December 4, 2000

CONTENTS

• SUMMARY
• MOST RECENT DEVELOPMENTS
• BACKGROUND AND ANALYSIS
• EPA's Budget by Appropriations Accounts
• Science and Technology
• Environmental Programs and Management
• Office of Inspector General
• Buildings and Facilities
• Oil Spill Response
• Superfund
• Leaking Underground Storage Tanks
• State and Tribal Environmental Programs
• Better America Bonds (BAB): A New Role for EPA?
• LEGISLATION
• CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
• FOR ADDITIONAL READING

SUMMARY

On February 7, 2000, the President requested $7.26 billion in discretionary budget authority for the Environmental Protection Agency (EPA) for FY2001, $306 million less than the FY2000 funding level of $7.56 billion. On June 21, 2000, the House passed H.R. 4635, which would provide $7.27 billion for EPA and related activities. The Senate Appropriations Committee recommended $7.53 billion for EPA in reporting its version of the bill (S.Rept. 106-410) on September 13, 2000. The Senate approved $7.84 billion on October 12, 2000. The conference report, H.Rept. 106-988, was filed October 18, 2000 and approved by the House and Senate the next day. On October 27, 2000, the President signed the bill as P.L. 106-377. It appropriated $7.8 billion for the Agency. Funding for EPA was provided under continuing resolutions from October 1 through 27.

The request consisted of $2.92 billion for EPA's operating programs, $2.90 billion for state and local assistance, and $1.45 billion for Superfund. It also included $150 million in mandatory budget authority for Superfund orphan shares. The key issues regarding the request were: 1) proposed reductions in popular wastewater infrastructure funding, 2) not to continue $500 million in funding that was earmarked in FY2000 (much of which was directed to clean water assistance to states), 3) continued Superfund management shortcomings, 4) substantial climate change funding increases, 5) implementation of total maximum daily loads (TMDLs) under the Clean Water Act, 6) designating new ozone nonattainment areas, and 7) an environmental bond proposal.

EPA's appropriation is traditionally organized according to different accounts. The $674 million requested for Science and Technology reflected a $29 million increase. The House passed $650 million, the Senate $696 million, and the conferees $696 million The $2.1 billion requested for Environmental Programs and Management would have been a $204 million increase. The House passed nearly $1.9 billion, the Senate $2.1 billion and the conferees $2.1 billion. The House and Senate denied the Administration's proposal to more than double the funding for the Climate Change Technology Initiative. The $1.45 billion requested for Superfund reflected a $50 million increase. Conferees approved $1.27 billion; about $130 million for the Agency for Toxic Substances and Disease Registry and the National Institutes for Environmental Health Sciences was funded separately. The Superfund request also included, and the conferees approved, $92 million for the Brownfields Program.

The request for state and local wastewater and drinking water capital needs was a key issue. The request of $2.91 billion for State and Tribal Assistance Grants, which fund these needs, was about one-half billion less than in FY2000. The House passed $3.18 billion, the Senate $3.32 billion, and the conferees $3.62 billion. The request included $800 million for Clean Water State Revolving Funds, $550 million less than in FY2000. The House passed $1.20 billion, the Senate $1.35 billion and the conferees $1.35 billion. Conferees approved the $825 million requested for Drinking Water State Revolving Funds. Congress denied the Administration's request for a new Clean Air Partnership program. EPA requested $100 million for Mexican border water projects and $15 million for State of Alaska projects. Conferees approved $75 million and $35 million respectively. For state and tribal administrative grants, the conferees approved roughly the requested amount of $1.0 billion.

MOST RECENT DEVELOPMENTS

On February 7, 2000, the President requested $7.26 billion for the Environmental Protection Agency (EPA) for FY2001, $306 million (or 4%) less than the FY2000 funding level of $7.56 billion. On June 21, 2000, the House passed the VA-HUD-Independent Agencies appropriations bill for FY2001 (H.R. 4635, H.Rept. 106-674), and approved $7.14 billion for EPA. The Senate Appropriations Committee reported its version of H.R. 4635 (S.Rept. 106-410) on September 13, 2000, and recommended $7.53 billion for EPA; unlike the House bill, it included about $130 million for the Agency for Toxic Substances and Disease Registry (ATSDR) and the National Institute of Environmental Health Sciences (NIEHS) under the Superfund account. Floor action on H.R. 4635 occurred in the Senate on October 12, 2000 and $7.8 billion was approved. A conference report (H.Rept. 106-988) was filed October 18 and the House and Senate agreed to it on October 19, 2000. The President signed the bill as P.L. 106-377 on October 27, 2000, funding the Agency at $7.8 billion.

BACKGROUND AND ANALYSIS

The FY2001 EPA request of $7.26 billion was $306 million, or 4%, less than the FY2000 funding level of $7.56 billion. The decrease reflects EPA's decision not to request continued funding for many wastewater projects earmarked in the FY2000 appropriations bill. On March 23, 2000, testifying before the Senate Appropriations Committee's Subcommittee on VA-HUD-Independent Agencies, the Administrator of EPA noted that the solicited funding levels "continue and strengthen the Administration's commitment to the environment and public health by providing our children with clean water, clean air and improved quality of life."

Figure 1, on the following page, depicts EPA funding by three major categories since FY1983: operating programs, Superfund, and state assistance. The major amounts requested by the Administration within these categories included: $2.1 billion for environmental programs and management, $674 million for science and technology, $1.45 billion for Superfund, and $2.91 billion for State and Tribal Assistance Grants (STAG). The STAG request was about one-half billion dollars, or 16%, less than the FY2000 funding level of $3.45 billion. This account incorporates wastewater/drinking water state revolving funds (SRFs) monies and traditional state program assistance and management grants. The total of request of $2.91 billion for the STAG account included: $800 million for wastewater SRFs, $825 million for drinking water SRFs, $100 million for Mexican Border projects, $13 million for special project grants, $1.07 billion for traditional grants to states for administering their programs, and $85 million for a new Clean Air Partnership Fund. Under the President's Budget, EPA would have administered a $10.8 billion Better America Bonds program, which technically would be scored within the Department of Treasury's budget and whose tax credits would be considered a revenue loss.

The major issue associated with the request was that the Administration is not seeking roughly $500 million that was added-on and earmarked for special projects during consideration of the FY2000 appropriations bill. In defending this decision before the Senate Subcommittee on March 23, 2000, the Administrator contended that "these earmarks direct money away from the Agency's core programs ...". She added that EPA will also oppose earmarks this year, as well as any legislative riders in the FY2001 bill.

The FY2001 budget presentation, now referred to as the "2001 Annual Plan," was the third presented under provisions of the 1993 Government Performance and Results Act (GPRA), which directs that a performance plan accompany the budget. On September 30, 1997, EPA submitted a GPRA-mandated strategic plan spelling out its mission and 10 major goals and associated objectives. Its FY2001 budget justification is aligned with these 10 goals and objectives. Under GPRA, EPA reported to Congress in March 2000 on its progress in meeting its goals and objectives for FY1999.

In a January 1999 report (Major Management Challenges and Program Risk. Environmental Protection Agency. GAO/OCG -99-17), and in more recent February 17, 2000 testimony before the House Budget Committee (Opportunities to Address Risks, Reducing Costs, Improving Performance, GAO/T-AIMD-00-96), GAO found that major problems continue to confront EPA, especially (1) information management weaknesses, (2) efficiency of the current regulatory system, (3) EPA-state relationships, and (4) management of Superfund.

Another administrative problem involved EPA's workforce planning. In a report submitted on March 23, 2000, to the House Committee on Appropriation's Subcommittee on VA-HUD-Independent Agencies (Human Capital. Observations on EPA's Efforts to Implement a Workforce Planning Strategy, GAO/T-RCED-00-129), the GAO found that EPA had no workforce strategy to determine the number of employees and their competency to carry out goals and objectives. The EPA Inspector General in her FY1999 audit found that EPA was not adequately accumulating and reporting costs according to the Agency's strategic objectives.

EPA's Budget by Appropriations Accounts

Traditionally, EPA's budget has been presented, considered, and enacted according to major appropriations accounts including environmental programs and management, science and technology, Office of Inspector General, buildings and facilities, and oil spills. This group of activities is sometimes referred to as the "operating programs" and reflects the heart of the Agency's research, regulatory, and enforcement efforts. The operating programs represent about 40% of EPA's total request for FY2001. Two trust fund-based accounts -- 20% of the Agency's FY2001 request -- are Superfund and the Leaking Underground Storage Tank Trust Fund (LUST). All state supporting activities are reflected in the State and Tribal Assistance Grants (STAG) account. About 40% of the Agency's FY2001 request is allotted to this account. Within the many EPA programs, there are numerous issues with respect to implementing and administering the media (air, water, etc.) protection programs, wastewater treatment funding, and Superfund. Table 1, on the following page, shows the breakdown of EPA's funding by appropriations accounts.

^a On May 26, 1999, the Administration submitted an amendment to the FY1999 proposal seeking $650 million for Superfund not tied to reauthorization. Conferees authorized an additional $650 million for Superfund contingent on it being reauthorized by August 1, 1999, which did not occur.

^b The FY1999 Omnibus Appropriations Bill, P.L. 105-277, included $30 million in additional FY1999 EPA funds including $20 million for Boston Harbor wastewater treatment funds and $10 million more for the Climate Change Technology Initiative (CCTI). The FY1999 Emergency Supplemental, P.L. 106-31 (H.R. 1141), rescinded $10 million in FY1999 CCTI funds.

^c In passing H.R. 4635, the House adopted an amendment during floor debate which reduced the Environmental Programs and Management account by $5 million.

^d In approving FY2001 funds, the House Appropriations Committee elected to fund the Superfund-related activities of the National Institute of Environmental Health Sciences (NIEHS) and the Agency for Toxic Substances and Disease Registry (ATSDR) - a total of $130 million - separately from the Superfund account and EPA's appropriation. Including the amount for the NIEHS and the ATSDR, the House provided $1.40 billion for Superfund. The Senate Appropriations Committee chose to continue the traditional practice of funding these agencies under the Superfund account as part of EPA's total appropriation, but the full Senate and the conferees sided with the House-passed measure.

^e The President's FY2001 budget assumes $20 million in offsetting fees, which yields a net request of $7.26 billion.

Science and Technology

The Science and Technology (S&T) account incorporates elements of the former research and development account (also called extramural research) as well as EPA's 1

inhouse research, development, and technology efforts. The FY2001 request of $674.4 million for the S&T account represents a marginal increase when compared to the FY2000 funding level of $643 million.

A continuing issue has been the quality of the science upon which EPA bases its decisions, regulations, and criteria. EPA's role in climate research and in the Climate Change Technology Initiative (CCTI) is an issue. There is a proposed increase in funds for climate change-related research under the S&T account. EPA requested$257.9 million for all of its climate change activities in FY2001, a 95%, or $125.8 million, increase when compared to FY2000 funding level of $132.1 million. About 30% of the request ($75.8 million) was research-related and fell under the S&T account. (The remaining amount of $182.1 million -- abatement in nature -- falls under the Environmental Programs and Management account.) The S&T portion of the climate change request includes two research activities: 1) CCTI research related to reducing greenhouse gas emissions from transportation and 2) non-CCTI research on climate change. The CCTI portion of the request for the S&T account is $53.1 million, which is an increase of nearly $26.1 million, or 97%, above the FY2000 funding level. All of this is for CCTI research related to transportation activities and greenhouse gases. The non-CCTI portion of the climate change research request was $22.7 million, which was an increase of $2.1 million, or 10%. Some critics have faulted EPA for prioritizing this research program above others that may involve greater risks to human health. (For a discussion of climate change issues, see the CRS Electronic Briefing Book on Climate Change.)

As passed by the House, H.R. 4635 would have provided $650 million for the Science and Technology account, $24 million less than requested. The House denied the requested increase in funding for the Climate Change Technology Initiative and for non-CCTI research, essentially funding those activities at FY2000 levels. The Senate Appropriations Committee recommended $670 million for the Science and Technology account and included $25.1 million for the Climate Change Technology Initiative, which is $28 million less than the request of $53.1 million. The bill passed by the Senate included $696.0 million, the amount approved by the conferees. They added-on 32 earmarks for specific science and technology projects and reduced the climate change technology initiative transportation research program request to $26.1 million.

Environmental Programs and Management

The Environmental Programs and Management account -- representing about 29% of the Agency's resources -- reflects the heart of the Agency's regulatory, standard setting, and enforcement efforts for various media programs such as water quality, air quality, and hazardous waste management. The President's FY2001budget sought $2.1 billion, $204 million, or 11%, more than the FY2000 funding level of $1.9 billion. As passed by the House, H.R. 4635 would have provided $1.895 billion. The Senate Appropriations Committee recommended a total of $2.0 billion in reporting its version of the bill and the full Senate passed $2.088 billion, the amount approved by the conferees. They included 109 add-ons and 14 reductions compared to the Administration's request. Many controversial regulatory/standard setting issues are associated with this account. (CRS Issue Brief IB10003, Environmental Protection Issues in the 106^th Congress, discusses some of them.) EPA's administration of non-research climate change activities and the significant increase in funding within this account requested for these functions has also generated controversy.

For FY2001, EPA requested about $257.9 million for all of its climate change activities, of which $182.1 million, or 71%, would have been allocated for activities under the Environmental Programs and Management account. These activities are linked to reducing greenhouse gas emissions, which is a controversial portion of the request. Whereas some Members are concerned about the Administration's proposed expanded research budget, many remain troubled with the shift from EPA's previous long-term focus on research to understand greenhouse gases and the environment to the FY2001budget submission where the majority of the requested funds would be directed to reducing carbon emissions. Some assert that these activities are tantamount to implementation of the Kyoto Protocol prior to Senate ratification. EPA counters that it has the authority under the Clean Air Act to conduct these activities and that participation by industry in greenhouse gas reduction activities is purely voluntary. At appropriations hearings this year, the Administrator staunchly defended the Administration's position and the requested funding levels. During House Subcommittee hearings this year, Representative Knollenberg presented information he believes demonstrates that EPA is violating a restriction that it not spend FY2000 funds to implement the Kyoto Protocol. The Agency argues that it is engaging in these activities under other authorities, including the U.N. Framework Convention on Climate Change which the United States has ratified.

The FY1999 Senate-passed budget resolution (S.Con.Res. 86) included a sense of the Senate that "funding should not be provided to fulfill commitments to limit greenhouse gases under the Kyoto protocol prior to Senate ratification." The conference agreement on the FY2000 budget resolution (H.Con.Res. 68, H.Rept. 106-91) contains in Section 329 a sense of the Senate assuming that no funds would be provided to put the Kyoto Protocol into effect prior to Senate ratification. FY2000 bill language prohibited EPA from using FY2000 funds "to propose or issue rules, regulations, decrees, or orders for the purpose of implementation, or in preparation for implementation, of the Kyoto Protocol." The FY2001 Budget Resolution (H.Con.Res. 290, H.Rept. 106-277) did not contain language on the Kyoto Protocol. As passed by the House, H.R. 4635 included the Kyoto bill language that was included in the FY2000 appropriations bill, and the Senate adopted this language as well in passing its version of H.R. 4635. On the House floor, Members approved an amendment clarifying that the Kyoto language would not apply to activities authorized by statute. The House also denied the requested increase of approximately $98 million for CCTI funds under the Environmental Programs and Management account. The Senate Appropriations Committee also rejected the Administration's increase noting that the General Accounting Office found EPA provided no justification for the additional funds. The final version of the bill included Kyoto language

A regulatory initiative associated with the budget request involves the Clean Water Act's Total Maximum Daily Load (TMDL) program. This refers to the maximum amount of pollution that certain waters can handle safely. Although part of the 1972 amendments to the Clean Water Act, most states have lacked the resources to develop and implement procedures for impaired waters. Litigation is now forcing EPA and states to adopt cleanup plans to implement the TMDL requirement in the law. In 1999, EPA proposed rules to strengthen and clarify current TMDL regulations; and final rules are scheduled for this year. Many Members on both the appropriations and authorizing committees have expressed concern over this regulatory initiative, particularly the cost burden to states and those potentially affected, especially silviculture and agriculture industries. The FY2000 Supplemental appropriations bill, P.L. 106-246 (H.R. 4425, H.Rept. 106-710), contains bill language that prohibits EPA from using FY2000 and FY2001 funds to make a final determination on or implement any new rule relative to the TMDL proposal. As passed by the House, H.R. 4635 includes bill language prohibiting the expenditure of FY2001 funds to make a final determination on or implement rules on TMDLs. The Senate Appropriations Committee did not include the House provision but did include report language which directs EPA to: 1) contract with the National Academy of Sciences to review the science used to develop and implement the TMDL rule, 2) assess state financial and personnel resources that would be necessary to implement the TMDL rule, and 3) analyze the monitoring data used to develop TMDLs. The conferees included similar language in the final version of the bill. For further discussion, see CRS Report RL30573, Changes Recently Announced by EPA to its Total Maximum Daily Load (TMDL) Proposal.

Some of the proposed increases in the State and Tribal Assistance Grants (STAG) account were intended to assist the states in their TMDL efforts. As passed by the House, H.R. 4635 would set aside $245.5 million from the STAG account for state administrative grant funds to assist states in TMDL activities, $85 million more than the Administration's request of $160.5 million and $130 million more than the FY2000 funding level of $115.5 million. The Senate Appropriations Committee recommended $142.5 million for such grants.

On the floor, the House adopted an amendment to H.R. 4635 prohibiting EPA from spending funds to designate areas that are out of attainment with the new National Ambient Air Quality Standards (NAAQS) for ozone until the Supreme Court rules on a pending case. In contrast, the Senate Appropriations Committee added an administrative provision which would amend the Clean Air Act to provide states an additional 12 months before requirements for newly designated nonattainment areas would become effective. EPA finalized stricter NAAQS for ozone and particulate matter in 1997 and that action has been challenged. The Supreme Court is expected to rule on the case later this year. (For a further discussion of the appeals court ruling, see CRS Report RS20228 (pdf), The D.C. Circuit Remands the Ozone and Particulate Matter Clean-Air Standards: American Trucking Associations v. EPA, June 10, 1999.)

Office of Inspector General

The President's FY2001budget seeks $34.1 million for the Office of Inspector General, a decrease of $9.3 million (or 21%) from the funding level of $43.4 million enacted for FY2000. As passed by the House, H.R. 4635 would provide $34.0 million. The Senate approved recommended $34.1 million, the same as requested and incorporated in the final bill.

Buildings and Facilities

The FY2001 request of $23.9 million for the Buildings and Facilities account is nearly $38.5 million less than the FY2000 funding level of $62.4 million. As passed by the House, H.R. 4635 would provide $23.9 million, the same as requested. The Senate approved $23.0 million in passing the bill. Conferees approved $23.9 million.

Oil Spill Response

For EPA's oil spill response activities, the President's FY2001 budget sought $15.7 million, 5 % more than the FY2000 funding level of $15.0 million. As passed by the House and Senate, and approved by the conferees, H.R. 4635 provides $15.0 million.

Superfund

In its FY2001 request, EPA sought a $50 million, or 4%, increase for the Superfund program to clean up hazardous waste sites, from a level of $1.40 billion in FY2000 to $1.45 billion for FY2001. While taxing authority to support the Superfund Trust Fund expired on December 31, 1995, it is anticipated that monies will continue to be available into 2001. Also part of the President's FY2001 budget was a $92 million request for cleaning up certain urban sites, called Brownfields, which have development potential.

In testimony before the House Appropriations Subcommittee, the Administrator of EPA noted that the Agency planned to complete construction at 75 sites for a total of 830 by the end of 2000 and 900 by the end of 2001. Looking beyond 2001, GAO has estimated that by 2008, 85% of all non-federal National Priority List sites will be cleaned up (Superfund: Information on the Program's Funding and Status). This will entail annual appropriations of $875 million through FY2008. GAO estimates that it will cost between $8.2 billion and $11.7 billion for studies, design, and remedial work to clean up all remaining sites.

A significant budget issue is administration of the Superfund program. GAO continues to place the program at "high risk" for fraud, waste, and abuse. GAO found that EPA has not taken relative risk into consideration in establishing cleanup priorities, has not pursued reimbursement effectively, and has not controlled contractor costs (see High Risk Series in For Additional Reading). While acknowledging some improvements, GAO sees the need for more progress. EPA notes that it has embarked on a series of reforms in the Superfund program which address GAO-highlighted deficiencies and which will provide benefits including savings in the costs and duration of Superfund cleanup activities as well as in recouping cleanup costs from responsible parties. (See also CRS Issue Brief IB10011, Superfund Reauthorization Issues in the 106^th Congress.)

The President's FY2001 budget proposed to renew the taxes that support the Superfund Trust Fund. The available balance of the fund has been declining since the taxing authority expired on December 31, 1995. The balance of the fund on October 1, 2000, the beginning of FY2001, is expected to accommodate the requested appropriation of $1.45 billion.

As passed by the House and Senate, H.R. 4635 would have provided $1.27 billion for the Superfund account. Additionally, the House approved the requested amount of $130 million for the Superfund support activities of the National Institute of Environmental Health Sciences (NIEHS) and the Agency for Toxic Substances and Disease Registry (ATSDR), which traditionally have received their funding under the Superfund account. The House Appropriations Committee recommended that these agencies be funded separately under new accounts, and this recommendation was adopted when the House passed H.R. 4635. Including the amount of $130 million for the ATSDR and the NIEHS, the House would provide $1.40 billion for the Superfund program's activities, the same as enacted for FY2000 but $50 million less than the Administration's request of $1.45 billion. The Senate Appropriations Committee did not adopt the House's proposal to fund the ATSDR and the NIEHS separately, and recommended $1.40 billion for the Superfund account in reporting its version of H.R. 4635. In passing the bill, the full Senate separated the NIEHS and ATSDR as the House did.

Conferees also separated the funding for these two agencies and funded the Superfund account at $1.270 billion.

Leaking Underground Storage Tanks

The President's FY2001 budget seeks $72.1 million for the Leaking Underground Storage Tank (LUST) program, which assists states in addressing leaking underground petroleum storage tanks. The requested level is $2.3 million more than the funding level of $69.8 million enacted for FY2000. As passed by the House, H.R. 4635 would provide $79.0 million for the LUST account, which is $6.9 million more than requested. In its report on H.R. 4635, the House Appropriations Committee noted that the proposed increase should be used to mitigate LUST problems associated with contamination from methyl tertiary butyl ether (MTBE). The Senate Appropriations Committee recommended $72.1 million, the same as requested, in reporting its version of the bill. The full Senate passed this amount and the conference approved it.

The status of state LUST programs is a significant issue. Many states are finding it difficult to finance their programs. At the same time, the roughly $1.3 billion balance in the Treasury's LUST Trust Fund, from which the appropriation is actually made, has led some to call for allowing greater use of the fund balance by states. (For further discussion, refer to CRS Report 97-471 ENR, Leaking Underground Storage Tank Cleanup Issues.)

State and Tribal Environmental Programs

The FY2001 request for the State and Tribal Assistance Grants (STAG) account was particularly controversial in Congress since EPA requests $2.91 billion, nearly $540 million (or 16%) less than FY2000 funding level of $3.45 billion. Many Members criticized this decision during hearings on EPA's appropriations. This account capitalizes popular Clean Water and Drinking Water State Revolving Funds and provides other state assistance. EPA does not seek continued funding for water projects totaling about $400 million that were earmarked in the FY2000 appropriations bill. As passed by the House, H.R. 4635 would have provided $3.18 billion for the STAG account, which was $270 million more than requested. The Senate Appropriations Committee recommended $3.32 billion in reporting its version of the bill; the full Senate passed $3.629 billion the amount approved by the conferees. The elements of the STAG request include:

• $800 million for Clean Water State Revolving Funds, $400 million less than the House-passed amount of $1.20 billion, and $550 million less than the Senate-passed $1.35 billion, the FY2000 funding level and the amount approved by the conferees;

• $825 million for Drinking Water State Revolving Funds, the same amount as the House passed, but $5 million more than the Senate Appropriations Committee's recommendation and the FY2000 funding level of $820 million. The full Senate and the conferees approved $825.0 million.

• $100 million for Mexican Border projects, $25 million more than the House-passed and conference-approved amount of $75 million, and $50 million more than the Senate Appropriations Committee's recommendation and the FY2000 funding level of $50 million;

• $15 million for special projects for Alaska Native Villages the conferees approved $35 million;

• $3 million for special projects in Bristol County, MA, and $10 million for special projects in New Orleans, LA; the Senate Appropriations Committee recommended $1 million for Bristol County projects but did not approve any funding for New Orleans projects; the House did not provide any funding for these activities;

• no continued funding of earmarked projects totaling $332 million that were added on during consideration of the FY2000 appropriations bill; the House did not add on or earmark any funds for special needs projects; the Senate Appropriations Committee added on a total of $110 million for such projects in various localities; the Senate-passed bill includes language noting that $335.7 million shall be for grants for the construction of wastewater and drinking water treatment facilities. The conferees included funding for 237 specific water projects.

• $1.07 billion for traditional grants to states for their administration of various environmental programs, the same as the amount passed by the House (but with different allocations for various programs), roughly $114 million more than the Senate Appropriations Committee's recommendation of $955 million, and $184 million more than the FY2000 funding level of $885 million. The full Senate included $1.0 billion.

The major capital needs that communities face for funding drinking water and wastewater facility construction remain the chief issue associated with the STAG account. By statutory design, the federal contribution to most of these needs has been through capitalizing state funds from which states loan monies to communities. Since most localities are now borrowing their funding, any remaining direct grants listed above for special projects have become controversial. The total national needs remain great as EPA's 1996 needs survey for clean water SRF monies estimated remaining needs at $139.5 billion to $200 billion while sewerage agencies estimate funding needs may be as high as $330 billion. EPA acknowledges that funding needs exceed levels in the 1996 needs survey and is working on more current assessments. The needs of small communities remain a special component of this problem.

A more recent estimate has spotlighted the FY2001 water SRF request even more. A stakeholder group, the Water Infrastructure Network (WIN), in Clean and Safe Water for the 21^st Century, estimates wastewater and drinking water capital needs at around $1 trillion and, even more, if operation and maintenance needs are added in. WIN estimates that 20-year capital funding needs to wastewater are about $460 billion and for drinking water about $480 billion. WIN foresees a $23 billion per year funding gap: $12 billion for wastewater and $11 billion for drinking water capital needs. As part of the request for the U.S. Department of Agriculture (USDA), the President's FY2001 budget sought $648 million for the rural water and waste disposal grant and loan program, which is another federal assistance program for such projects.

For state administrative grants, the President's FY2001 budget sought $1.07 billion, $184 million more than the FY2000 funding level of $885 million. The House approved the requested amount in passing H.R. 4635 but remixed the allocations for these grant funds. The Senate Appropriations Committee recommended $955 million for state administrative grants in reporting its version of the bill; the full Senate passed and the conferees approved $1.0 billion. These grants support state programs which administer various environmental protection activities. Most of the proposed increases would be for water quality grants to address TMDL program needs. Under the request, Section 106 state administrative grants would receive $160.5 million, $45 million more than the FY2000 funding level of $115.5 million. Section 319 nonpoint source grants would receive $250 million under the request, $50 million more than the FY2000 funding level of $200 million, and a new $50 million Great Lakes grants program has been proposed by the Administration as well. As passed by the House, H.R. 4635 would provide $245.5 million for Section 106 grants, $85 million more than requested and $130 million more than enacted for FY2000. The Senate Appropriations Committee recommended $142.5 million in reporting its version of the bill, $27 million more than the FY2000 funding level but $18 million less than requested. The House-passed and the Senate Appropriations Committee- reported versions of H.R. 4635 would provide $220 million for Section 319 non-point source grants, $30 million less than requested but $20 million more than the FY2000 funding level. Of the proposal to create a new Great Lakes grants program, the Administrator said that "through this initiative, states and communities will be eligible for competitively-awarded matching funds to improve water quality...." During House subcommittee hearings, there was some criticism voiced that this proposal was too vague, and neither the House-passed nor the Senate Appropriations Committee-reported version of H.R. 4635 included funding for this initiative.

Another proposal that has received congressional scrutiny is the $85 million proposed by EPA for the Clean Air Partnership Fund. The initiative would direct funds to states and local governments to find innovative ways to reduce soot, smog, air toxics and greenhouse gases. Senator Christopher Bond, Chairman of the Senate Subcommittee on VA-HUD-Independent Agencies, noted that there was no statutory authorization for the fund and also questioned establishing this new initiative when traditional funding for clean water permitting and state assistance was lagging. In the Senate Committee on Environment and Public Works views and estimates report, Chairman Robert Smith called this proposal an "ill-defined initiative." The Administrator justified this initiative by claiming that it would foster public-private partnerships to help communities achieve their clean air goals sooner than required. The House approved $41 million for the Clean Air Partnership Fund during consideration of FY2000 funds under H.R. 2684, but neither the Senate nor the conferees on the bill included funding for this new initiative for FY2000. For FY2001, neither the House-passed nor the Senate Appropriations Committee-reported version of H.R. 4635 includes funding for this requested initiative.

Better America Bonds (BAB): A New Role for EPA?

The President's FY2001 budget seeks new bond authority -- Better America Bonds (BAB) -- to assist state, local and tribal governments in a variety of environmental activities. This proposal would require a legislative change in the tax code and, if adopted, would be scored within the Department of the Treasury's budget, not EPA's. The President's budget anticipated issuing a total of $10.75 billion in bond authority over 5 years, with $2.1 billion to be awarded in 2001 starting January 1, 2001. Discussions to date have not challenged the goals of the BAB proposals, namely open space and land remediation. Rather, observers have questioned the proposal's perceived costs, possible duplication of other programs and lack of details.

There is no estimate of total costs accompanying the proposal. The President's budget estimate shows the tax credit for all of the bonds but only for the first 5 years, or the "budget window." EPA's estimate shows the tax credit for the full 15 years, but only for the bonds issued in 2001. Neither provides an estimate of the full cost of issuing these bonds, that is, what they would cost the taxpayer for $10.75 billion over the 15-year life of all the bonds. This could be several billion in revenue loss depending on market conditions and successful issuance of all the bonds.

The proposal also lacks criteria and specifics. The President's budget and EPA's budget summary provide only cursory descriptions. EPA's budget justifications do not mention the bond program, and the Treasury "Greenbook" only lists several basic criteria for Better America Bonds. Some are questioning EPA's involvement in conservation and economic development activities, and whether the bonds would be apportioned equitably among populations and allow local input into the decision. Some have called for clearer legislative definitions and an explanation of the proposal's relationship to other federal and state programs. The proposal is supported by the U.S. Conference of Mayors since it reflects the strategies contained in its "A New Agenda For American Cities."

In making its recommendation for FY2001, the House Appropriations Committee made no comment on this proposal, and no discussion occurred in the House during floor debate on H.R. 4635. The Senate Appropriations Committee did not include bill or report language regarding EPA's bond proposal either. The conferees also made no mention of the proposal.

Aside from appropriations legislation, two bills, H.R. 2574 and H.R. 2446, include provisions reflecting the Better America Bond proposal. They have not received any action. In July 2000, the Senate Finance Committee held hearings on S. 1558, the Community Open Space Bonds Act, a bill similar to the Better America Bonds proposal. It would amend the Internal Revenue Code to allow tax credit to holders of Community Open Space Bonds which could be issued by state or local governments for "environmental infrastructure projects." These could include acquisition of open space, visitor center construction, remediation of property to enhance water quality, acquisition of easements, and environmental assessment and remediation of real property. The bill would authorize a total of $9.5 billion in bonding authority, $1.9 billion per year for FY2000 through FY2004.

LEGISLATION

P.L. 106-246/H.R. 4425 (Hobson)

FY2000 Supplemental which contains language restricting EPA FY2000 and FY2001 funds on TMDL regulation.

P.L. 106-275/H.J. Res. 109 (Young)
Passed by the House on September 26, 2000. Passed by the Senate on September 28, 2000. Continuing resolution providing funding for EPA and other federal agencies through October 6, 2000, at the same level as enacted for FY2000. Signed into law September 29, 2000.

P.L. 106-282/H.J. Res. 110 (Young)
Passed by the House on October 3, 2000. Passed by the Senate on October 5, 2000. Signed into law by the President on October 6, 2000. Continuing resolution providing funding for EPA and other federal agencies through October 14, 2000, at the same level as enacted for FY2000.

P.L. 106-377 (H.R. 4635)
VA-HUD-Independent Agencies Appropriations Act for FY2001. Reported June 7, 2000 (H.Rept. 106-674) by the House Committee on Appropriations. Passed by the House, as amended, on June 21, 2000. Reported September 13, 2000 (S.Rept. 106-410) by the Senate Committee on Appropriations with an amendment in the nature of a substitute. Passed by the Senate, October 12, 2000. Conference report (H.Rept. 106-988) filed October 18, and agreed to by the House and Senate on October 19, 2000. Signed into law October 27, 2000.

CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS

House Committee on Appropriations. Subcommittee on VA-HUD-Independent Agencies. EPA's FY2001 Budget Request. Hearings, 106^th Congress, 2^nd Session. Washington, GPO. (To be published).

House Committee on Commerce. FY2001 Budget Request for the Environmental Protection Agency. Hearings, 106^th congress, 2^nd Session. March 10, 2000. Washington, GPO. (To be published).

House Committee on Transportation and Infrastructure. Agency Budget Proposals. Hearings, 106^th Congress, 2^nd Session. February 9, 2000. Washington, GPO. (To be published).

Senate Committee on Appropriations. FY2001 Budget for the Environmental Protection Agency. Hearings, 106^th congress, 2^nd Session. March 23, 2000. Washington, GPO. (To be published).

FOR ADDITIONAL READING

CRS Issue Brief IB10001. Clean Water Act Reauthorization, by Claudia Copeland. (Updated regularly)

CRS Issue Brief IB10003. Environmental Protection Issues in the 106th Congress, Coordinated by Martin Lee. (Updated regularly)

CRS Issue Brief IB10011. Superfund Reauthorization Issues in the 106th Congress, by Mark Reisch. (Updated regularly)

CRS Issue Brief 89102. Water Quality: Implementing the Clean Water Act, by Claudia Copeland. (Updated regularly)

General Accounting Office. High Risk Series. Performance and Accountability. Major Management Challenges and Program Risks. Environmental Protection Agency. GAO.OCG-99-17. January 1999. 48 p.

---- Opportunities to Address Risks, Reducing Costs, Improving Performance, GAO/T-AIMD-00-96. February 17, 2000. 49 p.

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