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

Published by the Government Accountability Office on 1990-03-07.

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  Budget Request
Exoected at
9:'30 a.m. EST      for Fiscal      Year 1991
March 7, 1990


                    Statement     for the Record by
                    Richard     L. Hembra, Director
                    Environmental      Protection    Issues
                    Resources,      Community,    and Economic         Development
                    Before the
                    Committee on Environment              and Public    Works
                    United States Senate

                                                                            GAO Form 160 (12/W)
Mr. Chairman           and Members of the                           Committee:

          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     environmanta                      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
marginally           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     environmental                  cleanup      and protection                     continue           to be
funded       at current            levels,            the pace             and extent            of environmental
improvement            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          government,                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

'Environmental     Protection Agency: Protecting Human 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 substantial                    responsibilities                  for     hazardous                 waste
regulat     ion     and dr inking              water       protection,             among others.

          In addition,            EPA's total              budget        request          of $5.6            billion          is
essentially           the      same     as the         amount        appropriated                for        fiscal       year
1990.       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      key areas             illustrate                 the       staggering             but     largely          unset
needs       facing           the      nation           and how EPA's proposed                            budget        addresses

Safe Drinking                 Water

          First,        safe          drinking              water.            Recent         amendments             to the          Safe
Drinking           Water        Act will               not     only        cost      communities                  hundreds          of
millions           of dollars                a year          to bring             their       water         systems          into
coqliance,              but they               will         also      require             significant              expenditures             by
EPA and the             states           for          enforcement              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's          increasing             enforcement                   resource       needs,
considering             its          other       responsibilities                         and initiatives                   to protect
drinking           water.             Moreover,               the     budget         request          does 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                      plants            are another               area       of serious            financial
concerns.              Since          1973,           EPA has provided                     over      $50 billion               in grants
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 comply           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        cons?         ,Jction         will      be funded             in the
future.            It     replaced            direct          federal          construction               grants         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             represents              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 as runoff                 from
agricultural                 lands       and urban              development,                  is another            area     in which
needs        are not           being         fully          addressed.               Billions           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           sources
would        still          leave       many of our                 lakes,          rivers,        streams,          and estuaries

            Because           statutory              authorities              for      nonpoint           source         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           has 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       costs,

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          needs         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               grants      from        $36.9
million           estimated           for       1990 to $14.3                  million             proposed         for     1991.
With       the     reduction              in state              grants,         nonpoint            source         funding
represents            about         4 percent                 of EPA's          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           substantially                   less         resources.                After       providing            a total        of
about       $245 million                  under         its      Asbestos-in-Schools                         Loans        and Grants
Program           ($43.4         million           in     fiscal          year      19901,          EPA is         requesting           no
additional               funds      for        the      program           in     fiscal           year     1991.          EPA's
activities               related          to    asbestos             in schools              are to          be funded            under
its     Asbestos-in-Buildings                             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
planning,          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        199   1 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.