Environmental Protection: Collaborative EPA-State Effort Needed to
Improve Performance Partnership System (Testimony, 05/02/2000,
GAO/T-RCED-00-163).

Pursuant to a congressional request, GAO discussed the National
Environmental Performance Partnership System (NEPPS), focusing on: (1)
grants and agreements made under NEPPS between the Environmental
Protection Agency (EPA) and states; (2) progress that EPA and the states
have made in developing results-oriented performance measures to be
incorporated into NEPPS agreements and grants to the states; (3) how EPA
oversight may or may not have been changing in states that were
participating in NEPPS; and (4) the extent to which the use of these
performance partnership agreements and grants had achieved the benefits
envisioned for the states and the public.

GAO noted that: (1) state participation in NEPPS grew from 6 pilot
states in its initial year in fiscal year (FY) 1996 to 45 states by the
end of FY 1998; (2) of that number, 31 states had both Performance
Partnership Agreements and Performance Partnership Grants with EPA in
1998, 12 states had grants only, 2 states had agreements only, and 5
states did not participate at all; (3) EPA and the states agree on the
importance of measuring the outcomes of environmental activities rather
than just the activities themselves, in order to help them better
understand whether their programs are achieving their intended results;
(4) despite a number of technical challenges (e.g., the inherent
difficulty in quantifying certain results, and the difficulty of linking
program activities to environmental results) and disagreements between
EPA and the states on such matters as the degree to which states should
be permitted to vary from the national core measures, EPA and state
leaders have managed to agree on a set of core measures for FY 2000 that
are widely regarded by EPA and state officials as significantly improved
from those negotiated in previous years; (5) the initial expectation
that participation in NEPPS would be accompanied by reduced federal
oversight of states has thus far been realized to only a limited degree;
(6) GAO identified a number of instances among the six states that GAO
visited where oversight reduction did accompany participation in the
system; (7) however, in other cases cited by both state and EPA regional
officials, it was difficult to attribute reduced oversight directly to
NEPPS participation; (8) other instances were cited where oversight had
either remained the same or had actually increased; (9) EPA and state
participants cited a number of benefits associated with NEPPS, for
example, that participation provided a means of getting buy-in for
innovative and unique projects and served as a tool to divide an often
burdensome workload more efficiently between federal and state
regulators; (10) yet while participants from each state indicated that
their participation in the voluntary program would probably continue,
they also consistently expressed the view that: (a) the benefits of the
program should be greater; (b) the program has yet to achieve its
potential; and (c) improvements are needed; and (11) the 1995 agreement
anticipated the appropriateness of such reflection in calling for "a
joint evaluation system for EPA and the states to review the results of
their efforts to ensure continuous improvement."

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-RCED-00-163
     TITLE:  Environmental Protection: Collaborative EPA-State Effort
	     Needed to Improve Performance Partnership System
      DATE:  05/02/2000
   SUBJECT:  Grants to states
	     Environmental policies
	     Performance measures
	     Federal/state relations
	     State-administered programs
	     Environmental monitoring
	     Grant monitoring
IDENTIFIER:  EPA National Environmental Performance Partnership System
	     EPA Performance Partnership Grant
	     Florida

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Testimony

Before the Committee on Environment and Public Works, United States Senate

For Release on Delivery
Expected at 10:00 a.m. DST
Tuesday, May 2, 2000

ENVIRONMENTAL PROTECTION

Collaborative EPA-State Effort Needed to Improve Performance Partnership
System

Statement of Peter F. Guerrero, Director,
Environmental Protection Issues,
Resources, Community, and Economic
Development Division

GAO/T-RCED-00-163

Mr. Chairman and Members of the Committee:

I am pleased to be here to discuss our recent assessment of the National
Environmental Performance Partnership System (NEPPS). NEPPS was established
by a May 1995 agreement between the Environmental Protection Agency (EPA)
and the states as a new framework for improving their working relationship,
and for improving the effectiveness of states' environmental programs. Under
the program, a state and EPA may enter into a Performance Partnership
Agreement that identifies the state's environmental goals and priorities,
and how both EPA and state officials are to address them. The two sides may
also agree on a Performance Partnership Grant, which is intended to allow
the state greater flexibility in targeting limited resources to meet its
most pressing needs.

Both EPA and the states launched NEPPS to help address long-standing issues
affecting their working relationship. Among these issues were concerns that
EPA (1) is inconsistent in its oversight of states from one region to
another, (2) sometimes micromanages the states' programs, (3) does not
provide sufficient technical support for the states' programs increasingly
complex requirements, and (4) often does not adequately consult the states
before making key decisions affecting them.

In signing the agreement that established NEPPS, EPA and state leaders
stated that they sought to "strengthen our protection of public health and
the environment by directing scarce public resources toward improving
environmental results, allowing states greater flexibility to achieve those
results, and enhancing our accountability to the public and taxpayers."
Among the key elements of NEPPS were (1) EPA's commitment to give states
with strong environmental performance greater flexibility and autonomy in
running their environmental programs and (2) the agreement between EPA and
the states to develop effective "core" performance measures to better
understand whether the states' programs are achieving their intended
results.

Given the expectation among participants that NEPPS could deal with many of
the issues that have long impeded the EPA-state relationship, the Chairman,
Subcommittee on VA, HUD, and Independent Agencies, House Committee on
Appropriations, asked us to examine the progress made by EPA and the states
since the 1995 Agreement. In response to this request, our June 1999 report
(1) identified the status of grants and agreements made under NEPPS between
EPA and participating states, (2) examined the progress that EPA and the
states have made in developing results-oriented performance measures to be
incorporated into NEPPS agreements and grants to the states, (3) examined
how EPA oversight may or may not have been changing in states that were
participating in NEPPS, and (4) discussed the extent to which the use of
these performance partnership agreements and grants had achieved the
benefits envisioned for the states and the public.

In summary, Mr. Chairman, we found the following:

   * State participation in NEPPS grew from 6 pilot states in its initial
     year in fiscal year 1996 to 45 states by the end of fiscal year 1998.
     Of that number, 31 states had both Performance Partnership Agreements
     and Performance Partnership Grants with EPA in 1998; 12 states had
     grants only; 2 states had Agreements only; and 5 states did not
     participate at all.

   * EPA and the states agree on the importance of measuring the outcomes of
     environmental activities rather than just the activities themselves, in
     order to help them better understand whether their programs are
     achieving their intended results. Despite a number of technical
     challenges (e.g., the inherent difficulty in quantifying certain
     results, and the difficulty of linking program activities to
     environmental results) and disagreements between EPA and the states on
     such matters as the degree to which states should be permitted to vary
     from the national core measures, EPA and state leaders have managed to
     agree on a set of core measures for fiscal year 2000 that are widely
     regarded by EPA and state officials as significantly improved from
     those negotiated in previous years.

   * The initial expectation that participation in NEPPS would be
     accompanied by reduced federal oversight of states has thus far been
     realized to only a limited degree. We identified a number of instances
     among the six states that we visited where oversight reduction did
     accompany participation in the system. However, in other cases cited by
     both state and EPA regional officials, it was difficult to attribute
     reduced oversight directly to NEPPS participation. Other instances were
     cited where oversight had either remained the same or had actually
     increased.

   * EPA and state participants cited a number of benefits associated with
     NEPPS noting, for example, that participation provided a means of
     getting buy-in for innovative and/or unique projects and served as a
     tool to divide an often burdensome workload more efficiently between
     federal and state regulators. Yet while participants from each state
     indicated that their participation in the voluntary program would
     probably continue, they also consistently expressed the view that the
     benefits of the program should be greater; that the program has yet to
     achieve its potential; and that improvements are needed. The 1995
     Agreement anticipated the appropriateness of such reflection in calling
     for "a joint evaluation system for EPA and the states to review the
     results of their efforts to ensure continuous improvement." We
     recommended in our report that such a joint evaluation process be
     initiated, and suggested a number of issues to be considered for
     attention during such a process.

Background

Under NEPPS, states may voluntarily enter into "Performance Partnership
Agreements" with their EPA regional offices. While there is considerable
flexibility in how the agreements may be designed, they typically provide a
means for EPA and the states to negotiate such matters as (1) which problems
will receive priority attention within the state programs, (2) what EPA's
and the states' respective roles will be, and (3) how the states' progress
in achieving clearly defined program objectives will be assessed. An
important component of the Partnership Agreements is the use of a common set
of national environmental indicators (called "Core Performance Measures") to
measure the effectiveness and success of states' environmental programs. In
their efforts to develop these Performance Measures, EPA and state officials
have sought to move beyond counting the number of actions (such as the
number of inspections conducted or environmental enforcement actions taken),
and increasingly toward evaluating the impact of programs on the
environment.

While NEPPS provides the overarching framework for developing partnership
agreements, Performance Partnership Grants, authorized by the Congress in
April 1996, serves as a major tool to implement them. This program allows
states to request that funds from 2 or more of the 15 eligible categorical
grants be combined to give governmental entities greater flexibility in
targeting limited resources to their most pressing environmental needs.
These grants are also intended to be used to better coordinate existing
activities across environmental media and to develop multimedia programs.
While the Partnership Agreements are designed to complement the Partnership
Grants, states are free to negotiate both agreements and grants or to
decline participation in NEPPS altogether.

Growth of State Participation in NEPPS

In fiscal year 1996, NEPPS was initially tested on a pilot basis with six
participating states. EPA and the states viewed the first year as a time to
experiment with the new system and various ways to implement it. The number
of participating states subsequently increased to 45 states in fiscal year
1998, although the extent of participation varied widely. For example, half
the states have negotiated both Partnership Agreements and Partnership
Grants through their lead environmental agencies that cover most EPA
programs; other states have substantially limited their participation and
cover fewer programs.

States have also varied considerably in the detail and content of their
Agreements. Senior officials in EPA's Office of State and Local Relations
explained that the agency has not attempted to impose uniformity on the
development of Partnership Agreements at this early stage of the NEPPS
process, and has therefore refrained from issuing guidance on how the
agreements should be structured. Hence, the agreements vary widely in
content and emphasis, reflecting each individual state's conditions and
priorities and reflecting the results of negotiations with their respective
EPA regional offices.

Progress in Developing Results-Oriented Measures

Both EPA and the individual states have had a number of efforts underway to
develop effective performance measures to better understand whether their
programs are achieving their intended results. Their collective efforts to
develop such measures for NEPPS has centered around the Performance Measures
that were negotiated between EPA and the Environmental Council of the States
during the past several years (The Council is a national nonpartisan,
nonprofit association of state and territorial environmental
commissioners.). The effort faced a number of technical challenges inherent
in developing defensible results-oriented measures. The results of
activities designed to improve water quality, for example, can take years to
appear, and the capability of many states to monitor a significant share of
their waters is limited. Moreover, even if environmental conditions could be
reliably and consistently measured, it may be particularly difficult to
demonstrate the extent to which a specific government program affected that
condition. Officials from Florida (which has made a significant commitment
to measuring compliance rates and environmental indicators), for example,
explained that such factors outside their control as economic activity and
weather conditions, make it particularly difficult to link program
activities with changes in environmental conditions.

In addition to these technical challenges in developing results-oriented
measures, the effort was also challenged by disagreements between EPA and
the states on issues such as (1) the degree to which states should be
permitted to vary from the national Performance Measures and (2) the
composition of these measures, particularly regarding the degree to which
pre-existing output measures should be retained as newer outcome measures
are added. Overall, however, the states and EPA made progress in meeting
these challenges. For example, officials in four of the six states whose
programs we examined had developed and implemented their own measures to
address their own priorities. At the same time, program officials in each of
the six states also agreed to report information required for the national
Performance Measures agreed upon between the Environmental Council of the
States and EPA. In addition, while they maintained that further refinement
will still be needed, EPA and state officials agreed on a set of fiscal year
2000 measures that, by most accounts, is a substantial improvement over
those measures negotiated from previous years in that they are fewer in
number (i.e., better targeted to address key goals) and generally more
outcome-oriented.

Reductions in Oversight Attributable to NEPPS Have Thus Far Been Modest

Instances of greater state flexibility and reduced EPA oversight tended to
focus on reducing the frequency of reporting and, in some cases, the
frequency of on-site reviews. Maine environmental officials, for example,
noted that more frequent, and less formal, dialogue between the program
staff and regional staff had replaced written reports, saving time and
improving the level of cooperation between EPA and state staff. While Maine
program officials attributed the reductions in part to the assignment by
EPA's Boston regional office of a liaison for each state's delegated
programs, they credited NEPPS with formalizing or legitimizing the changes.
Likewise, Florida program officials identified sizable reporting reductions
in its waste program as a result of a joint effort with EPA included in the
Partnership Agreement. Other instances were cited by officials in Georgia
and Minnesota.

Aside from such individual instances of streamlining reporting requirements
and similar tracking efforts, the large majority of the state officials we
contacted generally maintained that participation in NEPPS had not yet
brought about significant reductions in reporting and other oversight
activities by EPA staff, nor had it resulted in significant opportunities
for them to focus on other priorities or to shift resources to weaker
program areas. EPA officials generally acknowledged this point, but they
provided specific reasons why the agency's oversight of state programs has
not significantly decreased as a result of NEPPS--and in some cases has
actually increased. In this connection, we noted that environmental statutes
or regulations sometimes prescribe the level of oversight required of EPA
which, according to some headquarters and regional officials, leaves the
agency with little room to scale it back. These officials also pointed to
(1) audits that identified problems in some states' enforcement programs
(such as the underreporting by states of significant violations and
precipitous decreases in the number of state enforcement actions taken),
which they believed called for greater oversight, and (2) the difficulty in
scaling back oversight without measurable assurances that the states'
programs experimenting with alternative compliance strategies are achieving
their desired results.

At the same time, EPA officials cited a number of barriers preventing
greater state flexibility that could be more readily addressed. For example,
senior EPA officials in three of the four regional offices that we visited
acknowledged that support for NEPPS within EPA varies. One senior regional
official explained that many regional managers and staff are often more
comfortable with pre-existing ways of doing business and are unsure as to
how they can accomplish their work in the context of the partnership
approach under NEPPS. He voiced the opinion that there may be a need for
training EPA regional staff in NEPPS implementation. Another senior regional
official said that some agency staff will only take NEPPS seriously when
EPA's reward system is more closely tied to their performance in
implementing the program. Headquarters officials also acknowledged another
problem cited by many of the state officials we contacted-that headquarters
guidance, initiatives, and special requests sometimes arrived at the regions
too late to be used effectively in regional-state Partnership Agreement
negotiations, and that they were working to address the problem.

Benefits of NEPPS Participation Cited, But Full Potential Has Yet to be
Realized

Senior officials and program managers from each of the six states in our
review agreed that NEPPS has provided their programs with worthwhile
benefits, and that its potential for achieving a more effective partnership
between EPA and the states was still worth pursuing. Among the examples
cited were instances in which Partnership Agreements were used to more
efficiently divide a heavy workload between regional and state staff, and in
which states were able to take at least limited advantage of the flexibility
in their Partnership Grant agreements to shift resources among their media
programs. Overall, however, the most frequently cited benefit among both
state and EPA regional participants was that the two-way negotiation process
inherent in NEPPS has fostered more frequent and effective communication
between regional and state participants and improved their overall working
relationship.

At the same time, state officials almost unanimously expressed the view that
the benefits from their investment of time and resources into NEPPS should
be greater; that it has yet to achieve its potential; and that improvements
are needed. Of particular note, almost all of the state officials we
interviewed cited progress in achieving reduced oversight and greater
autonomy as critical to the future success of NEPPS. They also cited the
need to continue improving performance measures; address the barriers
impeding greater acceptance of NEPPS among staff within both EPA and state
agencies; determine how to make greater use of the flexibility under
Partnership Grants to shift resources and funding to address higher
priorities; and improve how EPA's headquarters offices provide their input
into state-regional NEPPS negotiations.

These concerns pose challenges for the future of NEPPS-challenges that were
anticipated by the 1995 Agreement that launched the program which called for
a joint evaluation system for EPA and the states to review the results of
their efforts to ensure continuous improvement. On the basis of the
information that can be gleaned from the experiences to date of
participating states and regional offices, we concluded that it was now
appropriate to undertake such a joint evaluation process. We recommended
that EPA work with senior-level state officials to initiate a joint
evaluation process that (1) seeks agreement on the key issues impeding
progress in developing a more effective National Environmental Performance
Partnership System and (2) develops mutually agreeable remedies for these
issues. Among the issues we suggested that such a process could focus on
were the following:

   * Developing a set of flexible guidelines, to be used as a tool by state
     and EPA regional NEPPS negotiators, that could help to clarify the
     appropriate performance expectations and other conditions that states
     must meet to achieve reduced oversight in carrying out their
     environmental programs, and the type of reduced oversight (e.g.,
     reduced frequency of reporting, greater autonomy in setting program
     priorities) that could be achieved.
   * Identifying what additional work is needed to improve the national Core
     Performance Measures recently negotiated by EPA and state
     representatives for fiscal year 2000.
   * Alleviating the resistance among some staff (both within EPA offices
     and among participating state agencies) toward implementing NEPPS
     through training efforts and other strategies.
   * Determining what appropriate steps should be taken by EPA and the
     states to allow for greater use by states of the flexibility envisioned
     under the Performance Partnership Grant system to shift resources and
     funding among their media programs.
   * Determining how effective public participation in the NEPPS process can
     best be ensured.
   * Developing ways to improve communication among EPA's headquarters and
     regional offices and participating states to ensure that states are
     given clear and timely information on whether key elements of their
     NEPPS-related agreements have the full buy-in of key EPA offices.

In response to this recommendation, EPA pointed out that in March 1999, EPA
and the Environmental Council of the States agreed in principle to conduct
such a joint evaluation and that it would review many of the issues cited in
our recommendation. Since that time, however, progress has been limited.
According to an official with the agency's Office of State and Local
Relations, EPA and the Council have yet to agree on such basic issues as who
should undertake the evaluation and what its scope should be. Furthermore,
it is unclear when final resolution will be reached. Our findings suggest
that future support for this program will depend heavily on the timely
resolution of many of the barriers that have thus far impeded its
effectiveness. Therefore, we believe timely efforts by EPA and the Council
to identify what specific issues are to be addressed, and to identify a
timetable for addressing them, would be important steps in expanding both
the participation in, and effectiveness of, this important program.

This concludes my prepared statement, Mr. Chairman. I would be pleased to
address any questions that you or other Members of the Committee may have.

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