for Environmental and Natural Resource Programs

Background

Recent reports by the Comptroller of Public Accounts and the State Auditor's Office point out that, on a national average per capita basis, Texas' share of all federal grants is underfunded by a total of $2.4 billion each year.[1] The environmental and natural resource programs portion of this underfunding amounted to approximately $96 million for fiscal year 1989. Table 1 provides a list of the grants making up this total and shows that $70.6 million of the underfunding is due to formula grants. The underfunding is due, in part, to various inequities in the authorizing federal legislation or in its implementation by the responsible federal agency. Specifically, much of the underfunding in Texas is caused by federal formulas tied to outdated and undercounted federal census figures. Those grants that are based on formulas are marked in Table 1. A recent report by the Central Office of Federal Funds Management provides more information on the reasons for Texas' poor record of obtaining federal funds.[2]

The total fiscal year 1991 state budget from all funding sources for environmental and natural resource programs was $420 million. For fiscal year 1990, environmental and natural resource programs had total federal grant expenditures of $111.7 million, or about 31 percent of total expenditures. By obtaining only 20 percent of the $96 million underfunding, or $19.2 million, Texas would gain a significant increase in the funding for these programs. Increasing the amount of federal funding is important because Texas is a relatively poor state. Although ranking third in total personal income for 1988, the state was 34th in per capita income.[3]

Since Texas ranks 50th among the states in per capita spending on natural resource and environmental programs, additional federal funds are needed to stretch our state dollars in order to protect our natural resources and environment.[4]

Much of the efforts to obtain federal funds is left to individual agencies. Comptroller and State Auditor reports contained the following recommendations for agencies to improve their ability to obtain additional federal funds:[5]

* A statewide approach is needed, including improved monitoring of federal grants. Major agencies should develop a centralized approach and work with the state's central grant agencies to provide information that could correct federal laws and regulations unfair to Texas.

* Learn what makes other states more successful than Texas. Use a case management approach, including improved grant writing techniques. Case management involves a detailed study of an individual grant's objectives, eligibility requirements, formula or matching requirements, etc., in relation to the needs and priorities of the state.

* Accountability should be increased through the use of early warning grant information and grant tracking mechanisms. State leaders should be furnished with regular reports outlining the estimated impact of federal budgets. Federal dollars should be tracked from announcement by the federal government to expenditure by state agencies.

* More cooperation between agencies is needed to maximize the use and amount of federal money.

Separate surveys conducted during the 72nd Legislative session by the Comptroller and House of Representatives indicate some progress by the environmental and natural resource agencies in response to Comptroller's and State Auditor's recommendations. Some form of centralized grant administration has been established within most of the larger agencies. Upgrading of grant writing expertise through employment of experienced personnel, training and sharing of expertise has begun. More agencies are using the services provided by the Central Office of Federal Funds Management and the Office of State Federal Relations.

The Air Control Board suggested the creation of a professional association of public grant writers, similar to the Texas Association of Public Purchasers. An association of state agency grant specialists could help improve grant writing expertise through training offered to all agencies.

Insert Table 1

Federal Funding for Natural Resources

However, the surveys also indicated that some federal funds management problems persist within the environmental and natural resource agencies. There is a lack of formal interagency cooperation to obtain grants, and while some agencies have established a central grant coordinator, identification and pursuit of federal grants is still left up to individual program managers. The survey responses also indicated some confusion surrounding the federal grant process. For example, there appeared to be a lack of understanding that normal agency expenditures may in some cases provide grant matching funds, without a separate appropriation. The agencies indicated that help is needed to access information on grants and to obtain training on winning project grants.

Federal Funding. The New Federalism policies are reducing the availability of federal funding, and at the same time mandating more spending by state and local governments. Examples of major effects on natural resource and environmental programs are: grants for construction and improvement of municipal wastewater treatment facilities are being phased out, with the federal government planning to end its participation in 1995. A state revolving loan program has replaced direct construction grants, but the effect places the burden directly at the local level. Costs of the federal nonpoint source and toxic pollutants control programs, which are required by the 1987 Clean Water Act, must be funded by the states. The national sludge management program may require more state funding. The Resource Conservation and Recovery Act places the costs of improving solid waste disposal facilities (including municipal landfills) directly on states and local governments.[6]

Decreases in the amount of federal funds results in more competition among the states. Therefore, Texas has an even greater incentive to improve the processes for obtaining federal grants.

The following paragraphs provide examples of three grants which would help fund areas of high priority. The first two grants are examples of the need for planning efforts among agencies. The third grant, Coastal Zone Management Program Administration, is an example of apparently successful interagency cooperation to obtain federal funding.

Wastewater Treatment. Texas funding for the federal Construction Grants for Wastewater Treatment Works program had the largest shortfall among natural resource and environmental programs, estimated at $85 million for fiscal year 1988, and $42.9 million for fiscal year 1989.[7]

This program and other funding sources for wastewater treatment will become more important as evolving federal water quality standards increase the demand to upgrade sewage treatment facilities. Texas' Colonias provide the most extreme example of this funding need and the need for formal interagency planning.

A recent U.S. General Accounting Office report defines Colonias as rural unincorporated subdivisions along the U.S.-Mexican border which have, among other poverty conditions, substandard or no water and sewer facilities. As Table 2 illustrates, the Colonias present a significant health and water quality problem for Texas. Because of certain state law exemptions for subdivisions, Texas may not be able to control the growth of Colonias and thereby limit associated health and pollution problems.

Table 2

The Colonias Problem

States Number of Colonias Number of Colonias with Colonias with

Residents Colonias Water Systems Sewer Systems

Texas 197,833 842 503 3

New Mexico 14,600 15 12 1

Arizona State and local officials believe that there is no significant colonia problem,

primarily due to subdivision regulations requiring adequate water and sewer

facilities.

California According to state officials, very strict rural subdivision regulations and rural

zoning and planning ordinances have prevented creation of colonias.

Source: U.S. General Accounting Office, "Rural Development: Problems and Progress of Colonia

Subdivisions Near Mexico Border," November 1990.

Formal interagency cooperation can improve these conditions, including the use of federal funding sources. But the state agencies most involved in solving wastewater treatment problems have not established a formal means to jointly identify needs, plans and priorities. The agencies and their roles vary widely:

* For example, the Water Development Board administers the state's major program for wastewater treatment facility construction, planning, and funding. The Board administers the Water Development Fund, Water Assistance Fund and the state revolving loan fund. As part of available funding, the Board will make grants and loans from $100 million in general revenue bonds earmarked for the Colonias.

* In fiscal years 1989, 1988 and 1987 local grantees of the Texas Department of Commerce spent $29.9 million, $25.2 million and $24.5 million, respectively, for water and sewer projects from the Department's federal Community Development Block Grant. These grants are allocated to the state's 24 regional councils of government based on population and other factors. The Department has listed water and sewer projects as one of its highest priorities under the Community Development Program.

* The Water Commission is responsible for state water quality, including permitting community wastewater treatment facilities. The Commission regulates water and sewer utilities, and reviews plans and specifications of proposed water and wastewater projects.

* The Health Department has responsibility for the quality of the state's drinking water and also inspects and permits on-site wastewater treatment facilities.

* The U.S. Department of Agriculture's Water and Waste Disposal Systems for Rural Communities is another program which can contribute funding for wastewater treatment solutions.

Senior Environmental Employment. Texas has not taken advantage of the Senior Environmental Employment Program. Total nationwide federal grant funds for fiscal year 1991 are estimated at $14 million for this program. Even small programs, such as this one, could make a difference to our state's environmental programs. The Program uses the talents of older Americans (age 55 and older) to provide technical assistance to federal, state and local environmental agencies for pollution prevention, abatement and control projects. The program requires a minimum of five percent cost sharing. Depending on need and other factors, Texas could receive funding from $50,000 to $500,000. Cooperation between the Texas Department of Aging and the state's environmental agencies could result in obtaining funds under this grant.

Coastal Zone Management. Development of a coastal zone management plan is a high priority for the state. Federal Coastal Zone Management Program Administration grants would provide funding for a portion of this planning effort. Based on federal funding levels of other Gulf Coast states, it is likely that federal funding approaching $2 million annually would be available to help pay Texas' planning costs.

The Coastal Zone Management Act of 1972 defines federal policy concerning our national coastlines, ranging from redevelopment of deteriorating urban waterfronts to protecting fragile natural resources. The coastal zone is defined as coastal waters (and underwater lands) extending to the outer limit of U.S. territorial sea, islands, transitional and intertidal areas, salt marshes, wetlands and beaches.[8]

Texas is the only Gulf Coast state without a federally approved and financed Coastal Zone Management Plan. Texas has the largest undeveloped coastal acreage in the nation. Projections indicate that by the year 2000, more than 5.3 million persons will live in the first tier of counties along the coast.[9] The development of a plan is essential to address the conflicting concerns of protecting our coastal ecosystems, while at the same time providing for reasonable economic development and growth. The Texas coastline is one of the state's most environmentally vulnerable areas.

All of the other Gulf Coast states, Florida, Alabama, Mississippi and Louisiana participate in the program. The fiscal year 1990 federal funding for these states was $2,014,000; $593,000; $539,000; and $2,014,000, respectively.[10]

The General Land Office has begun work on this planning effort, publishing the Texas Coastal Management Plan in January 1991. The plan addresses coastal erosion, beach access, and wetland loss. It was prepared, at the request of the 71st Legislature, with the aid of a broad range of coastal interests, local governments and other state agencies. The General Land Office believes their efforts will result in Texas receiving federal funding under the Coastal Zone Management Program.

Recommended Policy

Many of the causes of low federal funding must be resolved in Washington by the Texas congressional delegation, working in concert with state officials. Changes at the state level are also needed, such as improvements to the budget process and consolidation of the Central Office of Federal Funds Management and Office of State-Federal Relations (discussed elsewhere in this report).

These recommendations and others, including those discussed below, incorporate some recommendations made earlier in reports by the State Comptroller, State Auditor's Office, Legislative Budget Board, Central Office of Federal Funds Management and others.[11]

Significant improvements in federal funding can be made by the agencies with natural resource and environmental programs by implementing the recommendations below.

I. Federal funds should be given more priority as a funding source for state programs. Recognition should be given to the fact that Texas' per capita income is below the national average and has historically been so. Stronger efforts to get Texas' share of formula grants are needed by the Texas federal delegation, Governor's Office and individual agencies working as a team. In 1996, the federal government is planning to end its participation in funding available for wastewater treatment works grants. Documenting the state's needs for the Colonias and obtaining federal support, rather than letting the federal government phase-out a needed program, is an example of the effort the state should make. The Texas federal delegation and state officials should work together in an effort to recover some of the hundreds of millions of dollars in federal aid the state has lost over the years in the Wastewater Treatment Works Program.

II. Needs identification, planning and priority setting should be carried out on a state-wide basis. Consolidation of the Office of Federal Funds Management and the Office of State Federal Relations would provide a forum for statewide planning and priority setting.

A. Agencies should be assigned the responsibility of monitoring and taking appropriate action on specific grants and/or certain Catalogue of Federal Domestic Assistance numbers. Reports related to grant activities should be sent to the Governor, Legislative Budget Board and Comptroller annually. For example, the reports should include a summary of the status and progress of the agency's grant program, including justification for those grants not applied for. The Central Office of Federal Funds Management made a similar recommendation, requiring each state agency to submit an application for every grant for which it is eligible.

B. More formal training is needed in grant writing and in the use of available grant information resources.

C. Agencies which have related objectives should be required to prepare joint plans for program implementation, including obtaining federal funds. Sewer and water projects are an important example of the need for joint agency planning.

Fiscal Implications

Some state matching funds may be necessary to obtain grants. However, as pointed out in many of the reports cited above, a majority of the potential additional funding would require no match. Any federal funding obtained must be expended for the purposes of the grant and would not offset General Revenue Fund expenditures. Obtaining federal funds could avoid the necessity of state funding being used for purposes that can be funded otherwise.

Texas should be able to acquire additional federal funds. A target of obtaining only 10 percent each year of the non-formula grant underfunding in Table 1 (total project grants underfunding of $21,715,908 + total other grants underfunding of $3,900,963 = $25,616,871 x 10 percent = approximately $2.56 million) would result in additional federal funding as follows. Formula grants are not included in this calculation, since they depend on changes by the federal Congress.

Fiscal Year Projected Gain in Federal Funds Change in

From Project and Other Grants FTEs

1992 $ 2,560,000 0

1993 5,120,000 0

1994 7,680,000 0

1995 10,240,000 0

1996 12,808,000 0

Endnotes