Drinking Water: Spending Constraints Could Affect States' Ability to Meet
Increasing Program Requirements (Testimony, 09/19/2000,
GAO/T-RCED-00-298).
Pursuant to a congressional request, GAO discussed the states' roles in
implementing the Safe Drinking Water Act, focusing on: (1) how the
Environmental Protection Agency's (EPA) budget requests for state
program implementation compared to the amounts that are authorized and
estimated to be needed; (2) how much the states have spent since the
passage of the 1996 amendments to implement their drinking water
programs and how their expenditures compare with estimated needs; (3)
what effects federal funding levels have had, and could have in the
future, on the states' ability to implement their programs; and (4) what
existing practices have the potential to help the states implement their
drinking water programs more effectively and efficiently.
GAO noted that: (1) in its budget requests for fiscal years (FY) 1998
through 2000, EPA requested about 94 percent of the $100 million
authorized annually for supervision grants; (2) for the same fiscal
years, EPA requested, on average, 80 percent of the amounts authorized
to capitalize the states' revolving funds for drinking water; (3) if the
states had made maximum use of the set-asides by reserving the full 31
percent available from the revolving fund, EPA's requested
appropriations would have provided a total of $308 million in FY 1999
and $318 million for FY 2000 to help the states meet their
responsibilities in implementing their drinking water programs; (4)
according to GAO's nationwide survey of state drinking water agencies,
for FY 1997 through FY 1999, the states' actual expenditures for
implementing their drinking water programs were $214 million, $237
million, and $276 million, respectively; (5) in FY 1999, total state
expenditures fell short of the Association of State Drinking Water
Administrators' estimate of the amount needed for program implementation
by about 20 percent; (6) according to GAO's nationwide survey, the
amounts of federal funding available for FY 1997 through FY 1999 had
less of an impact on the states' ability to implement their drinking
water programs than did the effects of state-imposed spending
constraints; (7) over 75 percent of the states reported that their
staffing levels in FY 1999 were inadequate to meet the act's
requirements in effect through that year; (8) the most frequently cited
reasons were: (a) the states' authorized staffing and authorized funding
levels were too low; (b) hiring freezes prevented the states from
filling authorized positions; and (c) inadequate state salaries made it
difficult to attract and retain qualified staff; (9) GAO's discussions
with drinking water officials from eight states disclosed that they have
been able to meet most requirements in effect through FY 1999, generally
by scaling back technical assistance and other oversight activities or
doing the minimum amount of work required; (10) program officials in the
eight states GAO contacted cited some management practices that could
increase the efficiency of program implementation; (11) EPA officials
pointed to new program requirements that may increase efficiency,
including those designed to assess water sources for contamination and
improve the financial, technical, and managerial ability of local water
systems to comply with drinking water regulations; and (12) however, it
could take years to realize the benefits of these programs.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: T-RCED-00-298
TITLE: Drinking Water: Spending Constraints Could Affect States'
Ability to Meet Increasing Program Requirements
DATE: 09/19/2000
SUBJECT: State-administered programs
Federal/state relations
Water quality
Potable water
Revolving funds
Grants to states
Water treatment
Water pollution control
Environmental policies
Cost sharing (finance)
IDENTIFIER: Drinking Water State Revolving Fund
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GAO/T-RCED-00-298
DRINKING WATER Spending Constraints Could Affect States' Ability to Meet
Increasing Program Requirements Statement of Peter F. Guerrero, Director,
Environmental Protection Issues Resources, Community, and Economic
Development Division
United States General Accounting Office
GAO Testimony Before the Subcommittee on Health and Environment,
Committee on Commerce, House of Representatives
For Release on Delivery Expected at 10 a. m. EDT Tuesday September 19, 2000
GAO/ T- RCED- 00- 298
1
Mr. Chairman and Members of the Committee: We are here today to discuss our
report entitled, Drinking Water: Spending Constraints Could Affect States'
Ability to Implement Increasing Program Requirements, which you are
releasing today. 1 Ensuring an adequate supply of safe drinking water
requires investing not only in the physical infrastructure, such as water
treatment and distribution systems, but also in essential oversight
activities performed by the states, such as training water system operators
and monitoring water systems' compliance with the drinking water standards
promulgated by the Environmental Protection Agency (EPA). Under the Safe
Drinking Water Act Amendments of 1996, the states are responsible for
implementing a number of new requirements, such as ensuring that the
nation's thousands of drinking water systems have the financial, managerial,
and technical ability to comply with regulations and assessing the
vulnerability of drinking water sources to contamination. In addition, the
states must oversee their water systems' compliance with complex new
regulations on specific contaminants.
In recognition of the key role that the states play in implementing the
requirements of the Safe Drinking Water Act, you asked us to provide
information on
� how EPA's budget requests for state program implementation compare to the
amounts that are authorized and estimated to be needed;
� how much the states have spent since the passage of the 1996 amendments to
implement their drinking water programs and how their expenditures compare
with estimated needs;
� what effects federal funding levels have had, and could have in the
future, on the states' ability to implement their programs; and
1 See GAO/ RCED- 00- 199, Aug. 31, 2000.
2
� what existing practices have the potential to help the states implement
their drinking water programs more effectively and efficiently.
To understand these issues in context, Mr. Chairman, it is necessary to
provide a brief summary of the funding available for implementing the
states' drinking water programs. In the 1996 amendments, the Congress
substantially increased the amount of funding authorized to help the states
meet their responsibilities. First, the amendments authorized an increase in
the funding for Public Water System Supervision grants from $70 million to
$100 million annually through fiscal year 2003. The states use these
supervision grants for a variety of activities related to implementing their
drinking water programs, such as providing technical assistance to local
water systems, conducting inspections, and overseeing the water systems'
compliance with requirements for testing and treating water quality. Second,
the amendments authorized $9.6 billion, to be appropriated through 2003, to
establish the Drinking Water State Revolving Fund primarily for financing
infrastructure improvements at local water systems. In its annual budgets,
EPA requests appropriations to capitalize the states' funds and,
subsequently, makes specific allotments to each state for that purpose. The
states, in turn, loan these funds to their local water systems. As loans are
repaid, the states' funds are replenished, and the states can make loans for
other eligible drinking water projects. While the state revolving funds are
primarily directed at financing local infrastructure, each state, at its
option, may reserve or “set aside” up to 31 percent of its
annual allotment to supplement the supervision grant and, thus, help the
state meet its responsibilities in implementing its program. The states must
match a portion of both the supervision grants and the moneys they set aside
from their revolving funds.
Despite the significant increases in the amount of funding Congress has
authorized to help states implement their programs, representatives of state
drinking water programs have expressed concerns about whether they have
sufficient resources to fulfill their responsibilities under the Safe
Drinking Water Act. Although EPA does not routinely estimate the states'
resource needs for implementing the act's requirements, the Association of
State Drinking Water Administrators (ASDWA) has periodically developed such
estimates with EPA's support and participation. According to ASDWA's most
recent estimate, which incorporated the requirements of the 1996 amendments,
the states' collective needs range from $345 million in fiscal year 1999 to
$449 million in fiscal 2005.
3
In response to the questions you asked, Mr. Chairman, we found the
following:
� In its budget requests for fiscal years 1998 through 2000, EPA requested
about 94 percent of the $100 million authorized annually for supervision
grants. For the same fiscal years, EPA requested, on average, 80 percent of
the amounts authorized to capitalize the states' revolving funds for
drinking water. If the states had made maximum use of the setasides by
reserving the full 31 percent available from the revolving fund, EPA's
requested appropriations would have provided a total of $308 million in
fiscal year 1999 and $318 million in fiscal year 2000 to help the states
meet their responsibilities in implementing their drinking water programs.
These amounts, when combined with required matching funds from the states,
would have exceeded ASDWA's estimates of the states' needs.
� Despite the fact that the funds potentially available to the states exceed
the estimated needs, actual state spending fell short of what was needed.
According to our nationwide survey of state drinking water agencies, for
fiscal years 1997 through 1999, the states' actual expenditures for
implementing their drinking water programs- including expenditures of both
federal and state funds- were $214 million, $237 million, and $276 million,
respectively. In fiscal year 1999- the only year for which our data permit
such a comparison- total state expenditures fell short of ASDWA's estimate
of the amount needed for program implementation by about 20 percent.
� However, according to our nationwide survey, the amounts of federal
funding available for fiscal years 1997 through 1999 had less of an impact
on the states' ability to implement their drinking water programs than did
the effects of state- imposed spending constraints. Over 75 percent of the
states reported that their staffing levels in fiscal year 1999 were
inadequate to meet the act's requirements in effect through that year. The
most frequently cited reasons were (1) the states' authorized staffing and
authorized funding levels were too low, (2) hiring freezes prevented the
states from filling authorized positions, and (3) inadequate state salaries
made it difficult to attract and retain qualified staff. In addition, about
40 percent of these respondents indicated a reluctance to use revolving fund
set- asides to address inadequate staffing levels, citing, among other
things, concerns about diverting funds from infrastructure projects. Our
discussions with drinking water officials from eight states disclosed that
they have been
4
able to meet most requirements in effect through fiscal year 1999, generally
by scaling back technical assistance and other oversight activities or doing
the minimum amount of work required. According to these officials, if this
situation continues, it could eventually lead to more compliance problems,
especially among small water systems, which make up the overwhelming
majority of water systems. Over 90 percent of the states in our nationwide
survey predicted that their staffing levels would be less than adequate in
the future as a number of new program requirements and complex contaminant
regulations take effect.
� Program officials in the eight states we contacted cited some management
practices that could increase the efficiency of program implementation. For
example, some states are taking advantage of the expertise in other state
and federal agencies or associations. EPA officials pointed to new program
requirements that may increase efficiency, including those designed to
assess water sources for contamination and improve the financial, technical,
and managerial ability of local water systems to comply with drinking water
regulations. However, it could take years to realize the benefits of these
programs.
Background
The Safe Drinking Water Act of 1974 authorized EPA to give the primary
responsibility for enforcing requirements of EPA's safe drinking water
program- commonly referred to as “primacy”- to the states that
meet certain requirements. Among the key requirements are that the states
(1) adopt drinking water regulations that are no less stringent than EPA's
national primary drinking water regulations and (2) adopt and implement
adequate procedures to carry out the program's requirements and enforce the
regulations. All states, except Wyoming, have assumed primacy for managing
their drinking water programs. To assist the states in developing and
implementing their own drinking water programs, the 1974 act authorized EPA
to award them program supervision grants and provided that the federal funds
would comprise not more than 75 percent of the cost of implementing state
programs.
5
In addition to increasing the authorized funding for the supervision grants,
the 1996 amendments authorized $9.6 billion through fiscal year 2003 to
establish the Drinking Water State Revolving Fund for infrastructure
improvements at local water systems. To give the states more flexibility in
operating their drinking water programs, the Congress gave the states the
option of setting aside up to 31 percent of their annual revolving fund
allotments for certain designated activities, most of which are related to
program implementation. For example, the states may set aside funds for:
supervision of public water systems; technical assistance through programs
designed to protect sources of drinking water; strategies to help ensure the
financial, technical, and managerial capacity of water systems to provide
safe drinking water; and programs to certify water system operators.
The 1996 amendments also gave the states a number of new responsibilities.
For example, the amendments established new programs for assessing the
vulnerability of drinking water sources to contamination and ensuring the
technical, financial, and managerial viability of water systems. As these
new programs are being implemented, states will also be overseeing the water
systems' compliance with complex new regulations on such contaminants as
arsenic and radon.
The Funds Potentially Available to the States Have Been Sufficient to Cover
Their Estimated Needs
For fiscal years 1998 through 2000, on average, EPA requested, as part of
the President's budget, about 94 percent of the funding authorized for
supervision grants in the Safe Drinking Water Act Amendments of 1996 and 80
percent of the funding authorized for the revolving fund, from which the
set- asides are available. During this period, EPA's requests for the
supervision grants remained constant at about $85 million while its requests
for the revolving fund allotments increased, making more funds available for
set- asides each year, from $212 million in fiscal year 1998 to $233 million
in fiscal year 2000. (During this period, EPA received the amount it
requested for both the supervision grants and the revolving fund, except for
fiscal year 2000 when the appropriation for the revolving fund was $5
million less than the request.)
6
According to ASDWA, the total estimated needs for implementing the states'
programs in fiscal years 1999 and 2000 are $345 million and $339 million,
respectively. The amounts EPA requested for those years would have been more
than enough to meet the states' annual needs as estimated by ASDWA if
� the states took full advantage of the available set- asides- that is, if
each state set aside the maximum 31 percent for state implementation
activities and provided the required matching funds- and
� the supervision grants and minimum required match were included in the
total. The funds potentially available to the states would have exceeded
their estimated needs for fiscal years 1999 and 2000 by about $27 million
and $44 million, respectively.
The States' Overall Spending Has Fallen Short of Their Estimated Needs
According to the results of our nationwide survey, for fiscal years 1997
through 1999, the states' actual expenditures for implementing their
drinking water programs- including expenditures of both federal and state
funds- were $214 million, $237 million, and $276 million, respectively. We
found that the states are contributing a significant share of the funding
for their programs and are contributing more funding than the minimum
required to meet the statutory matching provisions. Over the 3- year period,
state funds were the source of 53 percent, on average, of the states' total
expenditures for implementing their drinking water programs.
Although they have contributed more funds than required by the federal
matching provisions, according to the data on state expenditures obtained in
our survey, the states collectively may be spending less than ASDWA's
estimates of the amounts needed nationwide. For example, in fiscal year
1999- the only year for which our data permit a direct comparison- the
states' collective expenditures, including funds from both state and federal
sources, were about 80 percent of the amount estimated to be needed for
program implementation. 2 If recent trends continue over the next several
years- that is, if EPA's
2 We collected data on how much the states spent to implement their drinking
water programs for fiscal years 1997 through 1999 only; ASDWA estimated the
amount of funding states would need to implement their programs for fiscal
years 1999 through 2005 only.
7
appropriations for supervision grants and the state revolving fund remain at
about their existing levels relative to the amounts authorized and states
collectively continue to make use of only about half of the available set-
asides- then the gap between the amounts expended and estimated to be needed
could grow larger. ASDWA estimates that by fiscal year 2005 the states will
need $449 million to implement their drinking water programs, an increase of
about 30 percent from fiscal year 1999. Table 1 shows the projected resource
needs for implementing the states' oversight programs, by year, from fiscal
years 1999 through 2005.
Table 1: Resource Needs for Implementing the States' Drinking Water
Programs, Fiscal Years 1999 Through 2005
Dollars in millions
Fiscal year Full- time equivalent staff Funding
1999 4,911 $345 2000 5,020 339 2001 5,190 362 2002 5,208 374 2003 5,588 414
2004 5,755 439 2005 5,252 $449
Note: The estimates do not include Wyoming or the District of Columbia. In
addition, we adjusted ASDWA's estimates to exclude Puerto Rico, the U. S.
Virgin Islands, American Samoa, Guam, and the Commonwealth of the Northern
Mariana Islands.
Source: GAO's presentation of data from ASDWA.
Factors Other Than Federal Funding Levels Affect Most States' Ability to
Implement Their Programs
According to our nationwide survey and more detailed discussions with
drinking water officials in eight states, for fiscal years 1997 through
1999, factors other than federal funding levels affected the states' ability
to implement their drinking water programs. These factors include both
state- imposed spending constraints and concerns about using funds from the
revolving fund for program implementation instead of infrastructure
projects. Despite these factors, program officials from all eight states we
contacted told us they were able to meet most program requirements in effect
through fiscal year 1999, largely by scaling back their programs and doing
the minimum amount of work required. For example, four states told
8
us that they have reduced the frequency with which they conduct
comprehensive inspections of water systems, called sanitary surveys.
Officials from seven of the eight states indicated that over the next 5
years, increasing program responsibilities could exacerbate the effects that
the states have experienced thus far.
Factors Contributing to Inadequate Staffing Levels in State Drinking Water
Programs In responding to our nationwide survey, 76 percent of the states
reported that their current staffing level is less than adequate or much
less than adequate to implement their drinking water programs. Among these
states, the most frequently cited reasons for not having an adequate
staffing level were inadequate authorized state staffing levels (76
percent), inadequate authorized state funding levels (60 percent), state-
imposed hiring freezes that prevent drinking water program offices from
filling authorized positions (41 percent), and inadequate state salary
structures that make it difficult to attract and retain qualified staff (49
percent).
According to program officials from the eight states we contacted, state
legislatures generally authorize the number of staff that state drinking
water programs can hire and/ or the amount of state funding the programs can
receive. This can create situations in which some states have adequate
authorized staffing levels to carry out program responsibilities but not
enough funding to hire all of the authorized staff. Other states may have
adequate funding but cannot hire anyone because they have inadequate
authorized staffing levels or because there is a hiring freeze.
Five of the eight states that we looked at in- depth were experiencing
problems as a result of these circumstances. For example:
� Program officials from Maine commented that even if they did receive
additional federal funds, they would not be able to hire new permanent staff
unless the authorized state staffing level is increased.
9
� A program official from Indiana said that the authorized state funding
level is only enough to meet the minimum match required to obtain federal
funds and estimated that the state needs to increase its total resource
level by at least 50 percent.
Program officials from two of the states that we contacted attributed
inadequate staffing levels in their programs in part to an inability to pay
staff competitive salaries, which makes it difficult to attract and retain
qualified staff. Arkansas' program had several vacancies as a result of this
problem.
In addition to state- imposed spending constraints, our nationwide survey
found that over 40 percent of the states that reported inadequate staffing
levels attributed this situation to factors that can limit the states' use
of the revolving fund set- asides to help implement their drinking water
programs. 3 These factors included concerns about using the revolving fund
to implement drinking water programs instead of using the money to fund
infrastructure projects (41 percent) and uncertainty about the continued
availability of the set- aside money from this fund after its authorization
expires (43 percent). In addition, about 30 percent of the states reporting
inadequate staffing levels said that an insufficient level of funding for
the supervision grants was a contributing factor.
Regarding the adequacy of the funding for the supervision grants, program
officials from four of the eight states we contacted said that an increase
in this funding might prompt their legislatures to approve additional state
funding since a small increase in state funding could be used to match a
larger amount of federal dollars. Program officials from both Ohio and Utah
commented that increasing the supervision grants would mean that the states
would not be forced to make a choice between program implementation and
infrastructure construction.
Current and Future Impact of Inadequate Staffing on the States' Ability to
Implement Their Programs
3 During fiscal years 1997 and 1998, the only years for which complete set-
aside information is available, only 11 and 8 states, respectively, used the
full 31 percent set- aside allowed by law. Collectively, the states reserved
about two- thirds of the available set- asides in fiscal year 1997 and took
less than half of the amounts available in fiscal year 1998.
10
Although program officials in all of the eight states we contacted maintain
that they have been able to meet most of the program requirements in effect
through fiscal year 1999, they have done so by (1) scaling back their
programs, (2) doing the minimum amount of work required, and (3) setting
formal or informal priorities among their responsibilities. For example, six
of the eight states said they have had to scale back their programs by
providing less technical assistance to water systems, particularly small
water systems, which make up the overwhelming majority of all public water
systems. In addition, six of the eight states currently engage in some form
of priority setting using such criteria as the size of the water system, the
size of the population at risk, the potential health effects of a violation,
and whether or not the state could lose federal funding if it did not
perform an activity.
Ninety- four percent of the states in our nationwide survey predicted that
their staffing levels would be less than adequate or much less than adequate
as new program requirements and complex contaminant regulations take effect
over the next 5 years. Similarly, officials from seven of the eight states
we contacted indicated that the state- imposed constraints that currently
affect their ability to implement their programs- such as inadequate state
staffing and funding levels, hiring freezes, and inadequate state salary
levels- will continue to compromise their programs if not addressed. In
light of ASDWA's estimate that the states' resource needs will increase by
about 30 percent between fiscal years 1999 and 2005, the effects experienced
thus far could be exacerbated in the future.
The extent to which future spending constraints will affect the states'
drinking water programs is unclear because the details of certain
regulations, and hence the resulting workload on their programs, are
unclear. For example, an Ohio official pointed out that the cost of
implementing the arsenic regulation depends on where EPA sets the standard
for this contaminant. This official said that 225 public water systems in
Ohio would be affected by this regulation if the arsenic standard were set
at 10 milligrams per liter while 500 systems would be affected if the
standard were set at 5 milligrams per liter.
Management Practices and New Requirements Could Enhance the Effectiveness
and the Efficiency of the States' Drinking Water Programs
11
Beyond adding more funding, one potential solution to the states' increasing
responsibilities under the Safe Drinking Water Act is the adoption of
management practices that improve efficiency or otherwise enhance the
states' ability to implement their programs. Officials in the eight states
we contacted cited efforts to improve program efficiency by adopting such
new management practices as taking advantage of the expertise in other state
and federal agencies or associations through contracts, interagency
agreements, and partnerships. Also, the EPA officials we interviewed
emphasized that new requirements to assess drinking water sources and
improve water systems' ability to comply with drinking water regulations,
mandated in the 1996 amendments, would likely increase the efficiency of
state programs over the long term. Although these new requirements would
necessitate substantial resource investments in the short term, according to
EPA officials, they will eventually improve both the efficiency and
effectiveness of the states' programs.
Agency Comments on Our Report
We provided EPA with a draft of our report for its review and comment. EPA
officials generally agreed with the information presented in the draft
report; however, they expressed concerns in two areas. First, the officials
said that the draft report did not sufficiently emphasize the impact of the
increasing program requirements on the states' future resource needs. We
made several changes to highlight material already in the report concerning
the impact of potential state resource shortfalls on their future program
implementation. Second, the EPA officials noted that our comparison of the
funds potentially available to the states with the needs estimated by ASDWA
could be misleading because, as our draft report indicated, most states (1)
do not take the maximum amount allowed for the revolving fund set- asides
and (2) actually have contributed much more than the minimum amounts
required for matching the EPA- provided funds. We clarified our presentation
of this comparison.
---- In summary, Mr. Chairman, the amounts of federal funds potentially
available to the states during the last few years appears to have been
adequate for meeting their estimated collective needs to date. However, a
number of factors may impair the future ability of the states to meet the
requirements of the Safe Drinking Water Amendments of 1996. Most
12
important among these are the spending constraints at the state level,
resulting in staffing shortfalls, and an understandable reluctance to divert
revolving fund resources from needed infrastructure improvements at local
water systems. While the eight states we contacted have been able to meet
statutory program requirements in effect through fiscal year 1999, they have
done so only by scaling back their programs and doing the minimum amount of
work necessary. As the states' resource needs increase along with the growth
in their responsibilities, it will become imperative to address the factors
that have thus far affected the states' ability to implement their programs.
This concludes my prepared statement. I would be pleased to answer any
questions you or Members of the Committee may have.
Contact and Acknowledgement For future contacts regarding this testimony,
please contact Peter F. Guerrero at (202) 512- 6111. Individuals making key
contributions to this testimony included Ellen Crocker, Terri Dee, Carolyn
Hall, and Lisa Pittelkau.
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