tion of State Drinking Water Administrators, the American Water Works Association, the National Rural Water Association, the National Association of Water Companies and the Association of Metropolitan Water Agencies to request their "views and estimates with respect to the cost of new mandates and other information" they would like placed in this report. These organizations sent a joint response to this request on March 31, 1994. Their statement indicated that, "it is critical that the Congressional Budget Office develop a credible assessment of current and projected fiscal impacts for state and local entities based on accurate cost data. As some of our individual organizations have done in the past, we are willing to work with the Congressional Budget Office in this regard and to review their estimates from state and local entities." No specific cost information was provided in this communication. The cost estimates of the Congressional Budget Office with respect to this legislation appear below. [The response follows:] MEMORANDUM To: Jimmie Powell, Minority Staff, Senate Environment and Public Works Committee From: State and Local Drinking Water Coalition Members, The National Governor's Association, National Association of Counties, Association of State Drinking Water Administrators, National Rural Water Association, American Water Works Association, National Water Resources Association, Association of Metropolitan Water Agencies, National League of Cities, U.S. Conference of Mayors, National Association of Water Companies, National Conference of State Legislatures, and National Association of Regulatory Utility Commissions Re: Request for Information on the Fiscal Impacts of S. 1547 We strongly support Senator Kempthorne's request for a cost assessment of the mandates that will be imposed on state and local governments, as well as the water supply community and its customers, by S. 1547 as reported out of committee last week. All of the members of the State and Local Drinking Water Coalition have concerns about the increasing costs of drinking water regulations under current law and the new requirements proposal by S. 1547. We recognize that necessary improvements to the law will increase costs in some instances and believe that an accurate cost assessment is absolutely essential to provide guidance, as well as build awareness, about the cost-effectiveness of the law. As you know, the fiscal impacts of the 1986 drinking water amendments did not address state and local costs. Consequently, it is critical that the Congressional Budget Office develop a credible assessment of current and projected fiscal impacts for state and local entities based on accurate cost data. As some of our individual organizations have done in the past, we are willing to work with the Congressional Budget Office in this regard and to review their estimates from state and local entities. We have identified the following preliminary list of requirements contained in S. 1547 that impose significant costs and should be include in a cost assessment: Development of state viability programs for water systems Expansion of an operator certification and training program based on new EPA regulations Development of a statewide source water protection program Monitoring for unregulated contaminants Development of alternative monitoring programs based on vulnerability assessment of sourcewater and a contaminant's use, manufacture, storage, occurrence, and transport Development of affordability criteria for the issuance of variances and identification of disadvantaged communities for state revolving loan fund assistance Development of annual state report on system compliance Enforcement of requirements for "lead free" plumbing fix tures Determination of granular activated carbon as feasible for removal of disinfection byproducts New standard setting system and its impacts on treatment, testing, and monitoring costs Compliance with anticipated new standards. Again, we appreciate the opportunity for input regarding Senator Kempthome's request. We look forward to working with the committee and the Congressional Budget Office to promote the development of an accurate cost assessment. COST OF LEGISLATION Section 403 of the Congressional Budget and Impoundment Control Act requires each report to contain a statement of the cost of the reported bill prepared by the Congressional Budget Office. That statement follows: Hon. MAX BAUCUS, U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Chairman, Committee on Environment and Public Works, DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for the Safe Drinking Water Act Amendments of 1994. Enactment of the bill would affect direct spending and receipts. Therefore, pay-as-you-go procedures would apply. If you wish further details on this estimate, we will be pleased to provide them. Sincerely, Enclosure. JAMES L. BLUM (For Robert D. Reischauer). CONGRESSIONAL BUDGET OFFICE COST ESTIMATE 1. Bill number: Not yet assigned. 2. Bill title: Safe Drinking Water Act Amendments of 1994. 3. Bill status: As ordered reported by the Senate Committee on Environment and Public Works on March 28, 1994. 4. Bill purpose: The bill would amend the Safe Drinking Water Act (SDWA) to require the Environmental Protection Agency (EPA) to make grants to states for capitalizing state revolving loan funds (SRFs) that would finance facilities for the treatment of drinking water. The bill would authorize appropriations of $1 billion annually over the 1995-2000 period for these capitalization grants. In addition, major provisions of the bill would: amend the procedures EPA uses to identify contaminants for regulation under the SDWA; require EPA to establish an alternative monitoring program for drinking water; allow operators of small drinking water systems to obtain variances from drinking water standards under certain conditions; direct EPA to define treatment technologies that are feasible for small drinking water systems when the agency issues new contaminant regulations; require states to ensure that public water systems have the technical expertise and financial resources to implement the SDWA; establish an alternative standard for radon in drinking water; and authorize appropriations of $100 million annually for state public water system supervision programs (PWSS). 5. Estimated cost to the Federal Government: The costs of this bill fall within budget function 300. Basis of estimate: For purposes of this estimate, CBO assumes that the bill will be enacted by the end of this fiscal year, and that all funds authorized by the bill will be appropriated for each year. Estimated authorizations are based on information provided by EPA. Estimated outlays are based on historical spending patterns of ongoing SDWA programs administered by EPA and its grant program for waste water treatment SRFs. A discussion of the estimated costs for significant provisions of each section of the bill follows. Section 3 State revolving loan funds This section of the bill would authorize the appropriation of $600 million for 1994 and $1 billion annually over the 1995-2000 period for capitalization grants to states for new drinking water revolving loan funds. States would be required to provide a 20 percent match to receive the federal grant. Each state would be authorized to make loans to communities for capital projects that would facilitate compliance with national drinking water regulations, upgrade an existing public drinking water system, or facilitate the consolidation of two or more public drinking water systems. The bill also would direct states to set aside specific amounts of their grants to provide technical assistance to small drinking water systems, provide loan forgiveness for drinking water projects in disadvantaged communities, pay for administration of the program, and also pay for part of the public water system supervision program. Finally, the bill would authorize any state to move up to half of its drinking water SRF grant into its wastewater treatment SRF, or vice versa. The 1994 EPA appropriation for water infrastructure contains a set-aside of $599 million that is contingent on enactment of and authorization for an SRF program. The above table shows only that portion of the authorized amount-$1 million—that has not already been appropriated. Other State grants Sections 4, 9, 11, and 12 would authorize appropriations of $133 million annually over the 1995-2000 period for seven EPA state grant programs. EPA would receive, for each year: $15 million for monitoring of unregulated contaminants in drinking water; $20 million for drinking water aquifer protection programs; $35 million for drinking water wellhead protection programs; $25 million for research, public education, and certification of water system operating personnel and laboratory testing personnel; $8 million for emergency situations; $10 million for training programs; and $20 million for ground water protection programs. Public water system supervision grants Section 12 would authorize appropriations of $100 million annually over the 1995-2000 period for EPA grants to state drinking water supervision programs. EPA drinking water program costs The bill would not provide a specific reauthorization for EPA's ongoing drinking water research and regulatory activities. The authorization for these programs expired in 1991. In 1994, EPA estimates it will spend about $74 million on this program, including. $31 million for implementing drinking water regulations, $20 million for research on drinking water contaminants, $16 million on protecting ground water, and $7 million for enforcing regulations. Based on information from EPA, CBO estimates that enactment of this bill would require the agency to increase its base funding for drinking water by about $5 million in 1995 and by $60 million over the 1995-1999 period. This increase is largely for writing regulations and providing guidance and training to state programs. In addition, the bill would authorize $10 million annually over the 19952000 period for EPA to provide technical assistance to small water systems. Capital improvements to the Washington Aqueduct The bill would authorize the Army Corps of Engineers (Corps) to borrow funds from the Federal Financing Bank (FFB) to finance improvements the Corps would make to the Washington Aqueduct. All funds borrowed from the FFB for this purpose would have to be repaid by the users of the Washington Aqueduct according to terms and conditions established by the FFB. Based on information from the Corps, we estimate that capital improvements to the aqueduct would cost about $250 million and would occur over a tenyear period. Repayments, including interest, would likely begin as work is performed. Credit reform provisions of the Budget Enforcement Act of 1990 require the net present value cost of any loan to be recorded as an outlay in the year that the loan is disbursed. CBO estimates that the subsidy cost of providing this loan would be about ten percent of the capital costs and would be incurred over the construction period of ten years. We estimate that subsidy outlays, which would be direct spending, would total about $1 million in 1997, $2 million in each of the years 1998 and 1999, and a total of about $25 million by 2005. Civil penalties Section 6 would strengthen EPA's authority to assess and collect civil penalties and would raise the maximum civil penalties. Based on information provided by EPA, CBO estimates that increases in federal government receipts would be insignificant. 6. Pay-as-you-go considerations: Section 252 of the Balanced Budget and Emergency Defict Control Act of 1985 sets up pay-asyou-go procedures for legislation affecting direct spending or receipts through 1998. Enactment of this bill would affect direct spending, because the spending authority for improvements to the Washington Aqueduct would be provided by this bill and would not depend on future appropriations. CBO estimates that direct spending outlays for this purpose would be $1 million in fiscal year 1997 and $2 million in 1998. Enactment of this bill also could result in an increase in governmental receipts from civil penalties, but CBO expects that the amounts involved would be insignificant. Section 14 would explicitly waive any federal immunity from administrative orders, or civil or administrative fines or penalties assessed under SDWA, and would clarify that federal facilities are subject to reasonable service charges assessed in connection with a federal or state program. This provision of SDWA may encourage states to seek to impose fines and penalties against the federal government under SDWA. If federal agencies contest these fines penalties, it is possible that payments would have to be made from the government's Claims and Judgments Fund, if not otherwise provided from appropriated funds. The Claims and Judgment Fund is a permanent, open-end appropriation, and any amounts paid from it would be considered direct spending. CBŎ cannot predict the number or the dollar amount and judgments against the government that could result from enactment of this bill. Further, we cannot determine whether those judgments would be paid from the Claims and Judgments Fund or from appropriated funds. 7. Estimated cost to State and Local Governments: Summary, the bill would authorize appropriations of $12 billion annually over the 1995-2000 period for EPA to states to help public water supply systems comply with drinking water regulations. In 1994, EPA has about $75 million to provide to states for this purpose. |