SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 5480 words

COMMITTEE: HOUSE ENERGY AND COMMERCE

HEADLINE: TESTIMONY SAFE DRINKING WATER

TESTIMONY-BY: MR. BARKER HARMILL , CHIEF/ BUREAU FOR SAFE DRINKING WATER

AFFILIATION: NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECION

BODY:
March 28, 2001 The House Committee On Energy and Commerce W.J. Billy Tauzin, Chairman Subcommittee on Environment and Hazardous Materials Hearing Drinking Water Needs and Infrastructure Mr. Barker Hamill Chief Bureau for Safe Drinking Water; New Jersey Department of Environmental Protection SUMMARY OF MAJOR POINTS - The 1996 SDWA Amendments created enormous new programs and a complex regulatory structure that added significantly to the state implementation workload. - Forty-nine of the 50 states have primacy and are responsible for implementing all aspects of the Federal SDWA requirements for 169,000 public water systems nationwide. - The primary Federal funding for states is the Public Water Supply Supervision (PWSS) program. Funding for states under this program has remained unchanged, at $87.3 million, since FY-97 in spite of the significant new SDWA requirements. - While up to 31 percent of the DWSRF can theoretically be used by states for various aspects of program implementation, the practical reality is that states have only been able to use 16 percent on average nationwide. - In spite of Federal, state, and DWSRF set-aside funding, a gap currently exists for state implementation programs. The state staffing and funding gap is estimated at 1,906 FTEs and $110 million in FY-02 growing to 2,607 FTEs and $207 million by FY-05. - Drinking water systems also face significant infrastructure needs. EPA s 1999 Drinking Water Infrastructure Needs Survey indicates that water system infrastructure needs total $150.9 billion over the next 20 years with $102.5 billion needed today to ensure the provision of safe drinking water. - The majority of the estimated need is for transmission and distribution projects ($83.2 billion) followed by treatment ($38.0 billion), storage ($18.4 billion), source ($9.6 billion), and other needs ($1.9 billion). - In spite of Federal, state, and local funding, it is likely that an infrastructure funding gap exists and may be quite large. - ASDWA is prepared to work with Congress, EPA, water utilities, and other stakeholders on defining the funding gap for states as well as water systems and developing viable solutions to meet these funding needs. Introduction The Association of State Drinking Water Administrators (ASDWA) is pleased to provide testimony before the House Committee on Energy and Commerce Subcommittee on Environment and Hazardous Materials regarding water infrastructure needs and state drinking water program needs. ASDWA represents the drinking water programs in each of the fifty states, territories, and the District of Columbia in their efforts to ensure the provision of safe, potable drinking water to over 250 million consumers nationwide. ASDWA s primary mission is the protection of public health through the effective management of state drinking water programs that implement the Safe Drinking Water Act (SDWA). Water Infrastructure Water Infrastructure Needs Providing a supply of safe, potable drinking water is critical to protecting public health and ensuring current as well as the long- term economic growth of this Nation. In February 2001 the United States Environmental Protection Agency (EPA) released a report entitled 1999 Drinking Water Infrastructure Needs Survey that indicates that drinking water systems infrastructure needs total $150.9 billion over the next 20 years and that $102.5 billion is needed today to ensure the provision of safe drinking water. The bulk of this need, $83.2 billion, is for transmission and distribution projects followed by treatment ($38.0 billion), storage ($18.4 billion), source ($9.6 billion), and other needs ($1.9 billion). These needs are documented for the 54,000 community water systems and 21,400 not-for-profit noncommunity water systems nationwide. Large systems (serving more than 50,000 people) account for 41 percent of this need while medium sized systems account for $43.3 billion and small systems account for $31.2 billion. Not-for- profit noncommunity water systems account for $3.1 billion of need. Although the total small system need appears modest compared to needs of larger systems, the costs on a per household basis are almost four times higher than for larger systems because small systems lack the economies of scale to spread the costs of capital improvement among many consumers. Why is there an Infrastucture Need? Water utilities must continue to upgrade and improve their infrastructure to meet new SDWA regulatory mandates and to replace aging and failing distribution system pipes and appurtenances. While water systems have typically had to keep pace with new requirements of the SDWA with regard to treatment, specific upgrades and replacement of pipes and transmission lines have been addressed, from a regulatory perspective, only in a minor way through mandatory replacement of lead pipes under the Lead and Copper Rule. Much has been learned over the last decade or so; however, about specific health problems associated with distribution system problems such as leaking pipes, cross connections, and backflow. Many of these concerns are likely to be addressed specifically in the future as EPA proposes developing a distribution system rule. The 1996 Amendments to the SDWA require that EPA develop regulations to address microbial contamination, disinfection by- products, radon, radionuclides, arsenic, ground water protection, and filter backwash. EPA must also continue to evaluate potential contaminants for regulation well into the future. As a result, infrastructure funding needs will continue to escalate as more contaminants are promulgated that address new contaminants in drinking water, and as current regulatory levels are driven lower to meet improved analytical methods to bring standards closer to the maximum contaminant level goal. In addition, new treatment technologies such as membranes, ozone, and UV irradiation will become more commonplace in water treatment. Some of these technologies are capital intensive to install and operate, while others will require significant retrofitting of current treatment plants and upgrades to distribution systems. In addition to meeting infrastructure needs associated with compliance with the SDWA, water systems also face the challenge of replacing miles of distribution pipes as materials age and begin to fail. The demographics of distribution pipe installation indicate that over the course of the next 20 years, many of the miles of pipes that have been put in the ground over the last 100 years will reach the end of their useful life and need replacement. Current Funding Availability Funding of water system infrastructure needs involves a partnership at the Federal, state, and local level. At the Federal level, funding is available through the Drinking Water State Revolving Loan Fund (DWSRF) that was established under the 1996 SDWA Amendments. In the SDWA, Congress authorized $9.6 billion between FY-94 and FY-03 for states to provide loans and grant equivalents to water systems in need. An important note is that although $7.6 billion was authorized through FY-01, only $4.42 billion has been appropriated leaving a funding gap of $3.18 billion that the states and water systems were expecting to be available to meet infrastructure needs and compliance requirements of the SDWA. States also must match the DWSRF with 20 percent state funding as a way to further capitalize this program. Through June 30, 2000 states had contributed over $548 million additional funds for the program. To the extent that the full Federal amount has not been appropriated; however, revenue is also lost due to the loss of state matching funds. A number of states also leverage the funds to create additional dollars for infrastructure improvements. Through June 30, 2000, states had leveraged over $1 billion in bonds to provide additional project funding. A number of states have also established their own grant and loan programs that are used to supplement DWSRF funding. Additional Federal funding also comes through the Rural Utility Service Water and Waste Loan and Grant Program under the U.S. Department of Agriculture s Rural Development office. These funds assist eligible applicants in rural areas and cities and towns serving up to 10,000 people. The Federal Housing and Urban Development (HUD) Agency also provides block grants to states under its Community Development Block Grant (CDBG) program to provide assistance to small local governments that generally serve less than 50,000 people and counties with a population of less than 200,000 people. Water and wastewater projects are eligible activities under the CDBG program. Many states use these funds along with USDA and DWSRF funding to package the appropriate mix of grants and/or loans to meet a community s specific financing needs. At the local level, a primary source of funding for infrastructure improvements comes through rates charged by utilities to consumers for water use. In many cases, however, rates have been kept artificially low and long-term maintenance costs deferred. This has the potential to contribute to rate shock should customers have to bear the full cost of projected infrastructure replacement needs. Municipalities can also borrow money from the private sector such as banks or go to the bond market although many smaller water systems and non-municipal systems find it more difficult to access these types of funding. According to the Water Infrastructure Network s report Clean and Safe Water for the 21st Century, water systems are currently investing around $13 billion per year for infrastructure needs. Is There a Funding Gap? While it may be possible through instruments such as EPA s drinking water needs survey to project drinking water infrastructure needs over the next 20 years, it is much more problematic to define how large an infrastructure funding gap exits. To calculate this accurately, one needs to have a solid understanding of the current and long term funding needs and then have a fairly accurate assessment of the total sources of revenue at the Federal, state, and local level that can be brought together to meet these infrastructure funding needs. The delta (or gap) between these two numbers represents the funding gap or need but only at the gross national level. The gap can vary significantly on a water system-by-water system basis depending on system size, contaminants of concern, the system s current rate structure, access to available capital, and the age of the system, among many factors. Conclusion Drinking water system infrastructure needs will continue to increase due to new SDWA regulatory requirements as well as the need to replace aging and failing pipes in distribution systems. A continued partnership among Federal, state, and local funding sources will be essential to ensure the long-term provision of safe, potable drinking water to consumers nationwide. Numerous needs surveys, including EPA s recent analysis, have concluded that nationally, water systems face a daunting task in continuing to ensure safe drinking water. While ASDWA is not able to calculate the actual definitive dollar figure between the need and available funding, others have indicated that a gap exists and may be quite large. ASDWA is prepared to work with Congress, EPA, the water utility industry, and other interested stakeholders to better refine the scope of the problem and the gap, and determine how best to meet these needs today and into the future. State Infrastructure State Implementation Responsibilities State drinking water programs also need adequate funding to ensure the effectiveness of their own infrastructure to carry out the myriad responsibilities of the SDWA. Since the SDWA Amendments of 1996, state program responsibilities have dramatically expanded to move beyond compliance at the tap to delineating and assessing the sources of all waters used for public water supplies, ensuring qualified operators at all water systems, defining and implementing water system capacity programs, creating a new DWSRF funding mechanism, and providing significantly more information and outreach to the public. These efforts are in addition to implementing Federal as well as state- specific drinking water regulations addressing specific contaminants. Forty-nine of the 50 states currently have primacy or enforcement authority for the Federal SDWA. To achieve and maintain primacy, states must adopt rules that are no less stringent than the Federal requirements and have the ability to enforce these regulations. Although some states have requirements that are more stringent; for the most part, state drinking water programs are implementing and enforcing Federal requirements. Collectively, state programs provide oversight, implementation assistance, and enforcement for approximately 169,000 public water systems nationwide. These systems range from large metropolitan municipalities to mobile home parks and schools. The vast majority (over 95 percent) of these systems are small, serving less than 3,300 people. Many of these systems require extensive technical assistance, training, and oversight. Today, the regulatory landscape is significantly more complex than ever before. Since FY-97, state Public Water Supply Supervision (PWSS) dollars have had to stretch to cover development, implementation, and enforcement of numerous new regulations and programs such as those to address radionuclides, the microbial/disinfection byproducts rule cluster, unregulated contaminant monitoring, consumer confidence reports, capacity development, expanded operator certification requirements, source water assessment and delineation, and the DWSRF. States anticipate new regulations to be put in place this year to address radon, arsenic, and groundwater. Additionally, states are expected to implement revisions to the surface water treatment and lead and copper rules, public notification, and variance and exemption requirements. These requirements are in addition to the state program responsibilities for core activities such as compliance monitoring, data management, training, and enforcement for 88 currently regulated contaminants. States also are responsible for ensuring that public health is protected through preventive measures such as disease surveillance, risk communication, sanitary surveys, laboratory certification, permitting, and emergency response. States expect that their responsibilities will continue to expand as EPA promulgates additional regulations and reviews current regulations for modification (see attachment 1). State Funding The SDWA authorizes EPA to fund up to 75 percent of the costs to states to implement the drinking water program. Historically, however, states have contributed 65 percent of the funding while EPA has only contributed 35 percent. While the actual contributions for individual states vary, with some substantially over matching the Federal contribution, the bottom line is that adequate Federal funding for states to implement this Federal law has not historically been provided. The current Federal PWSS grant provides $87.3 million for states to implement their programs (the remainder of the $93 million currently appropriated by Congress is directed to Indian Tribes). This level has not increased for states over the last five years (since FY-97), even though many of the new initiatives under the 1996 Amendments became effective almost immediately. The level funding of $87.3 million actually means that states have lost funding due to inflation and rising personnel costs, not to mention a FY-01 rescission that actually reduced state PWSS and DWSRF grants. The 1996 Amendments also allowed states to take up to 31 percent set-asides from the DWSRF for program implementation. EPA, however, has never requested the full $1 billion per year authorization. DWSRF funds are also used to provide resources for new programs at the national level such as operator certification training reimbursement and unregulated contaminant monitoring which further reduces the corpus of the funds available for state use. In addition, many states have encountered significant barriers to fully accessing these funds including: - the inability to obtain the needed one-to-one state match with new state revenue (for program implementation activities) - the inability to shift resources directed to water system infrastructure improvements to state program implementation - the unstable nature of the annual SRF funding allocation which is based on water system needs and is affected by the states annual intended use plan for projects and set-asides - the threat of up to 40 percent withholding for failure to implement certain program requirements such as capacity development and operator certification - the unwillingness of state legislatures to approve new hires using temporary funding (the drinking water SRF is only authorized until 2003) To supplement insufficient Federal funding, many states have turned to state general revenues and fees to maintain an adequate core program. These additional funds; however, have not be adequate to fully meet state program implementation costs. ASDWA and EPA conducted a national resource gap analysis in early 1999 to estimate state resources needed to implement the drinking water program between 1999 and 2005. The analysis showed that in FY-99, the funding gap for states to implement the SDWA equaled $83 million and staffing needs fell short by 1,627 full time equivalents (FTEs). In FY-02, the gap will widen to $110 million and 1,906 FTEs; and by FY-05, the states ability to implement the SDWA is expected to fall short by $207 million and 2,670 FTEs (see charts, page 7). The situation was exacerbated this year when the state PWSS and DWSRF dollars were subjected to the Agency s FY-01 rescission cuts, thus further reducing Federal funds to the states. Even the U.S. General Accounting Office (GAO) has raised state funding concerns. In August 2000, GAO released a report to Congress entitled, Drinking Water: Spending Constraints Could Affect States Ability to Implement Increasing Program Requirements. An extrapolation of their findings indicate that even if all states had been able to access the maximum 31 percent of DWSRF set-asides for program implementation and related activities, there would still be a funding gap beginning in FY- 02. Since few states are able to access the full set-aside amounts, the funding gap is much greater than GAO s optimum estimate, and in fact, a gap already exists. The Report further notes that even those states that felt they were managing to keep up with the pace of implementing and enforcing the new statutory program requirements, at least for the short term, were only able to do so by . . .scaling back their drinking water programs, doing the minimum necessary to meet requirements, and setting formal or informal priorities among their responsibilities. This is a blueprint for a public health crisis. Conclusion Adequate infrastructure funding needs for state SDWA program implementation is just as critical as adequate funding for water system infrastructure improvements. States are responsible for ensuring water system compliance and providing infrastructure for source water assessments; certified and trained water system operators; water system financial, technical, and managerial competency; public outreach and communication; and working directly with water systems to obtain and maintain compliance. As Congress moves forward to evaluate and find solutions for the water infrastructure funding gap attention must also be directed to the state program funding gap. The goal of both of these efforts is protecting public health. It is about knowing that whenever you brush your teeth, bathe your child, or prepare your food, the water has been monitored and tested for contaminants; that the responsible operator has been trained and certified; and that the drinking water system has demonstrated that it is technically, financially, and managerially capable of providing safe drinking water. In order to meet Congressional expectations and Federal regulations to successfully implement the SDWA, both states and water systems need increased funding to ensure a safe and dependable supply of drinking water today and for future generations.

LOAD-DATE: March 30, 2001, Friday