPA) “State Section 106. Expenditure Reports,” compiled for Fiscal Years 1976, 1977, 1978, 1979, 1980, (unpublished). Rutledge, Gary T., Pollution Abatement and Control Expendi- tures in Constant and Current Dollars,” reprinted in Survey of Current Business , United States Department of Commerce, Bureau of Economic Analysis, February 1979. Rutledge, Gary T. and Baker, Bruce E., “An Overview of the Pollution Abatement and Control (PAC) Price Project,” (unpublished paper). Rutledge, Gary T. and Trevatian, Susan L., “Pollution Abatement and Control Expenditures, 1972—78,” reprinted in Survey of Current Business . United States Department of Commerce, Bureau of Economic Analysis, February 1980. “Section 106 Grant Regulations,” 40 CFR 25, 30, 31, 32, 33, 34, 35, 124, 125. “State Implementation Plans; General Preamble for Proposed Rulemaking on Approval of Plan Revision for Non Attain- ment Areas,” 44 FR. 20372, April 4, 1979. “State and Local Assistance; Grants for Water Quality Planning, Management and Implementation; Final Regulations,” 44 FR 30016, May 23, 1979. Tuerk, Edward J., (Assistant Administrator for Air and Waste Management) “Guidance on SIP Development and New Source Review in Areas Impacted by Fugitive Dust,” Memo to Regional Administrators, August 16, 1978. United States Bureau of the Census, “Pollution Abatement Costs and Expenditures 1977,” MA—200 (77)—2, United States Government Printing Office, Washington, D.C., 1979. United States Department of Labor, Bureau of Labor Statistics, “The Consumer Price Index, Concepts and Content over the Years,” 517, United States Government Printing Office, Washington, D.C., 1978. United States Environmental Protection Agency, “Basic Water Quality Management PrOgram,” EPA 440/7—76—025, United States Government Printing Office, Washington, D.C., 1977. United States Environmental Protection Agency, “The Cost of Clean Air and Water, Report to the Congress,” EPA 23013— 79—001, United States Government Printing Office, Washington, D.C., 1979. B— 4 ------- United States Environmental Protection Agency, “Resource Materials — Clean Water Act of 1977, (including imple- menting regualtions for Permits/Enforcement, Construc- tion Grants and Section 208), (unpublished) 1978. United States Environmental Protection Agency, Section 105 CAA Financial Status Reports , 1973—79, (unpublished). United States Environmental Protection Agency, Section 106 CWA Financial Status Reports , 1976—79, (unpublihsed). United States Environmental Protection Agency, Environmental Research Laboratory, “The Acid Precipitation Problem,” no number, no publisher, 1980. United States Environmental Protection Agency, Office of the Administrator, “Operation Year Guidance, USEPA,” no number, no publisher, 1980. United States Environmental Protection Agency, Office of Public Awareness, “Building for Clean Water,” no number, no publisher, 1975. United States Environmental Protection Agency, Office of Public Awareness, “Cleaning the Air; EPA ’s Program for Air Pollution Control,” OPA 48/B, United States Government Printing Office, Washington, D.C., 1979. United States Environmental Protection Agency, Office of Public Awareness, “A Guide to the Clean Water Act Amendments,” OPA 129/8, United States Government Printing Office, Washington, D.C., 1978. United States Environmental Protection Agency, Office of Public Awareness, “Regional Administrator’s Annual Report, Environmental Quality in New England”, no number, no publisher, 1979. United State Environmental Protection Agency, Office of Research and Development, Projects in the Industrial Pollution Control Division, 1974,” EPA 600/2—75—001, United States Government Printing Office, Washington, D.C., 1975. United States Environmental Protection Agency, Office of Research Management, Grants AdmInistration Division “Activities of the Grants Assistance Programs,” PM 216, United States Government Printing Office, Washington, D.C. , 1979. United States Environmental Protection Agency, Office of Water Planning and Standards, Water Planning Division, “Water Quality Management Five Year Strategy FY 81 Bage— line,” no number, no publisher, 1980. B—5 ------- United States Environmental Protection Agency, Office of Water Program Operations, Municipal Construction Division, The Clean Water Act of 1977 — Summary of Complete Act provisions,” (unpublished) 1977. United States Environmental Protection Agency, Office of Water and Waste Management, “Every Body’s Problem, Hazardous Waste,” SW—826, United States Government Printing Office, Washington, D.C., 1980. United States Environmental Protection Agency, United States Department of Transportation, “The Clean Air Act S174 Guidelines,” Memo to Regional Administrators, December 1979. United States Environmental Protection Agency, United States Department of Transportation, “Expanded Guide- lines for Public Participation in the SIP Transportation Revision Process,” Memo to Regional Administrators, May 1, 1980. United States Environmental Protection Agency, United States Department of Transportation, “Memorandum of Understanding Between the Department of Transportation and the EPA regarding the Integration of Transportation and Air Quality Planning,” Memo to Regional Administrators, June 14, 1978. United States Environmental Protection Agency, Intergovern— mental Personnel Program, “State Salary Survey,” no number, no publisher, Fiscal Years 1976, 1977, 1978, 1979, 1980. B—6 ------- INFLATION STUDY BIBLIOGRAPHY INTERVIEWS Lisa Baker, Massachusetts Environmental Coalition John Bewick, Secretary, Executive Office of Environmental Affairs, Massachusetts Jonathan Black, Environmental Affairs Committee, Greater Boston Chamber of Commerce William Brierley, Environmental Engineering Executive, Agency of Environmental Conservation, Vermont Leonard Bruchman, Director, Air Compliance Unit,- Department of Environmental Protection, Connecticut David dough, Director, Water Quality Division, Agency of Environmental Conservation, Vermont Judith Cohen, Librarian, Bureau of Labor Statistics, United States Department of Labor, Boston, MA Michael Cornelius, Budget Official, Governor’s Office New Hampshire Anthony Cortese, Commissioner, Department of Environmental Quality Engineering, Massachusetts Frank Dallesander, Office of Policy and Management, Department of Envirionmental Protection, Connecticut Marilyn Davis, Department of Water Resources, Agency of Environmental Conservation, Vermont George Donovan, Housing and Community Affairs Department, Agency of Development and Community Affairs, Vermont Richard Ducklo, Legislative Budget Assistant’s Office New Hampshire Michael Dukakis, Professor, The Kennedy School, former Governor of Massachusetts Dana Duxhury, Environmental Affairs Committee, League of Women Voters, Massachusetts Peter Fairchild, Executive Director, Northeast States for Coordinated Air Use Management (NESCAUM) B— 7 ------- James Fester, Chief, Division of Water Resources, Department of Environmental Protection, Rhode Island David Fierra, Deputy Commissioner, Department of Environmental Quality Engineering, Massachusetts Phil Florkowski, Senior Engineer, Air Compliance Unit Department of Environmental Protection, Connect icut David Friend, Deputy Director, Planning Branch, Division of Air Quality Control, Department of Environmental Quality Engineering, Massachusetts Norman Clover, Director of Administration, Department of Environmental Protection, Connect icut Stephen Groves, Director, Water Division, Department of Environmental Protection, Maine Susan Irving, President’s Council of Economic Advisors Washington, D.C. Vance Kane, Census Bureau, United States Department of Labor Washington, D.C. Reginald LaRosa, Director, Environmental Engineering Division and Acting Director, Water Resources Department Agency of Environmental Conservation, Vermont James LeForge, Principal Accountant for Regulation, Department of Environmental Protection, Rhode Island James Leigh, Budget Director, Department of Environmental Protection, Maine David Levine, Bureau of Economic Analysis, United States Department of Commerce, Washington, D.C. Dennis Lunderville, Director, Air Resources Agency, - New Hampshire Carleton A. Maine, Assistant Director for Regulation Department of Environmental Management Rhode Island David Masters, Associate Director, New Perspective, Boston, MA Hollis McGlauflin, Director, Hazardous Waste and Solid Waste Division, Department of Environmental Protection, Maine Dennis l4cSweeney, Bureau of Labor Statistics, United States Department of Labor, Boston, MA B— 8 ------- Robert Moore, Director, Water Compliance Unit, Department of Environmental Protection, Connecticut David Neville, Staff Member, Office of State Planning Governor’s Office, New Hampshire Robert Norwood, Water Compliance Unit, Department of Environmental Protection • Connecticut Betsy O’Connor, Bureau of Economic Analysis, United States Department of Commerce, Washington, D.C. Neil O’Leary, Deputy Director, Department of Environmental Quality Engineering, Massachusetts Arriat Ott, Department of Economics, Clark University Worcester, MA Stanley Pac, Commissioner, Department of Environmental Protection, Connecticut Cleveland Parker, Director, Society for the Protection of New Hampshire Forests Isabel Parks, Staff Member, New Hampshire Environmental Coalition Gary L. Rutledge, Bureau of Economic Analysis, United States Department of Commerce, Washington, D.C. Ross Saberin, Census Bureau, United States Department of Labor, Washington, D.C. Frank Siegel, Bureau of Economic Analysis, United States Department of Commerce, Washington, D.C. Noel Simpson, Economist, Department of Economic Affairs, Mas sachusetts Robert Smith, Assistant Director, Water Compliance Unit Department of Environmental Protection, Connecticut Southern New Hampshire Planning Commission Thomas Sweeney, Director, Bureau of Solid Waste, New Hampshire David Tudor, Director, Air Division, Department of Environmental Protection, Maine Richard Valentinetti, Chief, Air and Solid Waste Program, Agency of Environmental Conservation, Vermont B—9 ------- Ronald Van Winkle, Department of Economic Development, Connecticut Henry Warren, Commissioner, Department of Environmental Protection, Maine Donald Webster, Legislative Budget Laison, Vermont Brendon Whittaker, Secretary, Agency of Environmental Conservation, Vermont Thomas Wright, Chief of Air Resources and Hazardous Waste, Department of Environmental Protection, Rhode Island B — 10 ------- THE EFFECTS OF INFLATION AND FISCAL PRESSURES ON S ELECTED ENV IRONMENTAL PROGRAMS IN REGION I Analytic Center Management Division August 27. 1980 ------- |