The Future of State Environmental Funding: Is the Sky Falling?

Posted on February 28, 2018 by Ed Tormey

When I attend conferences and introduce myself as an official with Iowa’s environmental agency, people often ask me why Iowa does not have the federal hazardous waste program. I am always happy to explain why as I think the answer is a fairly practical one. But it is an answer that highlights funding concerns that state agencies face now and will likely face even more in the future. 

In 2007, several years after Iowa had returned the hazardous waste program back to EPA, Iowa DNR approached EPA about what it would take to become re-authorized for RCRA Subtitle C.  EPA explained that there were two fundamental requirements: (1) the state would be required to provide a 25% match on funding the program and (2) Iowa would be required to adopt all current federal hazardous waste rules.  In crunching numbers on what it actually would take to run the program, Iowa DNR determined that rather than the minimum 25% match, the state would need to fund 50% to 60% of the total program’s budget. This would require the Iowa DNR approaching stakeholders about a new fee. 

Here is where things got real interesting.  The common notion is that state stakeholders will always want the state to run a federal program in lieu of EPA.  But during a meeting with Iowa DNR on August 29, 2007, Iowa’s business and industry stakeholders made clear to the department that it would not support Iowa becoming a delegated state.  The main reason was fees.  EPA had been running the RCRA Subtitle C program in Iowa for years without requiring anyone to pay fees.  These stakeholders did not see enough value with Iowa becoming authorized to justify their financial support of a state program. Iowa DNR RCRA C Hazardous Waste Program Feasibility Study Report. Iowa would therefore remain one of two states without the RCRA C program (Alaska being the other).

The funding of state environmental programs is indeed an issue.  This funding is characterized as a three-legged stool where the three legs are (1) federal grants; (2) state funding, mostly general fund; and (3) state fees.  Many of the federal programs require states to provide a mandatory match, ranging from 25% to 50%, in order to run a delegated federal program.  The assumption years ago was that EPA would fund the remainder of the program.  In 1986, for example, federal funding comprised 58% of state environmental program funding. 1999 ECOS article. Unfortunately, today, it makes up only 27% and it may shrink even more in the future. Weblink.

State general fund support currently funds 12% of state environmental programs.  This is by far the smallest of the three legs.  In Iowa, for example, the Iowa DNR’s general fund allocation has decreased from $21,994,799 in State Fiscal Year 2009 to $11,299,811 in State Fiscal Year 2018, a 51.4% decrease. 

So, we are left with fees.  The concept of “polluter pays” resonates with a lot of people, and it is logical that fees represent one leg of the three-legged stool.  In fact, fees make up 62% of state environmental budgets.  These fees include user and permit fees.  States have also established fees to collect revenue based on the amount of pollution or waste generated or tonnage of waste landfilled.  With the progress of waste reduction in our country, these fees are shrinking.  Regulated industry is hesitant – if not offended – that they should pay more when they believe they have done their part to reduce their emissions or generation.   If new fees have to be established, who will be required to pay, and what will the fees be based on?   

Is the sky falling for state environmental agencies?  Not yet.  According to the Environmental Council of the States (ECOS), states are still handling 96% of the federally delegable programs.  But Iowa’s RCRA Subtitle C story is worth remembering.  There may be a limit to the funding support a state agency may receive.



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