Redistributed as a Service of the National Library for the Environment*
96-647: Water Infrastructure Financing: History of EPA AppropriationsClaudia Copeland Specialist in Resources and Environmental Policy
Resources, Science, and Industry Division Updated November 14, 2000
List of Tables
The principal federal program to aid municipal wastewater treatment plant construction is authorized in the Clean Water Act (CWA). Established as a grant program in 1972, it now capitalizes state loan programs. Authorizations from 1972 through FY2001 have totaled $65 billion, while appropriations have totaled $77.1 billion. It has represented 25-30% of total EPA appropriated funds in recent years.
In appropriations legislation, funding for EPA wastewater assistance grants is contained in the measure providing funds for the Veterans Administration, Department of Housing and Urban Development, and Independent Agencies, which includes EPA. Within the portion of that bill which funds EPA, wastewater treatment assistance is specified in an account now called State and Tribal Assistance Grants. Three trends in the funding of this account are most prominent: inclusion of non-infrastructure environmental grants to states, beginning in FY1993; increasing number and amount of special purpose grants since FY1989; and the addition of grant assistance for drinking water treatment projects, beginning in FY1997. This report summarizes, in chronological order, congressional activity to fund items in this account since 1987. It will be updated periodically to reflect most recent developments.
Prior to the 1987 amendments, wastewater treatment assistance was provided in the form of grants made to municipalities. The federal share of project costs was generally 55%; state and local governments were responsible for the remaining 45%. The 1987 amendments altered this arrangement by replacing the traditional grant program with one that provides federal grants to capitalize state clean water loan programs, or state revolving funds (SRFs). As a general matter, states and cities support the program changes and the shift to a loan program that was intended to provide long-term funding for water quality and wastewater construction activities. However, the change means that local communities now are responsible for 100% of projects costs, rather than 45%, because they are required to repay loans to states. The greater financial burden of the Act's loan program on some cities has caused some to seek continued grant funding.
This has been particularly evident in the appropriations process where, in recent years, Congress has reserved as much as 30% of funds in the State and Tribal Assistance Grants account for special purpose grants for specified communities. Most of the funded projects are not authorized in the Clean Water Act or amendments to it. State water quality officials, state infrastructure financing officials, and EPA have objected to this practice, since it reduces the amount of funding for state SRF programs. One additional aspect of this practice began in FY1994 when the Administration requested and Congress agreed to provide funds to capitalize state drinking water SRFs out of this account. In 1996 Congress passed legislation to authorize a drinking water SRF grant program, and the first funds for this program were available in FY1997.
The principal federal program to aid municipal wastewater treatment plant construction is authorized in the Clean Water Act (CWA). Congress established this program, essentially in its current form, in the Federal Water Pollution Control Act Amendments of 1972 (P.L. 92-500) (although prior versions of the Act had authorized less ambitious grants assistance since 1956). Title II of P.L. 92-500 authorized grants to states for wastewater treatment plant construction under a program administered by the Environmental Protection Agency (EPA). Federal funds are provided through annual appropriations under a state-by-state allocation formula contained in the Act itself. States used their allotments to make grants to cities to build or upgrade wastewater treatment plants and thus to achieve the overall objectives of the Act: restoring and maintaining the chemical, physical, and biological integrity of the nation's waters. The federal share of project costs, originally 75% under P.L. 92-500, was reduced to 55% under amendments enacted in 1981.
By the mid-1980s there was considerable policy debate between Congress and the Administration over the future of the Act's construction grants program and, in particular, the appropriate federal role. Through FY1984, Congress had appropriated nearly $41 billion under this program, representing the largest nonmilitary public works programs since the Interstate Highway System. The grants program was a target of the Reagan Administration's budget cutters, who sought to redirect budgetary priorities in part to sort out the appropriate roles of federal, state, and local governments in a number of domestic policy areas, including water pollution control. The Administration's rationale included several points.
Thus, the Reagan Administration sought a rapid phaseout of the Act's construction grants program (by 1990). Many states and localities supported the idea of phasing out the grants program, since many were critical of what they viewed as burdensome rules and regulations that accompanied the federal grant money. However, they sought a longer transition and ample flexibility to set up long-term financing to promote state and local self-sufficiency.
Congress' response to this debate was contained in 1987 amendments to the Act (P.L. 100-4, the Water Quality Act of 1987). It authorized $18 billion over 9 years for sewage treatment plant construction, through a combination of the Title II grants program and a new State Water Pollution Control Revolving Funds (SRF) program. Under the new program, in Title VI of the Act, federal grants would be provided as seed money for state-administered loans to build sewage treatment plants and, eventually, other water quality projects. Cities, in turn, would repay loans to the state, enabling a phaseout of federal involvement while the state builds up a source of capital for future investments. Under the amendments, the SRF program was phased in beginning in FY1989 (in FY1989 and FY1990, appropriations were to be split equally between Title II and Title VI grants) and entirely replaced the previous Title II program in FY1991. The intention was that states would have greater flexibility to set priorities and administer funding, while federal aid would end after FY1994.
The authorizations provided in the 1987 amendments expired in FY1994, but pressure to extend federal funding has continued, in part because, although Congress has appropriated over $77 billion in assistance since 1972, funding needs remain high: an additional $139.5 billion nationwide is needed over the next 20 years, according to the most recent formal estimate by EPA and states. (1) Thus, Congress has continued to appropriate funds, and the anticipated shift to full state funding responsibility has been delayed. More recent analyses continue to focus on the issue of local governments' need for funds and what the federal role should be in assisting states and cities. For some time, EPA has been working on a new study, called the Gap Analysis, to assess the difference between current federal funding for CWA programs and total funding needs. Drafts of this analysis reportedly indicate that, over the next two decades, the United States needs to spend $300 billion to replace existing wastewater infrastructure systems and to build new ones. According to the new data, by the year 2020, the United States will need to spend $21 billion per year to meet capital expenditures for wastewater treatment, compared with about $9.4 billion being spent annually now. Table 1 summarizes funding for water infrastructure programs since enactment of P.L. 100-4.
In appropriations legislation, funding for these programs is contained in the measure providing funds for the Veterans Administration, Department of Housing and Urban Development, and Independent Agencies, which includes EPA. (2) Within the portion of that bill which funds EPA, wastewater treatment assistance is specified in an account first called Construction Grants, which was later renamed State Revolving Funds/Construction Grants, then renamed Water Infrastructure, and now is called State and Tribal Assistance Grants. The remainder of this report summarizes, in chronological order, congressional activity to fund items in this account since the 1987 Clean Water Act amendments.
The latest renaming of the account, which occurred in the FY1996 act, reflects the fact that it now includes all water infrastructure funds and management grants provided to assist states in implementing air quality, water quality, and other media-specific environmental programs. The FY1996 appropriation was the first to include both water infrastructure and other state environmental grants; the latter previously were included in EPA's general program management account. Amounts shown in Table 1 do not include the funds for consolidated state environmental management grants. However, these state grants are discussed below in sections providing the appropriations chronology.Table 1. Water Infrastructure Funding
($ in Millions)
Three changes are especially evident in the recent history of water infrastructure funding, as reflected in the appropriations account where these funds are detailed. One is inclusion in the account of non-infrastructure grants to states. This began in FY1993 with addition of Clean Water Act section 319 grants for state programs to manage nonpoint source pollution and was expanded in FY1996 to include all state grants for management of environmental programs, in a single consolidated grants appropriation.
A second trend, discussed below, has been an increasing number and amount of specially earmarked grants for needy cities and other special purpose projects. A third trend, also discussed below, is expansion of the account to include SRF grants for drinking water projects, under authority of the Safe Drinking Water Act Amendments of 1996 (P.L. 104-134).
SRF Grants vs. Special Purpose Project Grants. The practice of earmarking a portion of the construction grants/SRF account for specific wastewater treatment and other water quality projects began in the FY1989 legislation. Since then it has increased to the point of representing a significant portion of appropriated funds (31% of the total water infrastructure appropriation in FY1994, for example, 28% in the FY1995 bill). The number of projects receiving these earmarked funds also has increased: from four in FY1989, to eight in FY1994, 45 in FY1995, and 237 in FY2001. (Conference reports on the individual appropriations bills, noted in the discussion in this report, provide some additional detail on projects funded in this manner.) The effective result has been to reduce the amount of funds provided to states to capitalize their SRF programs. Of the $37 billion appropriated for water infrastructure programs since 1986, $4.8 billion, or 13%, has gone to earmarked project grants.
Interest groups representing state water quality program managers and administrators of infrastructure financing programs have criticized this practice of appropriators. They contend that earmarking undermines the intended purpose of the state funds, to promote water quality improvements nationwide. State officials would prefer that funds be allocated more equitably, not based on what they view largely as political considerations, and they would prefer that state environmental and financing officials retain responsibility to set actual spending priorities. Further, they say, because directed funding of special projects diminishes the level of seed funding to SRFs, it delays the time when states will be financially self-sufficient and may actually prolong the time when states seek continued federal support.
The practice of earmarking has been criticized because designated projects are receiving more favorable treatment than other communities' projects: they generally are eligible for 55% federal grants (and will not be required to repay 100% of the funded project cost, as is the case with a loan through an SRF), and the practice sidesteps the standard CWA process of states' determining the priority by which projects will receive funding. It also means that the projects have generally not been reviewed by the CWA authorizing committees. This is especially true since FY1992 when the majority of special purpose grant funding has been designated for projects not authorized in the Act or amendments to it.
In the early years of this congressional practice, special purpose grant funding originated in the House version of the EPA appropriations bill, while the Senate for the most part resisted earmarking by rejecting or reducing amounts and projects included in House-passed legislation. With this difference in legislative approach, special purpose grant funding on several occasions were an issue during the House-Senate conference on the appropriations bill. Since FY1999, however, both the House and Senate have proposed earmarked projects in their respective versions of the EPA appropriations bill, with the final total number of projects and dollar amounts being determined by conferees. In addition, as it has now been more than 10 years since the last major amendments to the Clean Water Act, the desire by some Members to address special needs problems that might be debated during reauthorization has increased, thus leading to greater pressure on House and Senate Members to use the appropriations process to handle such concerns. (3)
Members of Congress may intervene for a specific community for a number of reasons. In some cases, the communities may have been unsuccessful in seeking state approval to fund the project, either under the previous construction grants program or the current SRF program. For some, the cost of a project financed through a state loan, which the community must fully repay, is deemed unacceptably high, because repaying the loan can result in such increased user fees that ratepayers object strenuously. The community then seeks a grant to avoid this difficult and costly financial scenario. This is often the case with wastewater projects in small and rural communities. A number of the special purpose grants have been made to projects characterized as "needy cities" based on local economic conditions.
Technically, the Title II grants program ended when authorizations for it expired after FY1990. One result of earmarking special purpose grants in appropriations bills has been to perpetuate grants as a method of funding wastewater treatment construction long after FY1990.
Local Cost Share on Special Purpose Grants.. The federal percentage share and local match required on special purpose grants depends on the project and the year of funding. For example, in the case of appropriations for projects in Boston, San Diego, New York City, and Des Moines, IA (discussed below in the section concerning FY1989), authorization of appropriations and federal cost share were specified in the 1987 Clean Water Act amendments. For a number of other projects for which appropriations were provided in FY1992 and FY1993, the appropriations acts specified that funds were provided "as grants under title II," resulting in a requirement for local communities to provide a 45% share of project costs.
After FY1993, the appropriations acts themselves are the authority for the special purpose projects grants. In the FY1995 appropriation bill, which also directed allocation of funds appropriated in FY1994 to several needy cities, Congress addressed the issue of federal and local cost shares in report language accompanying the bill, but not in the act itself. (4)
In the FY1996 appropriations, both the act and accompanying reports were silent on federal/local cost share and applicability of Title II requirements. Because of that, EPA officials planned to require only a 5% local match for most of the special purpose grants in that bill, which is the standard matching requirement for other EPA non-infrastructure grants. Under the agency's rules, the local match could include in-kind services, as well as funding toward the project.
In the FY1997 appropriations, Congress included report language as it had in FY1995 concerning federal and local cost share requirements. (5)
The FY1998 and FY1999 appropriations included neither bill nor report language on this point. However, language in the House and Senate Appropriations Committees' reports on the FY1998 and FY1999 bills directed EPA to work with grant recipients on appropriate cost-share arrangements. (6)
For FY2000, Congress included explicit report language concerning the local match. (7)
The conferees agree that the $331,650,000 provided to communities or other entities for construction of water and wastewater treatment facilities and for groundwater protection infrastructure shall be accompanied by a cost-share requirement whereby 45 percent of a project's cost is to be the responsibility of the community or entity consistent with long-standing guidelines for the Agency. These guidelines also offer flexibility in the application of the cost-share requirement for those few circumstances when meeting the 45 percent requirement is not possible.
Similar report language accompanied the FY2001 appropriations bill. (8)
Grants for a Drinking Water SRF. One additional aspect of earmarking a portion of the account's appropriation began in FY1994 when the Administration requested and Congress agreed to provide funds to capitalize state drinking water SRFs. However, until recently there was no statutory authority in federal law to make such grants. While Congress had appropriated drinking water SRF grants three times, those actions were contingent on enactment of authorizing legislation. In August 1996 Congress amended the Safe Drinking Water Act to authorize $1 billion annually through FY2003 as federal capitalization grants for drinking water SRFs (P.L. 104-182). As a result, grants for drinking water SRF programs were provided for the first time in FY1997 and have been included in each subsequent appropriations bill. As Congress continues to support both clean water SRFs and drinking water SRFs, the two types of grants compete for whatever overall level of funding is available within the account.
The authorization period covered by P.L. 100-4 was FY1986-FY1994. By the time the amendments were enacted, FY1986 was over, as was a portion of FY1987. Thus, appropriations for those two years only indirectly reflected the policy and program changes for later years that were contained in P.L. 100-4. For FY1986, Congress appropriated a total of $1.8 billion, consisting of $600 million approved in December 1985 (while Congress was beginning to debate reauthorization legislation that eventually was enacted as P.L. 100-4 in January 1987) and $1.2 billion more in July 1986.
For FY1987, while debate on CWA reauthorization continued, President Reagan requested $2.0 billion, consistent with his legislative proposal to terminate the grants program by FY1990. In October 1986, Congress appropriated $2.4 billion (P.L. 99-500/99-509). However, only $1.2 billion of that amount was released immediately, pending enactment of a reauthorization bill, which was then in conference. Following enactment of the Water Quality Act of 1987, remaining FY1987 funds were released as part of a supplemental appropriations bill (P.L. 100-71). Conferees on that measure agreed, however, to shift $39 million of the remaining unreleased grant funds to other priority water quality activities authorized in P.L. 100-4. The final total of construction grant monies was $2.361 billion.
For FY1988 the President again requested $2.0 billion. In December 1987 Congress approved legislation providing FY88 appropriations (P.L. 100-202, the omnibus continuing resolution to fund EPA and other federal agencies). In it, Congress appropriated $2.304 billion for construction grants. Final action on the EPA budget and other funding bills had been delayed by budget-cutting talks between Congress and the White House. Reduced construction grants funding was one of many spending cuts required to implement a congressional-White House "summit agreement" on the budget. The final construction grants appropriation was less than funding levels that had been provided in separate versions of a bill passed by the House and Senate before the budget summit, $2.4 billion.
For FY1989 President Reagan requested $1.5 billion, or 35% below FY1988 appropriations and 37.5% less than the authorized level of $2.4 billion for FY1989. In separate versions of an EPA appropriations bill, the House and Senate voted to provide $1.95 billion and $2.1 billion respectively. The final figure, in H.R. 100-404, was $1.95 billion which included $68 million for special projects in four states. Thus, the actual amount provided for grants was $1.882 billion. That total was divided equally between the previous Title II grants program and new Title VI SRF program, as provided in the authorizing language of P.L. 100-4.
The FY1989 legislation was the first to include earmarking of funds for specified projects or grants in EPA's construction grants account, an action that continued in subsequent years, as discussed above. All of the projects funded in the 1989 legislation were ones that had been authorized in provisions of the Water Quality Act of 1987 (WQA, P.L. 100-4). The designated projects were in Boston (authorized in section 513 of the WQA, to fund the Boston Harbor wastewater treatment project), San Diego/Tijuana (section 510, to fund an international sewage treatment project needed because of the flow of raw sewage from Tijuana, Mexico, across the border), Des Moines, IA (section 515, for sewage treatment plant construction), and Oakwood Beach/Redhook, NY (section 512 of the WQA, to relocate natural gas distribution facilities near wastewater treatment works in New York City).
For FY1990 President Reagan's budget requested $1.2 billion in wastewater treatment assistance, or 50% less than the authorized level and 38.5% less than the FY1989 enacted amount of $1.95 billion. Further, the Reagan budget proposed that the $1.2 billion consist of $800 million in Title VI monies and $400 million in Title II grants, contrary to provisions of the CWA directing that appropriations be equally divided between the two grant programs, as in FY1989. President's Bush's revised FY1990 budget, presented in March 1989, made no changes from the Reagan budget in this area.
In acting on this request, Congress agreed to provide $2.05 billion, including $46 million for three special projects (Boston, San Diego/Tijuana, and Des Moines), leaving a total of $1.002 billion each for Titles II and VI (P.L. 101-144). Title II funds were reduced by $6.8 million, however, due to funds earmarked for a specific project in South Carolina. Although these amounts were appropriated, all funds in the bill were reduced by 1.55% (or, a $31.8 million reduction from the construction grants account) to provide funds for the federal government's anti-drug program.
Final FY1990 appropriations were altered again by passage of the FY1990 Budget Reconciliation measure and implementation of the Balanced Budget and Emergency Deficit Control Act (the Gramm-Rudman-Hollings Act), which established procedures to reduce budget deficits annually, resulting in a zero deficit by 1993. For each fiscal year that the deficit was estimated to exceed maximum targets established in law, an automatic spending reduction procedure was triggered to eliminate deficits in excess of the targets through "sequestration," or permanent cancellation of budgetary resources.
Thus, to meet budget reduction mandates and, in particular, deficit reduction targets under the Balanced Budget and Emergency Deficit Control Act (the Gramm-Rudman-Hollings Act), additional funding cuts were included in P.L. 101-239, the Budget Reconciliation Act of 1989, affecting construction grants funding and all other accounts not exempted from Gramm-Rudman procedures. P.L. 101-239 provided that the "sequestration" procedures under the Gramm-Rudman-Hollings Act would be allowed to apply for a portion of FY1990 (for 130 days, or 35.6% of the year), providing an additional automatic spending reduction in EPA and other agencies' programs subject to the Act.
As a result of these reductions, funding for wastewater treatment aid in FY1990 totaled $1.98 billion, or $30 million more than in FY1989. The total included $53 million for special projects in San Diego, Boston, Des Moines, and Honea Path/Ware Shoals, SC, $960 million for Title II grants, and $967 million for Title VI grants. The combined reductions amounted to 3.4% less than the amount agreed to by conferees on P.L. 101-144 (i.e., $2.05 billion), before subtracting funds for anti-drug programs and accounting for effects of the Gramm-Rudman partial-year sequester.
For FY1991, President Bush requested $1.6 billion in funding for wastewater treatment assistance. This total included $15.4 million to be earmarked for the San Diego project authorized in section 510 of the Water Quality Act of 1987, to fund construction of an international sewage treatment project. The remainder, $1.584 billion, would be only for capitalization grants under Title VI of the Act, as the 1987 legislation provides for no new Title II grants after FY1990.
In acting on EPA's appropriations for FY1991 (P.L. 101-507), Congress agreed to provide $2.1 billion in wastewater treatment assistance. Beginning in FY1991, all appropriated funds are utilized for capitalization grants under Title VI of the Act (as provided in the Water Quality Act of 1987); funding for the traditional Title II grants program was no longer available.
The enacted level included several earmarkings: $15.7 million for San Diego, $20 million for Boston Harbor (section 513 of the WQA), and $16.5 million for a new Water Quality Cooperative Agreement Program under section 104(b)(3) of the Act. (9) The President's budget had requested $16.5 million to support state permitting, enforcement and water quality management activities, especially to offset the reductions in aid to states due to elimination of state management setasides from the previous Title II construction grants program. Congress agreed to the level requested, but provided it as a portion of the wastewater treatment appropriation, rather than as part of EPA's general program management appropriation, as in the President's request. As a result of these earmarkings, $2.048 billion was provided for Title VI grants.
For FY1992 President Bush requested $1.9 billion in wastewater treatment funds, or $100 million more than authorized under the Water Quality Act of 1987 for Title VI grants in FY1992. However, out of the $1.9 billion total, the President's request sought $1.5 billion for Title VI SRF grants and $400 million as grants under the expired Title II construction grants program for the following coastal cities: Boston, San Diego, New York, Los Angeles, and Seattle. Two of the five designated projects had been authorized in the 1987 Clean Water Act amendments; the other three did not have explicit statutory authorization. Also, $16.5 million was requested for Water Quality Cooperative Agreement grants to the states.
In acting on the request (P.L. 102-139) in November 1991, Congress provided total wastewater funds of $2.4 billion. The total was allocated as follows:
This appropriation bill was the first to include special purpose grant funding for several projects not specifically authorized in the Clean Water Act or amendments to that law.
For FY1993, President Bush requested $2.484 billion for state revolving funds/construction grants (now called the water infrastructure account). The requested total included $340 million to be targeted for 55% construction grants to six communities: Boston, New York, Los Angeles, San Diego, Seattle, and Baltimore. In addition, the President requested that $130 million be directed toward a Mexican Border Initiative, consisting of $65 million for construction of the international treatment plant at San Diego (to address the Tijuana sewage problem), $15 million for projects at Nogales AZ and New River, CA, and $50 million as 50% grants for colonias in Texas. (10) The President also requested $16.5 million for section 104(b)(3) grants. With these special project amounts, the request sought $2.014 billion for SRF assistance.
Final action on FY 1993 funding occurred on Sept. 25, 1992 (P.L. 102-389). It provided an appropriation of $2.55 billion, but $624.5 million of this amount was reserved for special projects and other grants. The bill provided $50 million in CWA section 319 grants (11) and $16.5 million in section 104(b)(3) grants out of the SRF amount. It included the following special purpose grants: the international treatment plant at San Diego (Tijuana -- section 510), with bill language capping funding for that project at $239.4 million; Title II grants for Boston, New York, Los Angeles, San Diego, Seattle, Rouge River, Baltimore, Ocean County NJ, Atlanta, and for colonias in Texas, Arizona and New Mexico. The final SRF amount under the bill was $1.928 billion; the total earmarked amount is $622 million.
Early in 1993 President Clinton requested that Congress approve "economic stimulus and investment" spending, in the form of supplemental FY1993 appropriations. Both his original proposal and a subsequent modified proposal included additional SRF grant funds, but neither of the bills enacted by Congress in response to these requests (P.L. 103-24, P.L. 103-50) provided additional SRF funds.
For FY1994, the Clinton Administration requested $2.047 billion for water infrastructure. The funds in this request were: $1.198 billion to capitalize State Revolving Funds, $150 million for Mexican Border Project grants, and $100 million for a single hardship community (Boston). The request also included $599 million to capitalize new state drinking water revolving funds.
The final version of the FY1994 legislation (P.L. 103-124) provided $2.477 billion for water infrastructure/state revolving funds. Of this total amount, $599 million was to be reserved for drinking water SRFs, if authorization legislation were enacted; $80 million was for section 319 grants; $22 million was for section 104(b)(3) grants; and $58 million was for Tijuana/San Diego-section 510 of the WQA. This resulted in an appropriation of $1.718 billion for clean water SRFs.
In addition, the final bill provided that $500 million be used to support water infrastructure financing in economically distressed/hardship communities. Under the bill, these funds were not available for spending until May 31, 1994, and were set aside until projects were authorized in the CWA for this purpose.
Thus, the bill as enacted provided $1.218 billion immediately for clean water SRFs, with the expectation that $500 million more would be available for financing hardship community projects after May 31, 1994.
For FY1995 President Clinton requested $2.65 billion for water infrastructure consisting of: $1.6 billion for CWA SRFs, $100 million for section 319 nonpoint source management grants to states, $52.5 million for a grant to San Diego for a wastewater project pursuant to section 510 of the WQA, $47.5 million for other Mexican border projects, $50 million to the State of Texas for colonias projects, and $100 million for grants under Title II for needy cities (intended for Boston). The request included $700 million for drinking water SRFs, pending enactment of authorizing legislation. The President's budget also requested $21.5 million for section 104(b)(3) grants/cooperative agreements.
Final agreement on FY1995 funding was contained in P.L. 103-327, enacted in September 1994, which provided a total of $2.962 billion for water infrastructure financing. Of the total, $22.5 million was for grants under section 104(b), $100 million for section 319 grants, $70 million for public water system grants (grants to states under the Safe Drinking Water Act to support state implementation of delegated drinking water programs), $52.5 million for the section 510 project in San Diego, and $700 million for drinking water SRFs (contingent upon enactment of authorization legislation).
The remaining $2.017 billion was for CWA projects. Of this amount, $1,235.2 million was for clean water SRF grants to states under Title VI of the CWA. The remaining $781.8 million (39% of this amount, 26% of the total appropriation) was designated for 45 specific, named projects in 22 states. The earmarked amounts ranged in size from $200,000 for Southern Fulton County, PA, to $100 million for the City of Boston.
Finally, the conferees included bill language concerning release of the $500 million in FY1994 needy cities money (because the authorizing committees of Congress had not acted on legislation to authorize specific projects, as had been intended in P.L. 103-124) as follows:
In February 1995 President Clinton submitted the Administration's budget request for FY1996. Included in it was a request for $2.365 billion for water infrastructure funding consisting of $1.6 billion for clean water state revolving funds,
$500 million for drinking water state revolving funds, $150 million to support Mexico border projects under the U.S.-Mexican Border Environmental Initiative and NAFTA and $100 million for special need/economically distressed communities (not specified in the request, but presumed to be intended for Boston), plus $15 million for water infrastructure needs in Alaska Native Villages.
In February 1995 congressional appropriations committees began considering legislation to rescind previously appropriated FY1995 funds, as part of overall efforts by the 104th Congress to shape the budget and federal spending. These efforts resulted in passage in July of P.L. 104-19 which rescinded $16.5 billion in total funds from a number of departments, agencies, and programs. In the water infrastructure area, it rescinded $1,077,200,000 from prior year appropriations including the $3.2 million for a project in New Jersey (it had mistakenly been funded twice in P.L. 103-327) and $1,074,000,000. Although not contained in bill language, it was understood that the larger rescinded amount consisted solely of drinking water SRF funds (leaving $1,235,000,000 for FY 1995 clean water SRF funds, $778.6 million for earmarked wastewater projects -- both amounts as originally appropriated -- and $225 million in FY94-95 drinking water SRF funds that had not yet been authorized).
It took until April 1996 for Congress and the Administration to reach agreement on FY1996 appropriations for EPA as part of omnibus legislation (H.R. 3019, P.L. 104-134) that consolidated five appropriations bills not yet enacted due to disagreements over funding levels and policy. Agreement came as the fiscal year was more than one-half over.
Before that, however, congressional conferees on FY1996 legislation for EPA reached agreement in November 1995 (H.R. 2099, H.Rept. 104-353). Conferees agreed to provide $2.323 billion for a new account titled State and Tribal Assistance Grants, consisting of infrastructure assistance and state environmental management grants for 16 categorical programs that had previously been funded in a separate appropriations account. The total included $1.125 billion for clean water SRF grants, $275 million in new appropriations for drinking water SRF grants, and $265 million for special purpose project grants. Report language provided that the drinking water SRF money also included $225 million from FY 1995 appropriations that were rescinded in P.L. 104-19. The drinking water SRF money would be available upon reauthorization of the Safe Drinking Water Act; otherwise, it would revert to clean water SRF grants if the SDWA were not reauthorized by June 30, 1996. This made the total for drinking water SRF grants $500 million.
The November 1995 agreement on H.R. 2099 included $658 million for consolidated state environmental grants. In doing so, Congress endorsed an Administration proposal for a more flexible approach to state grants, a key element of EPA's efforts to improve the federal-state partnership in environmental programs. In lieu of traditional grants provided separately to support state air, water, hazardous waste and other programs, consolidated grants are intended to reduce administrative burdens and improve environmental performance by allowing states and tribes to target funds to meet their specific needs and integrate their environmental programs, as appropriate. Congress' support was described in accompanying report language. (12)
Including state environmental grants in the same account with water infrastructure assistance reflects Congress' support for enhancing the ability of states and localities to implement environmental programs flexibly and support for EPA's ability to provide block grants to states and Indian tribes.
The H.R. 2099 conference agreement also included legislative riders intended to limit or prohibit EPA from spending money to implement several environmental programs. The Administration opposed the riders. The House and Senate approved this bill in December, but President Clinton vetoed it, because of objections to spending and policy aspects of the legislation.
With no full-year funding in place from October 1995 to April 1996, EPA and the programs it administers (along with agencies and departments covered by four other appropriations bills not yet enacted) were subject to a series of short-term continuing resolutions, some lasting only a day, some lasting several weeks. In March 1996 the House and Senate began consideration of an omnibus appropriations bill to fund EPA and other agencies for the remainder of FY1996, finally reaching agreement in April on a bill (H.R. 3019) enacted as P.L. 104-134. (13) Congress agreed to provide $2.813 billion for a new account titled State and Tribal Assistance Grants, consisting of state grants and infrastructure assistance, as in H.R. 2099, the vetoed measure. The total was divided as follows:
Report language provided that the drinking water SRF money also included $225 million from FY1995 appropriations that remained available after the rescissions in P.L. 104-19, for a total of $725 million. The drinking water SRF money was contingent upon reauthorization of the Safe Drinking Water Act by Aug. 1, 1996; otherwise, it would revert to clean water SRF grants.
The final agreement (P.L. 104-134) included several of the legislative riders from previous versions of the legislation, including riders related to drinking water and clean air, but dropped others strongly opposed by the Administration.
Funds within the State and Tribal Assistance Grants account were redistributed after Congress passed Safe Drinking Water Act amendments in August 1996. Enactment of the amendments (P.L. 104-182) occurred on August 6 -- after the August 1 deadline in P.L. 104-134 that would have made $725 million available for drinking water SRF grants in FY1996. Thus, the previously appropriated $725 million reverted to clean water SRF grants, making the FY1996 total for those grants $2,073.5 million.
While debate over the FY1996 appropriations was continuing, in March 1996 President Clinton submitted the details of a FY1997 budget. For water infrastructure and state and tribal assistance, the request totaled $2.852 billion consisting of:
In response to the Administration's request, in June 1996 the House approved legislation (H.R. 3666) providing FY1997 funding for EPA. In the State and Tribal Assistance Grants account, the House approved $2.768 billion, $84 million less than requested but on the whole endorsing the budget request. The total provided the following: $1.35 billion for clean water SRF grants, as requested; $165 million, as requested, for U.S.-Mexico border projects, Texas colonias, and Alaskan Native Village projects; $450 million for drinking water SRF funding, contingent upon authorization; $674 million for state performance partnership consolidated management grants; and $129 million for 7 special purpose grants.
In July, the Senate Appropriations Committee reported its version of H.R. 3666. The committee approved $2.815 billion for this account, consisting of $1.426 billion for clean water SRF grants; $550 million for drinking water SRF grants, contingent upon authorization; $165 million, as requested, for U.S.-Mexico border projects, Texas colonias, and Alaskan Native Village projects; and $674 million for consolidated state grants. The committee rejected the provision of the House-passed bill providing $129 million for special purpose grants, including funds for Boston and New Orleans requested by the Administration, saying in report language that earmarking is provided at the expense of state revolving funds and does not represent an equitable distribution of grant funds (S.Rept. 104-318).
During debate on H.R. 3666 in September, the Senate adopted an amendment to reduce the FY1997 appropriation for clean water SRF grants by $725 million in order to fund the new drinking water SRF program. This action was intended to restore funds to the drinking water program which had been lost when Safe Drinking Water Act amendments were not enacted by Aug. 1, 1996. Thus, the Senate-passed bill provided $701 million for clean water SRF grants and $1.275 billion for drinking water SRF grants for FY1997. Other amounts in the account were unchanged.
The conference report on H.R. 3666 (H.Rept. 104-812) was approved by the House and Senate on Sept. 24, 1996. President Clinton signed the bill September 26 (P.L. 104-204). It reflected compromise of the House- and Senate-passed bills, providing the following amounts within the State and Tribal Assistance Grants account ($2.875 billion total):
The allocation of clean water and drinking water SRF grants was consistent with the Senate's action to restore funds to the drinking water program after enactment of the Safe Drinking Water Act amendments in early August.
Subsequently, Congress passed a FY1997 Omnibus Consolidated Appropriations bill to cover agencies and departments for which full-year funding had not been enacted by Oct. 1, 1996 (P.L. 104-208). It included additional funding for several EPA programs, as well as $35 million (on top of $40 million provided in P.L. 104-204) for the Boston Harbor cleanup project.
President Clinton presented the Administration's budget request for FY1998 in February 1997. For water infrastructure and state and tribal assistance, the request totaled $2.793 billion, consisting of $1.075 billion for clean water SRF grants, $725 million for drinking water SRF grants, $715 million for consolidated state environmental grants, and $278 million for special project grants.
House and Senate committees began activities on FY1998 funding bills somewhat late in 1997, due to prolonged negotiations between Congress and the President over a 5-year budget plan to achieve a balanced budget by 2002. After appropriators took up the FY1998 funding bills in June, the House passed EPA's appropriation in H.R. 2158 (H.Rept. 105-175) on July 15. In the State and Tribal Assistance Grants account, the House approved $3.019 billion, consisting of $1.25 billion for clean water SRF grants ($600 million more than FY1997 levels and $175 million more than requested by the President), $750 million for drinking water SRF grants ($425 million less than FY1997 levels, but $25 million more than the request), $750 million for state environmental assistance grants, and $269 million for special projects. The latter included funds for the special projects requested by the Administration but at reduced levels ($149 million total for these projects), plus $120 million in special project grants for 21 other communities.
The Senate passed a separate version of an FY1998 appropriations bill on July 22, 1997 (S. 1034, S.Rept. 105-53). It provided $3.047 billion for the State and Tribal Assistance Grants account, consisting of $1.35 billion for clean water SRF grants, $725 million for drinking water SRF grants, $725 million for state environmental assistance grants, and $247 million for special project grants. The Senate bill provided the amounts requested by the Administration for U.S.-Mexico border projects, Texas colonias, and Alaskan Native Village projects (but no special funds for others requested by the President), plus $82 million for 18 special project grants for other communities identified in report language.
Conferees reached agreement on FY1998 funding in early October 1997 (H.R. 2158, H.Rept. 105-297). The final version passed the House on October 8 and passed the Senate on October 9. President Clinton signed the bill October 27 (P.L. 105-65). As enacted, it provides $3.213 for the State and Tribal Assistance Account, consisting of $1.35 billion for clean water SRF grants, $725 million for drinking water SRF grants, $745 million for consolidated state environmental assistance grants, and $393 million for 42 special purpose project and special community need grants for construction of wastewater, water treatment and drinking water facilities, and groundwater protection infrastructure. It included the following amounts for grants requested by the Administration:
The final bill also provided funds for all of the special purpose projects included in the separate House and Senate versions of the legislation, plus three projects not included in either earlier version.
Bill language was included which allows states to cross-collateralize clean water and drinking water SRF funds, that is, to use the combined assets of amounts appropriated to State Revolving Funds as common security for both SRFs, which conferees said is intended to ensure maximum opportunity for states to leverage these funds. Senate committee report language said that the conference report on the 1996 Safe Drinking Water Act Amendments had stated that bond pooling and similar arrangements were not precluded under that legislation. The appropriations bills language was intended to ensure that EPA does not take an unduly narrow interpretation of this point which would restrict the states' use of SRF funds. (14)
On Nov. 1, 1997, President Clinton used his authority under the Line Item Veto Act (P.L. 104-130) to cancel six items of discretionary budget authority provided in P.L. 105-65. The President's authority under this Act took effect in the 105th Congress; thus, this was the first EPA appropriation bill affected by it. The cancelled items included funding for one of the special purpose grants in the bill, $500,000 for new water and sewer lines in an industrial park in McConnellsburg, PA. Reasons for the cancellation, according to the President, were that the project had not been requested by the Administration; it would primarily benefit a private entity and is outside the scope of EPA's usual mission; it is a low priority use of environmental funds; and it would provide funding outside the normal process of allocating funds according to state environmental priorities. (15)
However, in June 1998, the Supreme Court struck down the Line Item Veto Act as unconstitutional, and in July the Office of Management and Budget announced that funding would be released for 40-plus cancellations made in 1997 under that Act (including those cancelled in P.L. 105-65) that Congress had not previously overturned. (For additional information, see CRS Issue Brief IB89148, Item Veto and Expanded Impoundment Proposals.)
President Clinton's budget request for FY1999, presented to Congress in February 1998, requested $2.9 billion for the State and Territorial Assistance Grants account, representing 37% of the $7.9 billion total requested for EPA programs. The total included $1,075 million for clean water SRF grants, $775 million for drinking water SRF grants, $115 million for water infrastructure projects along the U.S.-Mexico border projects and in Alaskan Native Villages, $78 million for needy cities projects, and $875 million for consolidated state environmental grants.
Legislative action on the budget request occurred in mid-1998. Both houses of Congress increased amounts for water infrastructure financing, finding the Administration's request for clean water and drinking water SRF grants, as well as special project funding, not adequate. First, the Senate Appropriations Committee reported its version of an EPA spending bill in June (S. 2168, S.Rept. 105-216). This bill, passed by the Senate July 17, provided $3.2 billion for the STAG account, consisting of $1.4 billion for clean water SRF grants, $800 million for drinking water SRF grants, $105 million for U.S.-Mexico and Alaskan Native Village projects, $100 million for 39 other special needs infrastructure grants, and $850 million for state performance partnership/categorical grants. As in FY1998, the committee included bill language allowing states to cross-collateralize their clean water and drinking water State Revolving Funds, making the language explicit for FY1999 and thereafter.
Second, the House passed its version of EPA's funding bill (H.R. 4194, H.Rept. 105-610) on July 29. This bill provided $3.2 billion for the STAG account, consisting of $1,250 million for clean water SRF grants, $775 million for drinking water SRF grants, $70 million for U.S.-Mexico and Alaskan Native Village projects, $253.5 million for 49 other special needs infrastructure grants (including 9 projects also funded in the Senate bill), and $885 million for state environmental management grants (a 20% increase above FY1998 amounts for these state grants).
Conferees resolved differences between the two versions in October 1998 (H.R. 4194, H.Rept. 105-769). The conference agreement provided $3.4 billion for the STAG account, consisting of $1,350 million for clean water SRF grants, $775 million for drinking water SRF grants, $80 million for U.S.-Mexico and Alaskan rural and Native Village projects, $301.8 million for 80 other special needs project grants, and $880 million for state and tribal environmental program grants. The House and Senate approved the agreement on October 7 and 8, respectively, and President Clinton signed the bill into law on October 21 (P.L. 105-276).
Additional funding was provided in the Omnibus Consolidated and Supplemental Appropriations Act, FY1999 (P.L. 105-277). This bill, which provided full-year funding for agencies and departments covered by seven separate appropriations measures, directed $20 million more in special needs grants for the Boston Harbor wastewater infrastructure project, on top of $30 million that was included in P.L. 105-276.
For FY2000, beginning on October 1, 1999, the Administration requested $2.838 billion for the State and Territorial Assistance Grants account. The total, $570 million less than the FY1999 appropriation for this account, consisted of $800 million for clean water SRF grants, $825 million for drinking water SRF grants, $128 million for Mexican Border and special project grants, $885 million for consolidated state environmental grants, and $200 million for a new Clean Air Partnership Fund. This Fund is intended to provide EPA grants to localities (public and/or private entities) for the purpose of promoting innovative technologies to reduce traditional air pollutants and greenhouse gases.
The request included one SRF policy issue. The Administration asked the appropriators to grant states the permission to set aside up to 20% of FY2000 clean water SRF monies in the form of grants for local communities to implement nonpoint source pollution and estuary management projects. Currently under the Clean Water Act, SRFs may only be used to provide loans. Some have argued that some types of water pollution projects which are eligible for SRF funding may not be suitable for loans, as they may not generate revenues which can be used to repay the loan to a state. This new authority, the Administration said, would allow states greater flexibility to address nonpoint pollution problems. Critics of the proposal say that making grants from an SRF would reduce the long-term integrity of a state's fund, since grants would not be repaid.
Members of Congress and stakeholder groups were particularly critical of the budget request for clean water SRF grants, $550 million (40%) less than the FY1999 level. Critics said the request was insufficient to meet the needs of states and localities for clean water infrastructure (estimated to be more than $130 billion through the year 2016, according to EPA's most recent survey). In response, EPA acknowledged that several years ago the Administration made a commitment to states that the clean water SRF would revolve at $2 billion annually in the year 2005. Because of loan repayments and other factors, EPA said, the overall fund will be revolve at $2 billion per year in the year 2002, even with the 20% grant setaside included in the FY2000 request. According to EPA, the $550 million decrease from 1999 would have only a limited impact on SRFs and would still allow the Agency to meet its long-term capitalization goal of providing an average amount of $2 billion in annual assistance.
The House and Senate passed their respective versions of an EPA appropriations bill (H.R. 2684) in September 1999. The conference committee report resolving differences between the two versions (H.Rept. 106-379) was passed by the House on October 14 and the Senate on October 15 and was signed by the President on October 20 (P.L. 106-74). The final bill provided $7.6 billion overall for EPA programs, including $3.47 billion for the STAG account. Within that account, the bill included $1.35 billion for clean water SRF grants, $820 million for drinking water SRF grants, $885 million for consolidated state grants, $80 million for U.S.-Mexico Border and Alaska Rural and Native Village projects, and $331.6 million for 141 other special needs water and wastewater grants specified in report language. The final bill did not approve the Administration's request to allow states to use up to 20% of clean water SRF monies as grants for nonpoint pollution and estuary management projects, nor did it provide for a Clean Air Partnership Fund.
Subsequent to enactment of the EPA funding bill, Congress passed the Consolidated Appropriations Act for FY2000 with funding for five other agencies (P.L. 106-113), which included provisions requiring a government-wide cut of 0.38% in discretionary appropriations. The bill gave the President some flexibility in applying this across-the-board reduction. Details of the reduction were announced at the time of the release of the FY2001 budget. EPA's distribution of the recission resulted in a total reduction of $16.3 million for 139 of the special needs water and wastewater projects identified in P.L. 106-74. These projects were reduced 4.9% below enacted levels. The Agency did not reduce funds for the two projects that had been included in the President's FY2000 budget request (Bristol County, MA and New Orleans, LA) or for the United States-Mexico Border and the Alaska Rural and Native Villages programs. EPA also reduced funds for the clean water SRF (enacted at $1.35 billion) by 0.3%, for a final funding level of $1.345 billion. The drinking water SRF appropriation was not reduced, nor were consolidated state grants.
The President's budget for FY2001 requested a total of $2.9 billion for EPA. For the second year in a row, the President requested $800 million for the clean water SRF program, a $545 million reduction from the FY2000 level. The President's request included $825 million for the drinking water SRF program, $100 million for U.S.-Mexico Border project grants, $15 million for Alaskan Native Villages projects, 2 needy cities grants totaling $13 million (Bristol County, MA and New Orleans, LA), plus $1.069 billion for consolidated state environmental grants and $85 million for a Clean Air Partnership Fund (which Congress did not fund for FY2000). The higher request for consolidated state grants (21% above the FY2000 level) consisted principally of increases for three clean water grants: $45 million more for state administrative grants (CWA section 106), $50 million more for nonpoint pollution management grants (CWA section 319), and $50 million for a new competitive grant program to address Great Lakes contamination problems.
The budget included a policy request similar to one in the FY2000 budget, which Congress rejected. The FY2001 budget sought flexibility for states to set aside up to 19% of clean water SRF monies in the form of grants for local communities to implement nonpoint source pollution and estuary management projects.
The House approved its version of EPA's funding bill (H.R. 4635, H.Rept. 106-286) on June 21, 2000. For the STAG account, H.R. 4635 provided $3.2 billion ($273 million more than requested, but $288 million below the FY2000 level). The total in the STAG account consisted of $1.2 billion for clean water SRF grants, $825 million for drinking water SRF grants, $1.068 billion (the budget request) for categorical state grants, and $85 million for U.S.-Mexico Border and Alaska Rural and Native Villages projects. Beyond these, however, the House-passed bill included no funds for other special needs grants.
The Senate approved its version of the funding bill (S.Rept. 106-410) on October 12. For the STAG account, the Senate-passed bill provided $3.3 billion, consisting of $1.35 billion for clean water SRF grants, $820 million for drinking water SRF grants, $955 million for categorical state grants, $85 million for U.S.-Mexico Border and Alaska Rural and Native Village projects, and $110 million for special needs water and wastewater grants.
In October, the House and Senate approved EPA's funding bill for FY2001 (H.Rept. 106-988), providing $1.35 billion for clean water SRF grants (the same level enacted for FY2000) and $825 million for drinking water SRF grants. The enacted bill includes $110 million for water infrastructure project grants in Alaskan Rural and Native Villages and U.S.-Mexico border projects and an additional $336 million for 237 other specified project grants throughout the country. The bill also provides $1,008 million for state categorical program grants ($60 million less in total than requested), including $38 million more than requested for nonpoint pollution management grants and $56.6 million more for Section 106 grants. Total funding for the STAG account is $3.6 billion. Congress rejected the Administration's request for new Great Lakes cleanup funds and for Clean Air Partnership Grants and also disapproved the Administration's policy request concerning use of clean water SRF monies. President Clinton signed the bill October 27 (P.L. 106-377).
2. (back)For further information on the EPA budget as a whole, see CRS Issue Brief IB10058, Environmental Protection Agency: FY2001 Budget Issues, updated regularly.
3. (back)In the 104th Congress, the House passed a comprehensive reauthorization bill, H.R. 961, but provisions in it that addressed regulatory relief and similar issues were controversial. In the Senate, reauthorization legislation was not introduced, and no hearings on H.R. 961 were held; thus, no amendments were enacted.
9. (back)Section 104(b)(3) grants have been used to support a variety of special studies and projects allowing states and localities to demonstrate innovative approaches to implementing the core water quality program.
11. (back)In the 1987 Clean Water Act amendments authorized federal grants to assist states in implementing programs to manage water pollution from nonpoint sources such as farm and urban areas, construction, forestry, and mining sites. Because of competing demands for funding, it had been difficult for Congress to fund this grant program and other water quality initiatives in the 1987 act. Appropriators did fund section 319 grants in EPA's general program management account (abatement, control and compliance) in FY1990, FY1991, and FY1992, but well below authorized levels. In the FY1993 act, appropriators moved funding into the SRF/construction grants account, thereby providing a degree of protection from competing priorities.
12. (back)H.Rept. 104-384, accompanying H.R. 2099, 104th Congress, 1st Session, in Congressional Record, vol. 141, no. 193, daily ed. Dec. 6, 1995, p. H 14132. This was the second conference report on this bill; a previous agreement, reflected in H.Rept. 104-353, was rejected by the House on November 29. However, amounts in the State and Tribal Assistance Grants account were the same in both versions.
13. (back)The conference report on H.R. 3019 (H.Rept. 104-537) references the conference report on the vetoed H.R. 2099, making the two reports together the full statement of the conference committee regarding EPA funding and the State and Tribal Assistance Grants account.
15. (back)Office of Management and Budget. "Cancellation Pursuant to Line Item Veto Act." 62 Federal Register 59768, Nov. 4, 1997. The President also cancelled funding for two other projects in the EPA portion of the bill, a water and wastewater training institute in Alabama and a solar aquatic wastewater treatment plant in Vermont. These projects were funded under a separate EPA account in the bill, the environmental programs and management account.
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