oversight

Budget Issues: Effects of the Fiscal Year 1990 Sequester at EPA

Published by the Government Accountability Office on 1990-07-26.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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GAO                                                Fact, Sheet for the Chairman,
                                                   Committee on the Budget,
                                                   IIIowc of Representatives



                                                  BUDGET ISSUES
                                                  Effects of the Fiscal
                                                  Year 1990 Sequester at


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                                                 RESTRI~       --Not   to be released outside the
                                                 General Accounting OfIke unless specifically
                                                 approved by the Offlce of Congressional
  *
      lJnited States
GAO   General Accounting OflIce
      Washington, D.C. 20548
                                                                                            -
      Resources, Community,   and
      Economic Development    Division

      B-239885



      July26,lQQO


      The Honorable  Leon E. Panetta
      Chairman, Committee on the Budget
      House of Representatives
      Dear    Mr.   Chairman:
      By letter    dated January 2, 1990, you requested             that we
      study the effects     of the fiscal     year 1990 sequester          under
      the Balanced Budget and Emergency Deficit              Control    Act of
      1985, as amended.      The sequester     was initially        ordered in
      October 1989 and modified       in December    1989.      Specifically,
      you asked us to identify      (1) how the resources           of selected
      agencies were reduced by implementation            of the sequester        and
      (2) what impact the resource        reductions     had on the agencies'
      ability    to fulfill  their  missions     and on those served by
      agency programs.      This fact sheet on the Environmental
      Protection    Agency (EPA) is one of a series of reports                in
      response to your request.
      As agreed with your office,      we examined five agencies.        YOU
      specified    the Department  of Health and Human Services       and
      the Internal    Revenue Service;   in addition,  we selected     the
      Department of Education,      EPA, and the Department   of Housing
      and Urban Development.      These agencies collectively      provide
      a cross-section    of large and small agencies     and various
      types of programs that affect      the public.
      In summary, the sequester              resulted      in a $73 million,       or 1.3
      percent,    reduction      in EPA's fiscal           year 1990 appropriations.
      Although     all but one of EPA's accounts still                   showed an
      increase     in obligational          authority      over fiscal     year 1989,
      agency officials        identified        a number of impacts from the
      sequester,      as not all activities             originally     planned for the
      fiscal    year with the larger            amount of funds could be carried
      out.     These officials         indicated      that expense funds for such
      items    as employee training            and travel       and the purchase and
      repair    of computers and other equipment absorbed the largest
      impact.     This situation          occurred      because EPA offices        took
      most of the reduction            in the Salaries          and Expenses account
      in the expenses portion             of the account to protect            funds for
      employee salaries         and benefits.
B-239885




SEQUESTER
The Balanced Budget and Emergency Deficit             Control Act, as
amended, established         federal budget deficit     targets to lead
to a balanced, unified         budget by fiscal   year 1993. The
deficit      target set for fiscal     year 1990 by the act was $100
billion.        However, in October 1989, the Office of Management
and Budget (OMB) estimated that the fiscal             year 1990 deficit
would be $116 billion.          According to OMB's October 1989
report,      a sequester of 4.3 percent in defense accounts and
5.3 percent in all other accounts subject to sequestration
would have been required to reduce budgetary resources
sufficiently       to reach the target deficit      level.
Sequestration        of this magnitude was never fully       implemented,
however, because of passage of the Omnibus Budget
Reconciliation        Act of 1989. The Reconciliation        Act reduced
the mandatory sequester amount, effectively             reducing the
sequester requirements         to 1.5 percent in defense accounts
and 1.4 percent in others.
Implementation    of the modified sequester resulted        in a
reduction    of $73 million   in EPA's fiscal     year 1990
appropriations.      This reduction     amounted to 1.3 percent,
rather than 1.4 percent, of EPA's appropriations          because of
the provisions    in the Balanced Budget Act for applying a
sequester to an agency’s      full-year    appropriations   enacted
after the effective      date of the sequester in October.        EPA's
appropriations    act was enacted in November 1989.

After the sequester and reductions         in EPA's appropriations
for the government's war on drugs program, the agency's
obligational   authority     for fiscal  year 1990 was 5.1 percent
less than in fiscal      year 1989. However, this decrease
occurred because of a large reduction         in the Construction
Grants account.     All the other accounts had an increase in
obligational   authority.       Section 1 of this fact sheet
provides further    details     on the sequester's  implementation.
SEOUESTERIMPACTS
Attributing   reductions  in activities      planned for fiscal   year
1990 solely to the sequester is difficult          because, as
provided by EPA's appropriations        act, reductions    in the
agency's budget authority    for the war on drugs program--
which at 1.55 percent were larger than the sequester
reductions --also occurred during the fiscal         year.   Agency
B-239885




officials,    however, identified  what they believed were the
sequester's    impacts.   These impacts included the following:
-- The curtailment,     postponement, or cancellation    of some
   planned program activities.       For example, Office of Solid
   Waste and Emergency Response budget officials        estimated
   that cleanup of from one to two Superfund sites would be
   delayed until    fiscal   year 1991.
-- The inability   &hire    and fully maintain the planned
   workforce.    The Office of Enforcement,    for example,
   reported that 5 of the 15 new criminal      investigators
   planned to be hired this fiscal    year will not be hired.
-- Reductions in travel and training,   purchase of office
   supplies and furniture,  and purchase and repair of
   computers and other equipment by various offices.
-- Reduced resources and/or technical             assistance planned for
   state environmental        programs.       For example, Office of Air
   and Radiation    officials      reported that because of the
   sequester,   they are providing          less support than planned
   to state and local officials           in radon measurement and
   mitigation   methods for schools.
-- The administrative   costs associated with        carrying out the
   sequester.    For example, several offices        cited the need
   to revise fiscal   year 1990 workplans.
The largest     impact of the sequester appears to have been in
the expenses portion of the Salaries and Expenses account.
To avoid the need to reduce existing       staffing   levels,     EPA
offices    have made most of the account's reduction        in the
expenses portion.      Because most of the account i.8 for
personnel compensation and benefits,       the reduction      resulted
in up to a 21.5-percent      cut in expense funds fijr some
offices.     Office of Research and Development budget
officials    told us that these reductions     have been difficult
for the agency's laboratories      because repair costs to keep
aging equipment in operation are high.         A more detailed
discussion     of the sequester's  impact is in section 2.


To obtain information   on the sequester's  implementation,          we
reviewed EPA's appropriations   act, OMB guidance, internal
3 *
 B-239885




 EPA instructions,     OMB sequester reports,         and the
 President's    sequester orders.        In addition,     we discussed the
 sequester's    implementation     with EPA budget officials         and
 obtained data on sequester reductions            by account and
 programs, projects,      and activities.       Further,     we obtained
 data depicting     EPA's obligational      authority     for fiscal   years
 1988, 1989, and 1990 after the sequester.               Except for the
 allocation    of the sequester by program, these data were
 obtained directly     from the Budget of the United States
 Government, Fiscal Years 1990 and 1991.
 To obtain the information       on the sequester impacts, EPA's
 budget office   solicited    for us written     statements from
 offices,  agencywide, on how programs and activities          were
 affected  by the spending reductions.         In addition,   we
 discussed the impacts with budget officials           of the Offices
 of Air and Radiation,      Water, Solid Waste and Emergency
 Response, Pesticides      and Toxic Substances, Research and
 Development, and Enforcement.         As agreed with your office,
 we did not verify     agency statements on the impacts.
 Our work was conducted between March and May 1990.
 We discussed the results  of the work with EPA officials, who
 generally  agreed with the data presented in this fact sheet.
 As agreed with your office,      unless you publicly         announce its
 contents earlier,     we plan no further      distribution      of this
 fact sheet until     30 days from its issue date.           At that time,
 we will provide copies to the Administrator,              Environmental
 Protection  Agency; the Director,       Office of Management and
 Budget; the Director,     Congressional     Budget Office:       and other
 interested  parties.     Copies will also be made available             on
 request.
 If you have any questions about this fact sheet,             please
 contact me on (202) 275-6111.     Major contributors          to this
 fact sheet are listed   in appendix III.
 S*ely       yours,



 Richard h. Hembra
 Director, Environmental       Protection
    Issues
"4
                                   CONTENTS
                                                                     Paae
LETTER                                                                 1
SECTION
    1            IMPLEMENTATIONOF THE FISCAL YEAR 1990
                   BUDGETSEQUESTERAT EPA                               7
                     The Budget Sequester Process                      7
                     EPA's Fiscal Year 1990 Appropriation              8
                     The Sequester Reductions for EPA                 10
    2            IMPACTS OF THE SEQUESTERAS CITED BY EPA
                   OFFICIALS                                          14
                     Curtailment,     Postponement, or
                        Cancellation     of Planned Program
                        Activities                                    15
                     Inability     to Hire and Maintain the
                        Planned Workforce                             18
                     Concentration     of Reductions in the
                        Expense Budgets                               18
                     Reduction of State Grants and Technical
                       Assistance                                     20
                     Administrative      Costs of Carrying Out the
                        Sequester                                    22
APPENDIX
         I       EPA'S FISCAL YEAR 1990 SEQUESTERAND SECTION
                   517 REDUCTIONSBY PROGRAM AREAS                    23
    II           CALCULATIONOF SEQUESTERAMOUNTSUNDER
                   CONTINUING RESOLUTIONS                            24
  III            MAJOR CONTRIBUTORSTO THIS FACT SHEET                26
TABLE
  1.1            EPA's Fiscal Year 1990 Gross Appropriations
                   by Account                                          9
  1.2            The Fiscal Year 1990 Sequester and Section
                   517 Budget Authority    Reductions by
                   EPA Appropriation    Account                       11
  1.3            EPA's Fiscal     Years 1988, 1989, and 1990
                   Obligational     Authority by Appropriation
                   Account                                            13
 II.1        *   Calculation  of Sequester    Amounts for Three       25
                   EPA Accounts

                                      5
                   ABBREVIATIONS
EPA    Environmental  Protection Agency
FY     fiscal  year
OMB    Office of Management and Budget
PC&B   Personnel Costs and Benefits
  .




                 IMPLEMENTATION0F'JX.E FISCAL YEAR 1990
                        BU
                        ] G
        For fiscal  year 1990, the Environmental    Protection Agency
 (EPA) and other federal agencies were subjected to a budget
sequester.      Reductions in agencies 1 budgetary resources were made
to reduce the federal deficit     to the target level specified    under
the Balanced Budget and Emergency Deficit        Control Act of 1985, as
amended. For EPA, the reduction       amounted to $73 million,   or 1.3
percent, of the funds appropriated      to carry out its programs and
activities.
THE BUDGETSEOUESTERPROCESS
        The Balanced Budget and Emergency Deficit       Control Act of 1985,
as amended, establishes      deficit  targets to lead to a balanced,
unified    budget by fiscal   year 1993. Each year, the Office of
Management and Budget (OMB) is required to submit an initial           report
on August 25 and a final report on October 15 projecting          the fiscal
year deficit.      If OMBprojects    a deficit  in excess of the target
amount plus $10 billion,      the President must issue a sequester order
to reduce budgetary resources sufficiently         to reach the target
deficit    level.    The amount to be sequestered must be divided evenly
between defense and nondefense accounts.          Sequestration  has been
implemented only once before, in fiscal        year 1986, when defense and
nondefense budgets were reduced by 4.9 and 4.3 percent,
respectively.
         The act set the fiscal  year 1990 deficit   target at $100
billion.      The August OMB report estimated a $116.2 billion       deficit,
exceeding the target by $16.2 billion;       the October report slightly
reduced the overall     estimate to $116.1 billion.      Both reports would
have required a sequester of 4.3 percent in defense accounts, and
5.3 percent in all others subject to sequestration.          Sequestration
of this magnitude was never fully      implemented, however, because of
passage of the Omnibus Budget Reconciliation        Act of 1989.
       The 1989 Reconciliation    Act, enacted on December 19, 1989,
reduced the mandatory sequester amount to 130/365 of the original
$16.1 billion    requirement.    This change effectively     reduced
sequester requirements      to $5.7 billion,   or 1.5 percent in defense
accounts and 1.4 percent in others.          OMB responded to this
legislation   with a "Revised Final Sequester Report," published
December 27, 1989, that sequestered the lower amounts.
      EPA's and most other agencies 1 appropriations      acts had not
been enacted by the October 15 sequestration      deadline and were
operating  under continuing resolutions.     (EPA's appropriations      act
was signed into law on November 9, 1989.)      In such cases, the
Balanced Budget Act requires that an assumed appropriation         level be
                                     7
                                                                                 .




used for making the sequester computation.                   That level,   in most
cases, is the prior year's appropriation                 adjusted upward for pay
raises and price inflation            as specified     in the act.      In the event
that the full-year         appropriation    finally      enacted1 is less than the
assumed level,        the decrease is counted toward, or "credited             to,"
the sequestration        requirement.      Depending on the degree of the
enacted decrease, the sequestered amount and percentage are reduced
or totally      eliminated.      On the other hand, if the final
appropriation       is larger than the assumed level, the increase is
protected     from sequestration.         Calculation      of sequester amounts for
agencies operating         under continuing      resolutions     at the time of the
sequestration       deadline is discussed in more detail             in appendix II.



      The Departments of Veterans Affairs         and Housing and Urban
Development and Independent Agencies Appropriations           Act, 1990,
which was enacted on November 9, 1989, provided fiscal            year 1990
funding for EPA. The amount of funds appropriated            for EPA by
appropriation    account is shown in table 1.1.2        These amounts are
the gross appropriations     before the reductions      for the
government's war on drugs program, which were provided by Section
517 of the appropriations     act.    The Section 517 reductions,      as
shown in table 1.2, totalled       $88.3 million,    or 1.55 percent of the
gross appropriations.      Other federal agencies were affected        by
similar drug war program provisions.


lFor EPA and other agencies that were subjected to the reductions
for the war on drugs program, the net appropriated    amounts, that
is, the amounts after subtracting    the war on drugs reductions,    were
used to calculate   actual sequester amounts.   In EPA's case, the war
on drugs reductions   were made by Section 517 of its appropriations
act, which reduced the amounts otherwise provided by the act by
1.55 percent.
2Not included in tables 1.1, 1.2, and 1.3 is the Miscellaneous
Contributed     Funds account.       This account includes    (1) gifts    for
pollution     control programs which are, for the most part, designated
for a specific       use by the donor and (2) deposits from pesticide
registrants     to cover the cost of petition        hearings when such
hearings result       in unfavorable     decisions to the petitioner.
Appropriation      of these funds is permanent and indefinite          rather
than being provided by the appropriations            act.   The account's
budget authority        for fiscal   year 1990 is $10,000.     The account was
not sequestered at all because the sequester amount would have
been less than $1,000.


                                        8
    .
t



Table 1.1:    EPA's Fiscal     Year 1990 Gross Aspronriations          bv Account
          Anarowriation      accounta              Amount of awwronriationb
Salaries and Exnenses:       employee              $     874,583,OOO
salaries   and related costs associated
with administering     EPA programs
exclusive   of grant programs, program-
specific   contractual   agreements,
hazardous substance response actions,
and costs associated with the Leaking
Underground Storage Tank Trust Fund and
the Office of the Inspector      General.
                        ment . financing    of           241,500,OOO
research and development'through
contracts,   grants, and intergovernmental
agreements to provide the scientific
basis for EPA's regulatory      activities.
Abntem$$J& Control and C nliance:                        829,940,OOO
funds for contracts,  gra%     and
cooperative agreements for pollution
abatement, control,  and compliance
activities.
Buildina      and Facilitie s: construction,              15,000,000
repair,     ymprovement extension,
alteration,     and purhhase of fixed
equipment or facilities      of, or used by,
EPA.
             ubstance Reswonse Trust Fund              1,575,000,000
y;;;if;;;d;:     funds to respond to and
clean up hazardous substance emergencies
and uncontrolled     waste sites.
Construction   Grants:    funds for grants             2,050,000,000
to local public agencies to construct
municipal wastewater treatment
facilities.    For fiscal   year 1990, two-
thirds of the funds are to capitalize
State Revolving Funds, from which local
agencies can borrow funds to build
treatment plants.
Lleakinq Underaround Storacre Tank Trust                  76,000,OOO
Fund: funds for responding to releases
from underground petroleum tanks.



                                        9
Qffice of the Insnector     General:                      31,734,ooo
funds for EPA audit and investigative
functions     to identify and correct
management and administrative
deficiencies.
Total                                               $5.693.757.ono
aNot included in this table and tables 1.2 and 1.3 is the
Miscellaneous Contributed   Funds account, a permanent, indefinite
account with budget authority   for fiscal year 1990 of $10,000.
bThese amounts represent the appropriations     before the Section 517
reductions.  The net appropriations,    derived by subtracting   the
Section 517 reductions,  were used to calculate     sequester amounts.
     The appropriations     act also provided that EPA could transfer
up to $15 million    of the funds to the Salaries and Expenses account
from other accounts:      $5 million from Research and Development and
$10 million  from Abatement, Control and Compliance.
THE SEOUESTERREDUCTIONS
EOR EPA
      The December 1989 sequester ordered by the President resulted
in a $73 million     reduction   in EPA's fiscal   year 1990 budget
authority.    Overall,    the reduction    for EPA amounted to 1.3 percent
of its appropriation      for fiscal   year 1990. The reduction     varied
from a low of 0.79 percent for the Buildings         and Facilities
account to a high of 1.35 percent for Salaries and Expenses.             None
of EPA's accounts were exempted from sequestration.
      The combined reductions        for the sequester and the war on drugs
program totalled     $161.3 million.        After these reductions,      EPA's
total  fiscal   year 1990 obligational         authority    was 5.1 percent less
than its obligational      authority     for fiscal      year 1989. This
decrease occurred, however, because of a large decrease in
Construction    Grants.    All the other accounts received an increase
over fiscal    year 1989.
      Table 1.2 shows the sequester reductions       for EPA by
appropriation  account.    Also shown are the Section 517, or war on
drugs program, reductions.      (These reductions    are shown by program
areas in app. I.)    The sequester reduced EPA's budget authority       by
less than the 1.4 percent ordered by the President in December
1989, because of the rules for calculating        the sequester amount for
agencies whose full-year    appropriations    have not been enacted by
the October sequestration     deadline.



                                      10
                                                                                                             wdget
                                            Section                                                        authority
                         appropriation        517            appropriation                                  afkr
                                                                                                          redhrctions
                                                 t-           ha)
salariesand                    $874,583     $13,556            $861,027             $11,618     1.35        $849,409

                                241,500          3,743          237,757               2,937     1.24         234,820

                                829,940      12,864             817,076              10,442     1.28         806,634


Build@         and               15,000               232          14,768                116    0.79             14,652
Facilities

Haz-                          1,575,ooo      24,412           1,550,588              20,360     1.31       1,530,228

m
construction                  2,050,OOO      31,775           2,018,225              26,505     1.31       1,991,720
Granta

                                 76,000          1,178             74,822               725     0.97             74,097
a
storage Tank
YYmJstm

Office of                        31.734                            31.242               332     1.09             30,903
Inspector

lbtdl                        $5.693.757                                                         1.30      %Alib?Q
apeKlerrtages        rep-t       the sequester        almunts relative       to net apprcrpriation     ammnts.




            As authorized    by the appropriations     act, EPA transferred   to
    the Salaries and Expenses account $5 million            from the Research and
    Development account and $10 million          from the Abatement, Control,
    and Compliance account.        After the sequester and Section 517
    reductions,     the total amount transferred       to the account was $14.59
    million.     According to EPA officials,        the transferred   funds were
    used toward the increased employee salary and benefit             costs
    associated with the January 1990 federal pay raise.

                                                              11
       EPA does not have the authority    to transfer    funds from one
appropriation    account to another unless specifically       authorized  by
law. However, the agency does have general authority           to reprogram
funds, that is, to move funds within an account from one program,
project,    or activity to another.    However, a reprogramming of over
$500,000 has to have prior congressional       approval.
        EPA typically      reprograms funds because of changes in
priorities,      responsibilities,    or needs from the time the budget was
prepared.      This year, however, EPA also made some reprogramming
adjustments because of the sequester and Section 517 reductions.
EPA officials       said that they did not maintain information       on the
amount of reprogramming done as a direct result of sequestration.
According to EPA budget officials,         a sequester may be only one
among several reasons for reprogramming funds.           In addition,    the
decision to reprogram may come some time after the sequester
reductions     are made. A budget official       told us that the
justification       contained in a request for reprogramming may or may
not cite the sequester as a reason even if it were one of the
reasons.
       Table   1.3 compares the fiscal  years 1988, 1989, and 1990
obligational      authority after the sequester and Section 51.7
reductions.




                                    12
       .

.




                                                                                              Fb! 1988-89         JY 1989-90

Salaries and                    $7,231,377            $ 814,504         $ 883,945                     5.8               8.5

Office of                              22,617            23,144             30,903                    2.3              33.5
Inspector

laseadland                            189,024           208,209            238,379                   10.1              14.5
Developtent

Abatement,cmt.ml                      624,184           735,390            824,412                   17.8              12.1
akicaT+mce
Buildingsand                           26,762            16,663             24,723               -37.7                 48.4
Facilities
Haz-           substance            1,658,116         1,602,755          1,608,239                   -3.3               0.3

                                       44,076            53,466             77,555                   21.3              45.1


Cons-ion             Grants         2.896.875         3.342.684          2.759.47&              -14.2              -17.4

                                                                        %idkUZ                       -6.0              -5.1

aobligational authority inclMes appropriations,                        offsetting     collectionS,          beginnbq
~ligatedbal~,andnettransf~rlessrescissians,~~ions,Secti~517
rceductians, and tlx sequester.




               As shown by table                 1.3,     all     of   EPA's        appropriation               accounts,
    except           Construction show            in obligational
                                            Grants,                increases
    authority  for fiscal year 1990 over fiscal   year 1989. Because of
    the large decrease in the unobligated   balances of the Construction
    Grants account, the agency's total fiscal    year 1990 obligational
    authority  after the sequester and Section 517 reductions      is 5.1
    percent less than the agency's fiscal   year 1989 obligational
    authority.


                 Y




                                                                  13
                                                                                    .




                                      SECTION 2
              ACTS OF THE SEQUESTERAS CITED BY EPA OFFICIALS
       EPA provided us information         on the impacts of the fiscal         year
1990 sequester through written          statements from its 12 major
headquarters     offices    and during interviews     with budget officials         of
the agency's 6 major operating program offices:                 Enforcement,
Research and Development, Solid Waste and Emergency Response, Air
and Radiation,      Pesticides    and Toxic Substances, and Water.           In some
cases, the offices       had not compared in detail        and summarized what
specific   activities      or actions had been planned and then were
cancelled or delayed by the reduction            in resources from the
sequester.     In addition,      all the specific    activities      or actions
that will have to be cancelled or delayed will not be known until
the end of the fiscal        year, when the offices      will have made all
their spending decisions.           However, all the offices       reported
negative effects       of varying degrees on their programs.            The
reported impacts were in five areas:
      -- The curtailment,    postponement, or cancellation             of program
         activities   planned for fiscal year 1990.
      -- The inability      to hire   and maintain       the planned   workforce.
      -- The concentration      of budget reductions  in the operating
         expense budgets,      with adverse programmatic effects    in some
         areas.
      -- The reduction  of state grants and technical  assistance to
         state and municipal environmental  programs from planned
         levels.
      -- The administrative       costs    of carrying     out the sequester.
      According to EPA officials,       the impact of the sequester,          which
reduced agency resources by 1.3 percent, was more significant                 than
the cut's size would imply for several reasons.            First,      the cut
was on top of the 1.55-percent       Section 517 reductions         for the
government's war on drugs program.          Second, the agency had to
absorb the 1990 federal pay increase.           Third, the cut was
substantially   intensified     in expense funds, which are used for such
items as employee travel and training          and the purchase and repair
of computers and equipment.        Programs that are more dependent on
their expense funds to carry out their activities           were affected
more than others.      Fourth, the impact is potentially          larger with
regard to grant programs requiring         states or municipalities        to
match the federal funds with their own funds.            As the federal funds
are reduced, the amount of the state or local funds required to
match them is likewise      reduced.


                                          14
OF PLANNEDPROGRAM
                ACTIVITIES
        According to EPA officials,            the sequester directly       affected
the operating       activities       of most programs planned for fiscal           year
1990. Specifically,            they said that fewer research and development
projects     will be carried out, some statutory               deadlines may not be
met, not as many audits will be performed, planned enforcement
activities      have been curtailed,          fewer Superfund sites will be
addressed, and the transfer              of information      to the public will be
less than planned.           Absent a detailed         comparison of activities
planned before the sequester with activities                   carried out after the
sequester reductions,            the cited impacts, in many cases, were not
quantified       in terms of specifically          how many activities      were
cancelled or curtailed             or how long an activity       was delayed.      It
should also be noted that the cited impacts are generally
references      to activities        that were originally       planned for fiscal
year 1990 or that could be achieved with the larger amount of
resources available          if a sequester had not occurred rather than
reductions      in the level of activity            for fiscal   year 1989. As
pointed out in Section 1, the fiscal                 year 1990 obligational
authority,      after the Section 517 reductions,              was greater than the
fiscal     year 1989 obligational          authority     for all but one of EPA's
accounts.
Research and Develonment
       Reductions in research and development were cited as having
impacts in various areas throughout EPA. Office of Research and
Development officials,     for example, stated that delays in research
projects    will affect their work in ozone attainment,   municipal
solid waste, radon mitigation,     and water quality.   Other officials
cited impacts such as the following:
       -- New chemical reviews:    the Office of Toxic Substances
          stated in a February 28, 1990, memo to the budget office
          that decreased testing   may result in some new chemicals
          going on the market with inadequate reviews.
      --     nerfund:    the Superfund management review emphasized the
           need for technical     assistance and research and development
           in solving problems associated with the Superfund program.
           The reduction    in research activity  impairs the ability  to
           solve those problems.
      mmAir and radiation:      research efforts   have been reduced in
        the areas of spark ignition      and cold start capability      that
        could affect the Ozone/Carbon Monoxide Standards Attainment
        Program.    Studies in the Indoor Air Program have been
        reduced, and support for the development of a credentials
        program for contractors      and the implementation     of an Indoor
        Air Information    Clearinghouse    have been affected.     In
                                         15
                addition,  work on ozone depletion  aimed at meeting the
                guidelines  of the Montreal Protocol have been reduced, as
                well as work in the modeling of greenhouse gases.


      Statutory deadlines which may be enacted as part of the
pending Clean Air Act Amendments may not be met in two major areas:
         --    Air toxics:      funding reductions    may delay the publication
               of high-priority      listings  of potentially  hazardous air
               pollutant    sources which the proposed amendments would
               require after enactment of the amendments.
         --    Ozone and narticulate  matter:  reduction of agency support
               for states in the preparation  of State Implementation
               Plans may prevent states from meeting the deadlines which
               would be imposed by the proposed amendments.
Audits
         The number of internal       and external    audits   planned   for   1990
will     be reduced:
         -- From 20 to 30 audits planned by the Office of Inspector
            General will be cancelled or postponed to future periods.
            According to EPA officials,  the agency's audits recover
            over $20 in costs for each dollar spent on audits.
         -- The Office of Administration        and Resources Management
            stated that environmental     compliance audits,    security
            audits,    and health and safety reviews of laboratory       and
            field   locations   will be curtailed.
Enforcement         Activities
        Agency officials  also cited eight areas where enforcement
activities    would be reduced or eliminated,   including the following
examples:
         --    Corrective action/hazardous      waste:    the number of
               facilities receiving    corrective    action oversight   will
               decrease by approximately     2 percent.
         -- J4.ticfation: litigation       support will be adversely affected
            in the area of evidence audit for both Superfund and non-
            Superfund judicial      cases.
         we
                Toxics enforcement:     grant funding will be available   to one
                less state to cover new Toxic Substances Control Act
                enforcement programs.      In addition,  the number of
              ' enforcement inspections      carried out by contractors and the
                                           16
           National Enforcement Investigations   Center will be
           reduced, which, according to EPA officials,   will affect
           the effectiveness  of the enforcement effort.
      VW
                                                     :   the implementation
           of a program to assess in-use compliance        of truck and bus
           emissions standards has been eliminated.
      mm
                                             technical      assistance and
           guidance by the Office of Federal Activities       will be
           reduced, which, according to EPA officials,       will result in
           overall  lower compliance by the facilities.
Hazardous Waste Cleanu
        A senior budget official    at the Office of Solid Waste and
Emergency Response stated that the average cleanup cost per
Superfund site is approximately         $10 million.    According to
information     provided by the official,      the sequester reduced the $1
billion    Superfund program by about $13 million,        which will postpone
the cleanup of from one to two sites until the next fiscal            year.
He stated that the combined effect of the Section 517 and sequester
reductions     would cause them to clean up two to three less sites
this year.      In addition,   the official    reported that regional
offices    will conduct a reduced number of spill        prevention,
containment,      and countermeasure inspections,      and fewer contingency
plans will be developed to deal with spills.
Jssuance of    Guidance

      EPA officials cited three cases where the issuance          of
guidance will be postponed by the sequester,   as follows:
      -- Deferring the development of guidance for newly regulated
         Mixed Waste and Organic Toxicity  Characteristics.
      -- Delaying the completion of guidance for implementing           the
         final Radionuclide   National Emissions Standards for
         Hazardous Air Pollutants.
      -- Reducing the amount of guidance to states         for implementing
         national standards for particulate matter         and ozone.
Information    Transfer
        The transfer    of information    to the public will be reduced.
For example, the Office of Pesticide           Programs reported that the
reduction     in communications activities       due to the sequester will
negatively      affect plans to provide outreach efforts        for the new
worker protection       regulations    and expanded public communications
efforts    on pesticide     risks.
          Y
                                     17
    .
.




            ent   mrovement      Programs
            Two management support      and improvement programs have been
    curtailed,    as follows:
          -- Cutbacks in the Productivity  Improvement Fund, decreasing
             EPA's ability  to foster agencywide management improvement
             efforts.
          -- Reductions    in support      for a public-private    partnership
             conference.


          Officials of six EPA offices    stated that they would have to
    let authorized  positions   lapse or not hire the personnel required
    to carry out their workplans, with varied impacts on their ability
    to meet program objectives.      The general effect 'appears to be one
    of restriction  rather than reduction,     as no reductions in force
    were reported.   The following    impacts were cited:
          -- The Office of Enforcement reported that 5 of the 15 new
             criminal  investigators planned for fiscal year 1990 will
             not be hired.
          -- The Office of General         Counsel has had to freeze existing
             vacancies that would         otherwise be filled,   with the net
             impact being that the         office will be unable to provide at
             least two additional         full-time   equivalent additional
             attorney positions      to    support agency needs for review,
             advice, interpretation,           and counsel.
          -- The Office of Policy,    Planning,    and Evaluation     had to stop
             hiring   in important areas such as pollution        prevention,
             climate change, and strategic      planning.
          -- The Water Program Divisions  will          be able to fill   only 90 to
             95 percent of its workyears.
                              UCTIONS IN THE EXPENSEBUDGETS
           At the program level, managers and budget officers          make their
    reduction    decisions     over a budget structure   that divides resources
    into intramural      (internal)   and extramural   (external)   operations.
    The budget of the Office of Pesticides          and Toxic Substances
    provides a representative        example:




                                            18
                                                                                  .

                                                                                      .


Intramural       :    alarles.    and Expenses
      -- Personnel          Compensation      and Benefits.
      -- Operating Expenses (travel,   training,                equipment,
         maintenance, support contracts,     other              expenses).
Extramural:          Abatement,     Control    and Comnliance
      -- External         Contracts.
      -- State        Grants and Cooperative         Agreements.
       In deciding how to best absorb the cuts on the intramural
side, the offices       placed first    priority    on maintaining   their
personnel costs and benefits,          with the result that the bulk of the
dollar    reductions    to the Salaries and Expenses account was taken
from the operating        expenses budget.       For example, the Office of
Pesticide     Programs took its entire $473,200 reduction          in Salaries
and Expenses from an expenses component of $2.2 million:
therefore,      the sequester was manifested as a 21.5-percent            reduction
in operating       expenses.   In other examples, the 1.3-percent
sequester cut translated         into a 17.8-percent     reduction   in the
operating     expenses of the Office of Water and a 9.5-percent
reduction     in the operating      expenses of the Office of Research and
Development.
      EPA offices   reported 10 areas where the reductions   in the
expense budgets adversely affect performance.       In commenting on
the tradeoffs    made in its budget for Operating Expenses and
Personnel Costs and Benefits     (PC&B), the Office of Executive
Support stated:
      As a result of the PC&B situation,  the majority  of the
      cuts were taken from the already deficient   expense object
      classes.   This has put a strain on all of the offices   in
      meeting programmatic goals.
        In addition,      the Office of Research and Development reported
that limited       funds to purchase and maintain essential         laboratory
equipment, purchase necessary supplies,           conduct facility       repairs,
and provide a minimal amount of necessary scientific               and
engineering      training     for researchers are adversely affecting         their
ability    to perform in-house research.         These functions      for their 12
major laboratories          and 5 field stations  are funded through the
expenses budget.          According to Office of Research and Development
budget officials,         60 to 70 percent of the laboratory       equipment is
over 8 years old in a field where scientific            equipment becomes
obsolete within 5 to 7 years.
             Y




                                              19
 .




       Similarly,     an official       from the Office of Enforcement stated
that expense fund cuts have been particularly                  severe on the
operations      of their National Enforcement Investigations                Center,
where a modern criminal           investigations      laboratory    is operated to
serve a staff of criminal            investigators.       Operation of the
laboratory     has been adversely affected by the expense fund
reductions      in a manner similar         to the Office of Research and
Development laboratories.             The Center's inability        to replace aging
laboratory     equipment is creating          large repair costs, which also
come out of the expense balance.                Field investigators      will also be
adversely affected because their transportation                  and equipment, a
primary requirement       in field investigations,            are affected.     The
purchase, maintenance, and repair of vehicles and equipment for the
investigators      are funded through operating            expenses, which have
taken the brunt of the cuts.
       Three offices cited eight cases in which the reduction     in
operating   expenses will negatively affect performance and output
of automated data processing systems, including    the following:
        -- The Office of Administration         and Resources Management
           reported that the reductions         have impaired funding for
           support, development, and enhancement to EPA's mission for
           critical   data systems, specifically       in new developments in
           the Integrated    Administration      Systems, and the ability  to
           assist regional    offices    with state EPA data management
           programs.    An official     reported that data storage and
           telecommunications       expansion in the programmatic areas will
           be severely curtailed.
        -- The Office of Pesticide    Programs stated that the automated
           data processing reductions     will delay systems maintenance
           and upgrades that were planned to support the
           implementation    of the Federal Insecticide,   Fungicide and
           Rodenticide    Act Amendments of 1988.
       -- Set-up and integration of the Automated Registration
          Tracking System for coordination  between the Office of
          Pesticide Programs and the Office of Enforcement will be
          slowed.
       One office   reported that the cuts in operating           expenses did
not significantly       affect their programs.       The office     of
International     Activities      reported that office   activities    and
program operations        received only minor impacts as a result of the
sequester.
     DUCTION OF STATE GRANTSAND TECHNICAL ASSISTANCE
     The EPA-state funding and technical  assistance     relationship
was cited by a number of agency officials   interviewed     as an area
where the sequester could produce a proportionally      greater impact
                                        20
                                                                                   .




than on headquarters      operations,  because of the leveraged funding
structure    required by many federal-state       agreements.     Senior budget
officials    from the Offices of Solid Waste and Emergency Response,
Pesticides     and Toxic Substances, and Water stated that many federal
grants to states require a proportionally          larger funding match by
the states,     sometimes in ratios requiring      up to $5 in state funding
for every federal dollar appropriated.          The officials     stated that
because most states are fiscally       constrained,     their legislatures
tend to appropriate      only the amounts required by the agreements in
matching federal grant funds.         When reductions     are taken in federal
funding, most state legislatures       subsequently     reduce funding in a
proportional     manner, so the effect of the sequester is leveraged.
       In addition,  agency officials cited specific    impacts        from the
reduction   of funding to states in the following    areas:
      --
           Toxics enforcement grants:   funds available will cover new
           Toxic Substances Control Act enforcement programs in one
           less state, thus reducing the coverage of the enforcement
           programs and slowing their decentralization  from EPA to the
           states.
      we
           Asbestos abatement:   the number of loans to public and
           private  schools for eliminating asbestos in buildings  has
           been reduced.
      --
           Radon: the transfer  of radon program responsibilities            from
           EPA to the states has been slowed.
      --
           &4:akin Unde rou                                reductions
           will be taken primarily  from state cooperative  agreements,
           with the overall  effect of increasing the backlog of
           unaddressed Leaking Underground Storage Tank sites.
       EPA officials    reported reductions     in technical    assistance to
states in several      areas; specifically,     the following    areas were
affected:
      --   Radionuclide     national    emissions standards for hazardous
           a&r uollutants:       the completion of guidance for
           implementation      of the standards will be delayed, resulting
           in reduced ability        to delegate implementation     authority to
           states.      According to EPA officials,      the strong
           participation      of the states is critical     to the successful
           nationwide     implementation     of the standards.
      -a
           Underground storage tanks:      assistance to states in their
           implementation  of the underground storage tank prevention
           program was reduced.     Headquarters staff normally support
           state pilot programs to develop improved methods of
           implementation.   Specifically,     officials report that two or

                                       21
          three fewer state   pilots    will be developed   than could have
          been accomplished   before    the cut.
     WV
          Radon: the provision   of radon measurement and mitigation
          methods to states and localities      will be reduced.   Agency
          officials  cite this as a critical     shortfall  because EPA had
          recommended that all schools be tested for radon this
          winter.   According to the officials,      fewer schools will
          have the tools necessary to address radon.
     --
          Aerometric Information    and Retrieval System:    funding was
          reduced for the facility    subsystem, which includes data
          necessary for air quality    planning and compliance,
          resulting  in fewer states coming on line with the subsystem
          in fiscal  year 1990.
     --
          Em
           g: enc          'n an
          a lower degree of technical  assistance      and training    will be
          provided by regions to state and local       organizations    in the
          development of their programs.
       The sequester may also affect state programs in other ways.
According to representatives      from the Association    of State and
Interstate   Water Pollution   Control Administrators,     states must
often borrow money to meet outlays if federal appropriations          are
delayed while the size of the sequester is determined.           When
federal appropriations     become available,  these funds cannot be used
to pay interest    incurred by state borrowing,     so the state program
must absorb the interest     costs.
ADMINISTRATIVE COSTS OF CARRYINGOUT THE SEQUESTER
        Five offices    cited significant  operating  costs and/or
burdensome administrative        problems associated with implementing the
sequester,    including     the confusion caused by the late timing,    the
uncertainty     over the size of the cuts, the inability     to plan
effectively,      and the need to revise workplans to reflect      the change
in resources.        The Office of Policy,  Planning,  and Evaluation
stated that:
     The impact has not only been felt on programmatic
     activities  but on administrative   activities    as well.
     The late timing of these reductions     and untimely approval
     of our FY operating plan has caused us to delay
     commitments, to delay reprogrammings,       and to delay hiring
     decisions-- all with a negative impact on our programs.
Budget officials  at the Offices of Solid Waste and Emergency
Response, Enforcement,   and Water echoed the above sentiment,
stating  that the administrative  costs were as significant    as the
programmatic costs.
        "
                                       22
APPENDIX1                                                                                            APPENDIX1



(Amounts in thausands)
                                            sec!tiorl                                                        Availabld
                       qropriathn              517         apprcp-iation
                                                                                                         a
Air                          $298,632         $4,631           $294,001              $3,710   1.26            $290,291
Water quality                 355,812          5,520              350,292             4,534   1.29             345,758
Drinkir~~Water                124,325          1,925              122,400             1,569   1.28             120,831
Hazarda       waste           278,101          4,314              273,787             3,489   1.27             270,299
Bzsticides                    108,616          1,684              106,932             1,387   1.30             105,546
Radiation                       36,426           564               35,862               462   1.29               35,401
Toxic substances              160,860          2,491              158,369             2,025   1.28             156,344
                               34,008            527               33,481               770   2.30               32,711
ConstructionGrarrts         2,050,OOO         31,775          2,018,225              26,505   1.31           1,991,720

super-                      1,585,317         24,572          1,560,745              20,459   1.31           1,540,286
IxJsTTnlst~                    76,000          1,178               74,822               725   0.97              74,097
Multimedia                    125,570          1,945              123,625             1,461   1.18             122,164

JKW-W -g-t                    149,926          2,321              147,605             1,933   1.31             145,672

ProgramManagement               17,621           273               17,348               234   1.35               17,114
Regional     Management        36,136            560               35,576               480   1.35              35,097
                               256,407         3.973              252,434             3,301   1.31             249.132
lbtald                                        %ifL&S       %ifB%Q2               %&&l&L2      1.30       %222&U&
%%zlm?nages rep lIx?sent sequester         amunts      relative      to net appropriation       amounts.
b2aki.q      undergnxlnd   Storage Tanks Trust         Fix&
c~~~~~SupportC!usts,                UnallccatedActions,            New Facilities,       andF&pai.mand
             .
dJ3ecauseofrmuMinrJ,-ofthe                  rimbers in the gmss and net apprapriation                    amcunt
colurtmsvaryslightly      fmtheactual            totals shcwn forthecolmns.




                                                              23
APPENDIX II                                                    APPENDIX II


                      UNDERCONTINUINGRESOLUTIONS

       Under the Balanced Budget and Emergency Deficit       Control Act of
1985, as amended, certain rules apply for calculating         sequester
amounts when an agency's full-year    appropriations      have not yet
been enacted and the agency is operating under a continuing
resolution   at the October 15 sequester deadline.        In such cases,
applying the sequester to the full-year     appropriation     when enacted
involves the use of the three following     calculations     as points of
reference:
      1. Seauester base: this amount is equal to the prior year's
         net appropriation    to the account, adjusted for pay raises
         and price inflation.
      2. Sequester amount: this amount is derived by multiplying
         the sequester base by the percentage mandated in the
         President's  sequester order.
      3. Post-seouester    base: this amount is derived by
         subtracting    the sequester amount as calculated above from
         the sequester base for each account.
After the appropriations    act has been enacted, the size of the
actual sequester amount for each account depends on how the final
amount appropriated    compares with the sequester base and the post-
sequester base, as follows:
      A. If the final net appropriation1 is higher than the
         sequester base for the account, then the appropriation        is
         reduced by the full sequester amount.
      B. If the final net appropriation    is equal to or lower than
         the sequester base but higher than the post-sequester     base,
         then the reduction   is taken only by the amount needed to
         reach the post-sequester    base.
      C. If the final net appropriation    is lower than the post-
         sequester base, then no further     reduction is taken.




lFor fiscal   year 1990, the final net appropriation     for EPA
represented   the gross appropriation    for each account after
subtracting   the Section 517 reduction.
                                   24
APPENDIX II                                                                                                    APPENDIX II



       Table II.1 shows how these rules applied to three EPA
appropriation     accounts in fiscal    year 1990. The method used in
calculating    the sequester for the Construction         Grants account was
method (B), while calculations       for the Buildings      and Facilities
and Leaking Underground Storage Tanks Trust Fund accounts used
method (A). Method (C) was not utilized            because no account at EPA
was appropriated     less than its post-sequester       base.
Table II-l- . Calculation      of Sequester Amounts for Three
EPA Accounts
                            (amounts in thousands)
                                                                Leaking
                    Construction     Buildings     and   Underground Storage
Cateaorv                Grants          Facilities         Tanks Trust Fund
Sequester                        2,020,000                           8,288                              51,819
base
Sequester                              28,280                            116                                  725
amount
(projected)
Sequester                                    1.4                         1.4                                  1.4
percentage
(projected)
Post-                            1,991,720                           8,172                             51,094
sequester
base
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Final net                        2,018,225                         14,768                              74,822
appropriationa
Sequester                              26,505                            116                                 725
amount
(actual)
Sequester                                    1.3                         0.8                                 1.0
percenta e
(actual) %
Adjusted                         1,991,720                         14,652                              74,097
appropriation
aFinal       gross appropriations                      minus the Section                   517 reductions.
bFiguresvrounded                 to the nearest                tenth       of one percent.


                                                              25
      *
11”
 7
          APPENDIX III                                 APPENDIX III




          Peter F. Guerrero, Associate Director
          Edward A. Kratzer,  Assistant  Director
          Raymond H Smith, Jr., Evaluator-in-Charge
          Thomas H. Black, Evaluator
          ACCOUNTINGAND FINANCIAL MANAGEMENT
                                           DIVISION,
          WASHINGTON,D.C.
          Edith A. Pyles, Assistant  Director
          Barbara D. Bovbjerg, Project Manager




          (160035)

                                            26
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