The Growing Burden of Unfunded EPA Mandates on the States

The U.S. Chamber of Commerce, easily one of the most respected business advocacy groups in the nation, recently released a report titled The Growing Burden of Unfunded EPA Mandates on the States. The paper details how EPA mandates have over time chipped away at the cooperative federalism model that has long undergirded the agency’s relationship with the states, a theme that has been explored by ALEC over the years, most notably in the 2012 report titled The U.S. Environmental Protection Agency’s Assault on State Sovereignty. Today, the relationship between EPA and the states more closely resembles a command and control model.

When Congress passed the Clean Air Act, Clean Water Act and a host of other environmental laws over 40 years ago, they intended for states to work equally with EPA as partners in carrying out environmental policy- and regulatory-making. Under such a model, states would implement national environmental policy through their own environmental regulatory agencies. In exchange, the federal government would provide technical assistance and funding to help implement these changes. Indeed, the Clean Air Act was explicitly designed to provide states with funding to cover 60 percent of their program costs.

Today, the states are responsible for implementing approximately 96.5 percent of federal environmental laws and roughly 90 percent of environmental inspections. In a survey conducted by the Chamber (of which 39 states responded, with 30 providing sufficient information), EPA grants for the states were 29 percent lower, adjusted for inflation, than their levels in 2004. However, during this same period of time, EPA imposed approximately $104 billion in new annual regulatory obligations.

In the state of Texas, for example, the total budget for the Texas Department of Environmental Quality (TDEQ) in FY2014 amounted to $519.4 million. Federal funds only amounted to $58 million, representing a mere 11.2 percent of the overall budget, forcing the majority of the department’s budget to be backfilled with general state funds and fees.

A major reason that state funding has dried up in recent years is that EPA now oftentimes promulgates new regulations (of which they may have dubious statutory authority) with Congress not agreeing to provide additional funding to the states to implement the programs. However, even if Congress does provide additional funding for implementation, there is no guarantee these monies make their way to the states. In FY2015, for instance, EPA raided $581 million from the states’ Clean Water and Drinking Water Revolving funds to increase spending on other projects, including fighting climate change.

EPA has also proven to be careless in how they evaluate the costs they impose on the states. Existing law – the Unfunded Mandates Reform Act (UMRA) – requires federal agencies to “assess the effects on state and local governments before imposing mandates of $100 million or more per year without providing federal funding to implement the mandate.” EPA gets around this requirement by suggesting that since they are willing and able to impose a federal implementation plan on states that opt against developing a state plan of their own, such regulations are not considered to be “federal mandates.”

So-called sue-and-settle agreements have only exacerbated the problem of unfunded mandates on the states. Sue-and-settle agreements arise when an environmental advocacy group will file a lawsuit against EPA for not developing certain environmental regulations ahead of statutory deadlines. Instead of going to trial, EPA and the advocacy group in question will settle the complaint behind closed doors, typically with states, local governments and other affected entities completely shut out of the process until they are called upon to carry out the terms of the settlement.

EPA’s unwillingness to work with the states has made the states, in the words of the Chamber, “less of a partner and more of a pawn.” The Chamber does, however, recommend four changes that Congress can impose that would likely to improve relations between the agency and the states (pages 28-29).

1. Amend the UMRA to more clearly define “mandate” such that it would apply to EPA;
2. Enact the Regulatory Accountability Act, which would modernize the 70-year-old Administrative Procedure Act;
3. Enact the Sunshine for Regulatory Decrees and Settlements Act, which would bring greater transparency to the sue-and-settle process and allow states and other affect parties to intervene; and
4. Restore the Advisory Commission on Intergovernmental Relations, which could serve as an effective watchdog for cooperative federalism.