Compromise Budget: Effect on Environmental Programs

July 24, 2013: Today, both the Senate and the House will take final votes on the compromise state budget.

Money (Summary)

Although  the  total budget for the Department of Environment and Natural Resources (DENR) appears to  grow, the final budget bill actually cuts the DENR budget for existing programs by  5% over the two-year budget period.  The reductions are not evenly distributed; water quality and water resource programs will take the largest cuts — at least 12.4 % compared to the 2012 budget for those programs.

The apparent increase in the DENR budget  mostly  comes from  moving money for programs being transferred into DENR from other departments (such as the State Energy Office); creation of  a new grant program for water and wastewater infrastructure; and replacement of dedicated funding sources with year to year appropriations.

The overall 5% reduction does not  include the reduction in funds  available to  the Parks and Recreation Trust Fund by shifting deed stamp tax revenue to the General Fund and replacing the dedicated funding with an  appropriation. See an earlier post  for more detail on the amount of revenue that the deed stamp tax had generated for the Parks and Recreation Trust Fund and Natural Heritage Trust Fund.

More detail below.

Department-wide spending reductions: The budget bill requires the Department of Environment and Natural Resources to reduce department spending by 2% from 2012 spending levels ( just over  $2.227 million department-wide).  DENR  can decide where to reduce spending to meet the 2% target. DENR’s 2012  budget already represented a nearly  40%  reduction from 2008 spending levels as a result of budget cuts in earlier years.

Other Reductions: In addition to the department-wide reduction of 2%, the budget makes additional cuts to specific programs. The largest of the targeted reductions requires  DENR to cut an additional $2 million out of the budget for water resources and water quality programs in the second  year of the  two-year budget  (2014-2015). That represents a 12.4% reduction from 2012  funding for water quality and water resource programs. The budget assumes the additional savings can be found by combining water resource and water quality programs into a single division. See an earlier post for more on the water quality/water resource budget cut.

Elimination of dedicated funding sources: The budget eliminates a number of dedicated funding sources for environmental protection and conservation programs, including the earmark of revenue from the state’s deed stamp tax for parks and recreation. All revenue from the deed stamp tax will go to the General Fund and the legislature will appropriate money for parks and recreation on a year to year basis. The budget also eliminates dedicated funding sources for the Bernard Allen Emergency Drinking Water Fund, the Solid Waste Management Trust Fund and the Inactive Hazardous Sites Fund.   Replacing dedicated  revenue from the deed stamp tax with an appropriation significantly reduces funds available for parks and conservation programs.

Clean Water Management Trust Fund: $10.4 million is appropriated for the Clean Water Management Trust Fund in 2013-2014 and $13.6 million in 2014-2015.

At-Sea Observer Program (Division of Marine Fisheries): The budget provides a one-time appropriation of $1.1 million to monitor the number of endangered sea turtles caught  in commercial fishing nets. The sea turtles, which  are protected under the federal  Endangered Species Act, sometimes get caught in gill nets  used by commercial flounder fishermen. The  monitoring program  is required as a part of an agreement between the state Division of Marine Fisheries and the  National Marine Fisheries Service that allows North Carolina commercial fishermen to continue to use gill nets.

Program increases: The  budget increases funding for shale gas and offshore energy staff (+$400,000) and  for  investigation of hazardous waste contamination (+ $250,000).

Grant Funds for Water/Wastewater Infrastructure: The General Assembly appropriates $3.5 million in 2013-2014 and $5 million in 2014-2015 for water and wastewater infrastructure grants. The new grant program partially offsets the fact that the budget provides zero funding for  infrastructure grants  through the N.C. Rural Economic Development Center.

Programs Eliminated: The budget eliminates the  Fisheries Resource Grant Program,  Sustainable Communities Task Force, Uwharrie Regional Resource Commission,   Adopt a Trail program, and the Division of Water Quality’s Groundwater Investigation Unit well drilling services.

Jordan Lake Cleanup

$1.35 million from the 2013-2014 appropriation for the Clean Water Management Trust Fund is earmarked for a pilot project to test the use of technology to improve water conditions in Jordan Lake. The appropriation appears to be partner to Senate Bill 515 which (as amended in the House) delays further implementation of the Jordan Lake rules for three years to test technology  to  reduce the water quality impacts of nutrient pollution. The budget bill describes the technology to be tested very specifically and appears intended to  direct the funds to a particular product.  The bill exempts the pilot project from normal state contract procedures, which means DENR will not be required to advertise for bids.

Environment Commissions

The budget bill includes changes in appointments to the state’s major environmental regulatory commissions — the  Environmental Management Commission (water quality, air quality and water resource rules) and the Coastal Resources Commission (coastal development rules).  The bill reduces the  number of members on each commission, but the most significant change gives Governor McCrory and current legislative leadership an opportunity to replace nearly all of the members immediately. Terms for  all  Environmental Management Commission (EMC)  members will end July 31, 2013.    Four Coastal Resources Commission (CRC)  members will continue to serve until June 30, 2014 (the specific seats on the commission  are identified in the bill); the terms of  all other CRC members will end July 31, 2013. Until now, members of both commissions served staggered terms of four or six years. Each new governor and legislature had an opportunity to appoint new members as their terms ended. The changes will recreate the staggered appointments, but only after giving the current governor and legislature  unprecedented power to replace all  of the members of each commission.

The final language on EMC appointment includes conflict of interest language intended to address conflict of interest requirements in federal law.

Noncommercial Underground Storage Tanks

The bill changes state law to require owners of  noncommercial underground petroleum storage tanks to pay a deductible of $1,000 and a 10% co-payment for environmental cleanup  if the tank leaks. The bill caps the total contribution required from the tank owner at $2,000 for the combined deductible and co-payment.  Until now, the state’s Noncommercial Underground Storage Tank Trust Fund paid the full amount of cleaning up soil and groundwater contamination from a noncommercial tank and the tank owner only paid for removal of the leaking tank. (“Noncommercial” tanks include home heating oil tanks and farm or residential motor fuel storage tanks that hold less than 1,100  gallons.)


Conservation Programs:  Clean Water Management Trust Fund staff will be transferred to DENR. The bill eliminates the Natural Heritage Trust Fund (NHTF) and amends the CWMTF statute to allow that fund to be used for conservation projects previously funded by the Natural Heritage Trust Fund.  Existing NHTF obligations  will be honored and any remaining funds will be transferred to the  Clean Water Management Trust Fund.

Water/Wastewater Infrastructure Programs: The budget creates a new Division of Water Infrastructure in DENR by combining existing staff for the Drinking Water State Revolving Fund and   Clean Water State Revolving Fund and  transferring some number of infrastructure staff from the Community Development Block Grant program in Department of Commerce. (The actual number to be negotiated between the two departments.)  Infrastructure grant and loan decisions will be made by a new Water Infrastructure Authority.

State Energy Office: The State Energy Office moves from the Department of Commerce to DENR.