Observations on the Environmental Protection Agency's Budget Request for Fiscal Year 1991

Published by the Government Accountability Office on 1990-03-08.

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

                   United States General Accounting Office

For Release         Observations   on the Environmental
on Delivery         Protection   Agency's Budset Request
Expected at
9:30 a.m. EST       for Fiscal Year 1991
March 8, 1990

                    Statement for the Record by
                    Richard L. Hembra, Director
                    Environmental Protection    Issues
                    Resources, Community, and Economic Development
                    Before the
                    Subcommittee on VA, HUD, and Independent     Aaencies
                    Committee on Appropriations
                    United States Senate

Madam Chairwoman and Members of the Subcommittee:

         We appreciate         the opportunity                 to offer         our views on the
President's        fiscal      year    1991 budget              request         for     the Environmental
Protection       Agency (EPA).

          There is    now     widespread           agreement           that     the nation          has reached
a crossroads         in environmental               policy        and that            fundamental        changes
must      be made in the way we deal with                         environmantal                problems.       In
response to these             heightened           expectations               for     strong     environmental
action,       the fiscal       year 1991 budget                 request         proposes         $5.6 billion
for    EPA.     This proposal          includes              a 12 percent             increase      in EPA's
operating       budget--from          $1.92 billion               to $2.15 billion--cited                     as
one of the largest             increases           for       any federal             agency.       The remainder
of the proposed             budget    for    EPA primarily                supports         the agency's
Superfund       and Wastewater           Construction                 Grants programs.

         As we discuss         in detail           later,       this      increase         needs to be put
in perspective.              A number of EPA's programs                             are receiving
additional       funding,       but when inflation                     and federal             pay increases
are accounted         for,     funding       for      most      programs             is being      increased
nmrginally       or is being          cut.         In many cases,               the funds to be
provided       represent       only a small              downpayment on the long-term                         costs
of protecting        the environment.                    Furthermore,                the proposal       does not
acknowledge       the difficulties               that         state     and local          governments         are

having      in coming up with            their        share of the required                      resources,

which in the aggregate                may    run into           billions             of dollars.        As a

result,      if     environnrental         cleanup      and protection                  continue             to be
funded at current              levels,      the pace and extent                       of environmental
improvemnt           may not meet public               expectations.

          Because of the extent              and magnitude                  of our environmental
problems          and the level          of resources             available           to EPA, the agency
needs to more effectively                   direct         its     resources           to the         most     pressing
problems          and to look      for     opportunities                to better         leverage            private,
state,      and local        funds to adequately                   deal with           them.          Based on our
1988 management review                   of EPA, we recommended a number of actions
that      EPA could      employ to better              manage its               resources.1


          Public     opinion      polls     consistently                identify        protection             of the
environment          as one of the nation's                      top priorities.                  In part,        this
concern       is prompted         by the tremendous                    costs     the nation            has had to
pay to clean           up the environment              as well             as by its           inability         to
rectify      past problems,              much less         deal effectively                    with    emerging
pollution          issues.      Over the last              20 years,            the United            States
(industry,          the federal          governmnt,              states,        and localities)                has
invested          some $700 billion           in pollution                 control;       it      currently

spends close           to $90 billion          a     year,        or    about      2   percent         of its
gross national           product,         to correct             and prevent           environmental

lEnvironmenta1  Protection Agency: Protecting Ruman Health and the
Environment Through Improved Management (RCED-88-101, August 16,

         Reflecting          a desire     to     more       effectively            address         these
environmental          challenges,             legislation--which                  GAO supports--has                   been
introduced       to elevate           EPA to cabinet                status     and create             a Department
of Environment.               Many other          bills      have been introduced                     and the
Congress has demonstrated                      a strong        interest        in dealing             with      new
environmental          problems,         such as global               warming.             The Congress ’
environmental          agenda over the next few years promises                                      to be full.

         Notwithstanding             the additional                emphasis that            the
administration           has given        to environmental                   issues,        it     has been
pointed       out that        the proposed            12 percent           increase             in EPA's
operating        programs budget               only       brings     the budget back to the level
it   was in fiscal            year    1979, taking             inflation           into         account.         Yet,
since     that     time the agency has seen its                         workload           expand enormously,
with     new and sobstantial                  responsibilities               for    hazardous          waste
regulation         and drinking          water        protection,            among others.

         In addition,          EPA's total             budget       request        of $5.6 billion                is
essentially         the sams as the amount appropriated                                   for     fiscal        year
1940.       Thus, the 12 percent                  operating          programs         budget         increase
occurs     because funding              for     construction            of wastewater                treatment
plants      is being         reduced     from $2.0 billion                   to $1.6 billion.                    In
other     words,      this     $400 million               reduction        would be offset                 by    almost

equal     increases          in Superfund             and EPA's operating                  programs.

          Six )cey areas              illustrate             the staggering             but largely            unmet
needs facing            the nation                 and how EPA's proposed                  budget addresses

Safe Drinking                Water

          First,      safe drinking                  water.           Recent amndments                to the Safe
Drinking           Water Act will                  not only cost communities                      hundreds        of
millions           of dollars           a year to bring                 their     water     systems into
compliance,            but they will                 also      require      significant             expenditure6           by
EPA and the states                    for     enforcemnt               of the federal             requirements.
EPA officials                acknowledge             that      the 10 percent             increase           proposed      for
the drinking            water program-- from the current                                 estimate           of $120.8
million        for     fiscal         year         1990 to $132.6           million        for       fiscal     year
1991--may            not cover          EPA'6 increasing                 enforcement             re6ource       needs,
considering            its      other        responsibilities               and initiatives                  to protect
drinking           water.        Moreover,            the budget           request        doe6 not address               the
multi-billion                dollar         costs         currently      facing         communities           in their
efforts       to comply with                  the new federal               drinking        water           requirements.

Sewage Treatment                 Plant        Construction

          Sewage treatment                   plant6         are another          area     of serious           financial
concerns.             Since      1973, EPA ha6 provided                         over $50 billion               in grant6
to states           and localities                  for     construction          of sewage treatment

plants.           Based on an extensive                      1986 survey,             EPA estimated                that
about      $60 billion             was needed to meet the need for                               new plant
capacity          required          for    the current             (1986)       population            and an
additional              $16 billion          by the year 2005.                   These need estimates
represent          the capital             costs       needed to build                publicly         owned
municipal          wastewater             treatment          facilities          to conply            with     the Clean
Water Act.               In addition,             the estimates             are limited             to facilities
for    which a known water                    quality         or public             health     problem         could       be

          The Water Quality                  Act of 1987 significantly                         changed the way
wastewater              treatment         plant       construction            will      be funded            in the
future.           It     replaced         direct         federal      construction             grant6         to
communities              with     grants      to states            to capitalize              state      revolving
loan funds,              from which communities                      can borrow            funds to construct
needed plants.

          State         and local         officials         have expressed                 concern      that        these
loan      funds         may     not sufficiently              replace         construction             grants.            In
addition,              the administration                 has consistently                 proposed          cutting
federal        funding,           and the fiscal              year        1991 request             of $1.6 billion
for    plant       construction              represent6            a proposed           decrease         of about 20
percent        from the appropriation                        for     fiscal         year     1990.

          Beyond the cost of constructing                                 plants,       communities            have the
additional              responsibility             for     operating,           maintaining,             and
eventually              replacing         existing         plants.            These costs           are also           in the

billions       of dollars.            Based on our work,                       it     is doubtful        that
localities        are setting             aside      sufficient             funds through            user fees to
cover these        costs.          To the extent                that      adequate           fees are not being
collected        for     these     purposes,          the demand for                   federal      assistance     may
increase       in the future.

Nonpoint       Source Water Pollution

        Nonpoint         source water             pollution,            such a6 runoff              from
agricultural            lands and urban development,                                is another      area in which
needs are not being                fully          addressed.             Billion6           of dollars      have been
spent to reduce water                 pollution            from municipal                   sewage treatment       and
industrial        plants         (point      source water                pollution).             However, EPA and
other       organizations          have said that,                 even if            further     improvements
occur       in point       source     controls,            pollution                from nonpoint        6ources
would still            leave many of our lakes,                         rivers,        streams,      and estuaries

           Because statutory               authorities            for      nonpoint          6ource control        do
not provide            direct     federal          regulatory            responsibility,             EPA must rely
on state        and local         programs.               Under the Clean Water Act,                       the states
were required            to submit          nonpoint         source          assessment          and management
programs        to EPA for          approval.              Implementing               these programs ha6 been
difficult        for     the states.

           EPA has estimated               that     by 1994 states                   will    face an 81 percent
increase        in their         overall          water     pollution               operating     budget co6t6,

excluding           water treatment                  plant      construction,           because of new
federal           requirements              and    more       complex operations.             At the         same

time,       federal         funding          has been declining.                    As a reSult,          EPA
estimates           that     the states              will      have a $322 million            funding
shortfall           in 1994, not including                       project       funding     need6 such as
those       for     construction              grants.           In addition,           the proposed          fiscal
year 1991 budget                    calls     for     a reduction            of approximately             $22.6
million           in state          nonpoint         source management grant6                    from $36.9
million           estimated          for     1990 to $14.3 million                    proposed      for    1991.
With the reduction                     in state           grants,        nonpoint      6ource funding
represents            about 4 percent                  of EPA'6 proposed               Water Quality           budget,
even though            nonpoint             source pollution                is recognized         as a
significant            contributor                to water        quality      degradation.

Asbestos           Abatement

          One of EPA's functions                            is to build       a coordinated          federal          and
state       program to manage the abatement                                 of asbestos      in buildings.
The proposed               fiscal          year     1991 budget            would continue         this      effort
but with           sobstantially              less          resources.        After     providing         a total       of
about $245 million                     under its             Asbestos-in-School6            Loan6 and Grants
Program ($43.4                million             in fiscal         year    19901, EPA is requesting                   no
additional            funds for             the program in fiscal                   year 1991.            EPA'6
activities            related          to asbestos              in schools       are to be funded               under
its     Asbestos-in-Building6                        program,         which is to receive                 about $7.7
million,           a $4.3 million                  reduction         from fiscal        year 1990.

          EPA estimates               that     35,000 schools               and 733,000 public                            and
commercial            buildings         require         asbestos           abatement             at a cost of over
$50     billion.             The extent           to which states,                 localities,                 and building
owners will             be able to meet asbestos                          abatement         requirements                    without
some form of federal                    financial          assistance              is not known.


           The President's                1991     budget       provides           about         $1.7        billion            for
the Superfund                program,         an increase           of over $200 million.                                 Although
the long-term                costs     of the Superfund                 program are unknown, EPA
recently            estimated         that     federal         costs       for     the 1,200 present
Superfund            sites     will       total     $30 billion.                 This figure                  is
understated                because it         omits     future         inflation           and is based on the
cost of cleaning                up earlier             sites       that     may     be less             complex than
those       now coming up for                  work.       More importantly,                          the $30 billion
estimate            is for     sites         already     in Superfund                and thus should be
viewed as only                a current           installment.              About         two        years         ago,     we

reported            that     the potential             number of hazardous                           waste sites            in the
United         States        may be as high             as 425,000.                Even         if     only        a small
portion            of this     universe           requires         cleanup         under Superfund,                        the
budget         consequences            would be staggering.2

2Hazardous Waste Problem Still                              unknown         (RCED-88-44,                     December           17,


         EPA's proposed           budget        also reflects               $14 million          in additional
user charges        that    would help             offset         EPA's costs            to register              new
pesticides.         However,        in 1988 amendments to federal                              pesticide               law,
the Congress prohibited                  EPA from establishing                         any more fees              on
pesticide      manufacturers             who were required,                    under the amendments, to
pay fees for        reregistering               existing          pesticides.             Consequently,
unless      the Congress          is willing           to reverse             itself      on this          point,         EPA
will     receive    about $14 million                  less       in revenues            than the
administration          has estimated.


         When the magnitude               of the problem                 greatly        exceeds the
resources      available          to deal with              it,    it      is essential            that      every
dollar      be spent wisely.               As mentioned                 earlier,        our 1988 EPA
management review           identified             several         management initiatives                         that
would help make the most of EPA's limited                                     resources.

         One such practice           would be to better                       link      planning--the
development        of   goals      and     creation          of    priorities--with                 EPA’s         budget

process.       The budget process                  should         be driven            by decisions            on what

has been and what needs                   to    be accomplished.                     But we found            at     EPA

that     the development           of operating               budgets         drives       operational

planninq,      rather      than     the        other    way       around.            As a result,

resources      continue         to be focused               on traditional               program          activities

rather        than on the highest                      priorities.                For example,             of three             air
and radiation               priorities           that          were included               in the agency's
priority        lists         for     fiscal          years         1987 and 1988, none were included
as key issues                in the budgets                  for     either        year.

         We    also         found that          EPA needs a better                       basis     for      evaluating                its
programs.             Many of the agency's                          efforts        are now assessed according
to activity-based                    indicators          --the          kind     of assessment              usually
referred         to as "bean counting "--such                                  as numbers of enforcement
actions        taken or permits                  issued.                We have argued,             however,             that         to
manage its            programs         for      environmental                   results,         EPA needs to develop
indicators            of progress              that      are based on environmental                              conditions--
improvements                in air     or water quality,                        for example.               This kind            of

information,                in our judgment,                   is not only more useful                       but is
essential         for making resource                          decisions           based on effectiveness.

           Finally,          EPA needs to institute                            better      financial         and other
management information                         systems,             as well        as better           internal
controls.             All     federal          agencies             should       be using         such systems and
controls         to guard against                     fraud,         waste,        and     abuse.          For    this

reason,        we have endorsed                  the designation                    of a Chief             Financial
Officer        and Chief             Information               Resources           Officer        within         the

Department            of Environment                  that         has been proposed                in Senate Bill


        In-summary,      EPA's proposed       1991 budget does not appear to
match up well        against   the total      costs   required    to address      the
nation's     environmental     problems       and EPA's expanding        legislative
responsibilities.          Because of this        apparent   mismatch,      we believe      it
is more important         than ever that       EPA manage its      programs,      apply    its
resources,        and coordinate      with   states   and localities      as effectively
and efficiently        as possible.