Testimony of Christopher Jones
Director Ohio Environmental Protection Agency
February 19. 2003
House Finance Committee

Mr. Chairman, members of the committee, I am Ohio EPA Director Chris Jones, and I appreciate the opportunity to discuss Ohio EPA's budget request for State Fiscal Years 2004 and 2005.

Ohio EPA uniquely touches the lives of every Ohioan. It is our job to make certain that the air Ohioans breathe is clean, the water they drink is safe. and waste is properly disposed so it does not impact public health or the environment. To fulfill these responsibilities, we regulate tens of thousands of facilities, ranging from the largest manufacturing plants to the local dry cleaner. Every day, the benefits of being able to turn on a water faucet, flush the toilet, and put out the trash depend upon environmental regulations. Our responsibilities are widespread, and with the GRF budget reductions in the current biennium, we are challenged to keep up with them. In addition to our traditional duties, we are now assuming more responsibility for homeland security, including vulnerability assessments for drinking water plants and air monitoring for biological and chemical agents. I want to be clear up front that we need the funding requested in this budget to avoid significant reductions in services.

Before I expand on this budget request, however, I want to assure you that Ohio EPA has and is managing frugally. We anticipate saving at least $30,000 annually in electric costs due to lighting changes at our Columbus office. We cut travel expenses by $66,000 from fiscal year 2001 to 2002, and saved $40,000 in legal research costs. By analyzing our automobile usage, we were able to save $776,000 by retiring 47 vehicles - 24 percent of the fleet - and not replacing them.

Last year. we instituted an Agency-wide program called "Waste-Out" that encourages each individual employee to identify ways to save money. The program has produced $25,000 in savings. This fiscal restraint has helped us to absorb some of the GRF reductions that were necessary to balance the budget this biennium.

To put this budget request in context, Ohio EPA's GRF request is 9.3 percent lower in SFY 2004 and 9.6 percent lower in SFY 2005 than our actual GRF spending in the corresponding years of the SFY 2000-2001 biennium. Our staffing is 76 positions lower than when I became director, a roughly 6% decrease in personnel. In other words, the Agency has felt the impact of reduced GRF funding, and those impacts will continue into the next two years.

This is true although only a small percentage of Ohio EPA's budget - less than 15% -consists of General Revenue Funds. The majority of our revenue - 55% - comes from fees. Federal grants account for 19% of our budget and the remainder is reimbursement for various support services. Although GRF provides only 15 % of Ohio EPA's budget, it is significantly weighted toward our water programs; therefore, GRF cuts have a disproportionate impact on our programs to protect drinking water and Ohio's rivers and streams.

While fees provide the dominant portion of our income, the current fee schedule for some of our programs is outdated, because some fees have not been adjusted in a decade. Revenues in those programs will be inadequate in the coming biennium without a fee increase. Because of the importance of this revenue, I'd like to spend the majority of my testimony outlining our fee proposals and the rationale for them.

Division of Air Pollution Control
For at least 20 years, a persistent problem at Ohio EPA has been the length of time it takes to process air pollution control permits-to-install, or PTIs. Because construction of a new facility cannot begin until the PTI is granted, there is a direct connection between economic growth and PTI issuance. On the other hand, because the PTI specifies what types of pollution controls must be installed and limits emissions, there is a direct connection between permit issuance and public health. There has always been pressure on Ohio EPA to be both thorough and prompt.

We committed to work with businesses to improve the efficiency of the air permitting process, and we have honored that commitment. In 2002 - for the first time in memory - Ohio EPA processed 99 percent of all applications received within the statutory time frames.

We achieved this through a collaborative effort with the regulated community. The Agency formed a joint committee with Ohio Chamber of Commerce, the Ohio Manufacturers' Association, the Ohio Chemistry Technology Council, the Ohio Petroleum Council, and the Ohio chapter of the National Federation of Independent Businesses. The group's purpose was to investigate ways to improve permit processing. The joint committee produced 14 recommendations, which we are now working to implement. They cover the full range of operations of the Division of Air Pollution Control, including the processing of permit applications. Enormous credit belongs to the members of the joint committee, as well as to the staff of the Division of Air Pollution Control, who engineered a complete internal re-organization to better manage their workload with fewer resources.

Ohio EPA shares the work of processing air permits with seven local air agencies. All told, it costs $2.6 million annually. Currently, fees charged for permit processing generate $1 million, so you can see that the PTI program is not, and never has been, self-supporting.

Some recommendations of the joint committee will exacerbate this situation. Specifically, we have agreed to work toward reducing the number of individual permits that must be processed, by increasing the use of general permits and/or permits-by-rule. These are regulatory devices that allow smaller pollution sources to comply with a set of general requirements, rather than having to obtain a customized permit specific to their operation.

Many states have cutoffs below which they do not require individual permits. Ohio's permitting cutoffs are at low thresholds. Therefore, Ohio EPA reviews far more applications than most other Region V states. There are currently 77,000 pollution sources in our system. The recommendations of the regulated community committee would reduce that number by about half.

It will not, however, cut the workload in half. The sources that would still need an individual permit would be the larger facilities with more complicated operations. We estimate, therefore, that eliminating the easier permits would reduce our workload by one-third.

It's currently costing us $2.6 million to process PTIs, so with one-third less work, that cost should go down to about $1.8 million. At the same time, eliminating half the required permits will also eliminate half the current revenue. Instead of collecting $1 million in permit fees, we'll collect only $500,000. That leaves us with an $1.3 million shortfall.

Ohio EPA is proposing to raise PTI fees by 50 percent. That would offset about $250,000 of the shortfall. At this new level, fees would generate 42 percent of the income we need to operate our PTI program. Because PTIs are only needed for new construction or expansion, the higher fees would not affect currently operating sources. And because smaller sources would not need an individual permit, many small businesses would be relieved of the obligation to complete a full application and pay a fee.

There is another aspect to this situation. Facilities that receive a permit-to-install must also receive a permit-to-operate. Those fees are based on how much pollution each facility emits. They are billed every other year, for the previous two years' emission levels.

Currently, permit-to-operate fees generate about $1.4 million per biennium and have not been increased since 1993. By reducing the number of permits required, we will also be cutting our revenue from permit-to-operate fees in half. Ohio EPA is proposing to raise those fees by 25 percent. However, the higher fees - for emission levels in 2004 and 2005 -would not be billed until 2006.

The members of the Ohio EPA/industry joint committee understand that we cannot proceed to implement the improvements to our permitting system without adequate revenue. If we exempt smaller sources without raising fees, we would need to divert other resources to make up for the loss. That would prevent us from continuing to meet permit timeliness requirements and delay implementation of permit processing improvements.

Division of Solid and Infectious Waste Management
The Division of Solid and Infectious Waste Management receives no GRF funding. The division receives 75 cents per ton of waste disposed, a fee which generates about $10.4 million annually. With this funding, the division currently supports 139 staff, who regulate the disposal of municipal garbage, construction and demolition debris, non-hazardous industrial waste, infectious waste, compost and scrap tires. Seventeen of these staff are geologists who help to confirm that newly proposed landfill sites will not harm underground aquifers, and monitor existing landfills to be vigilant for potential contamination of underground water supplies.

The per-ton fee which supports this division has not been increased in nine years. During that time, a number of new responsibilities have been added to the division's workload, ranging from new provisions for disposal of certain industrial wastes to a bill allowing the composting of dead animals. The legislature created the construction and demolition debris and infectious waste programs, but existing fees do not adequately cover their operations. The five-year rule review requirement has resulted in a massive rule package that has involved hundreds of hours of drafting, coupled with extensive interaction with stakeholder groups.

The current fee will not support the division at existing staffing levels through the '04-'05 biennium. We are asking for an increase of 25 cents, to generate a total revenue stream of $13.9 million for this division.

Your approval of this fee request will also enable us to maintain services at existing levels. It will also enable us to perform two duties assigned to local governments when they cannot do so themselves.

First, we have a statutory obligation to prepare a solid waste management plan for local districts unable to ratify a locally-prepared plan. While we try to work with local districts and the communities within them to avoid this situation, it does arise and when it does, the cost of preparing the plan is transferred to Ohio EPA.

Second, several of our program responsibilities are delegated to local health departments. Traditionally, the Agency maintains a list of "approved" health departments which are staffed and qualified to perform duties such as inspecting and licensing landfills and construction and demolition debris facilities. If a local health department is not performing its delegated duties adequately, the director can remove it from the approved list, in which case, Ohio EPA takes over the program in that locality.

In the past couple of years, with funding at the local level under the same pressures we face, we have encountered local health departments who simply wish to give the program back to us. They don't want to wait until deficiencies are identified and problems have occurred. They can tell by their own budget that they don't have the resources to carry out the solid waste program locally, and they want to redirect their efforts. We agree that this is better for the environment, so among our rule changes is a provision to allow this voluntary surrender of the program to occur. But to avoid simply transferring the potential for failure to Ohio EPA, we must adequately fund this division.

Finally, the fee increase will allow us to develop the training program for landfill operators mandated but not funded by the General Assembly. We agree that training will improve operation of sanitary landfills, reducing not only environmental problems but also nuisance complaints. It is a benefit we can provide to communities that are home to landfills, to help offset the negatives associated with them. However, we have not been able to fulfill this statutory obligation with current funding levels and will be unable to do so into the future without a fee increase.

Should the General Assembly decline to increase the solid waste disposal fee, we will be unable to fill 14 existing vacancies and will lack the funds to support an additional nine positions. The vacancies include two positions in the scrap tire unit, as well as field inspectors and engineers. Allowing them to go unfilled will result in slower cleanup at scrap tire dumps, fewer inspections of operating landfills, and slower review of permit applications. We would be forced to reduce spending for our enforcement program.

Division of Drinking and Ground Waters
Perhaps our most critical need is in the Division of Drinking and Ground Waters. I think you will agree that nowhere does the issue of environmental quality resonate with the public more than in the area of safe drinking water. I am concerned, frankly, about our ability to continue to provide the assurances that Ohioans have come to rely upon without the additional revenues requested in this budget.

Fees adopted for the drinking water program in 1994 were adequate at that time and produced some carry-over funding. That is no longer the case, and the Division has been in deficit spending for the past several years. We will be unable to maintain existing positions without new revenue.

Staffing in this program is already well below recommended levels. A national model for drinking water programs indicated the need for 195 people at Ohio EPA in SFY' 04 and 212 in SFY '05 in order to carry out the mandates of the federal Safe Drinking Water Act. With this budget, we can support 112 positions. Clearly, we are well below ideal staffing levels, particularly since we have already cut nine positions due to budget cuts in the current biennium. Nevertheless, we are not asking to increase staff at this difficult time. Rather, we seek only to maintain existing positions. Absent the revenues in this budget, we will need to eliminate 25 positions at the same time that we face a significant increase in workload.

In 1996, Congress reauthorized the Safe Drinking Water Act, adding many new requirements. Ohio EPA has 13 rule packages in development that will bring the State's rules into equivalence with these new federal requirements. We were grateful for Speaker Householder's sponsorship of House Bill 321 in 1997 that allowed us to accept these new responsibilities, and we fully intend to honor the Legislature's confidence by completing these new rules, which protect public health by addressing evolving issues such as new limits for lead, copper, and arsenic; provisions to limit the public's exposure to bacteria and viruses through drinking water; development of training programs for water plant operators; and annual reports to consumers about the quality of the water in their own system.

The federal law includes deadlines for local water systems to comply. Many systems, particularly smaller systems, will need significant technical assistance from us in order to do so. For example, a total of 254 systems do not currently meet new standards for surface water treatment, arsenic, and disinfection byproducts. Only with the funding in this budget will we be able to provide the technical assistance needed to help these systems comply and avoid enforcement.

Our fee proposal would increase fees for plan approval, operator certification, laboratory certification, and license to operate. All are critical to maintaining safe drinking water in Ohio.

For example, we are responsible for approving engineering plans for new and upgraded drinking water plants. We currently receive about 1800 plans annually. However, we expect that number to increase for two reasons. First, some systems will need to install new technology to meet changing federal requirements. Second, drinking water systems are currently being asked to assess their vulnerability to terrorist attack, and many will want to install early-warning technologies. Our ability to review engineering plans and to evaluate new treatment technologies will be significantly impacted by a reduction in revenues below what is contained in this budget.

We are also responsible for making sure that the people who operate drinking water plants on a daily basis are qualified to do so, and that the laboratories that test drinking water quality are providing reliable results. Allowing either the operators or the labs to go without adequate oversight opens the door to potential public health impacts.

Other programs
Air pollution control, solid waste management and drinking water are the programs for which we are seeking fee increases. I need to speak briefly about the Division of Surface Water as well, because this division uses the largest total of GRF funding.

The water resources this division protects are used by 357 public entities for drinking water supplies, and by countless Ohioans for recreation. The surface water program has lost 40 positions in the last five years due to the increase in operational costs and budget cuts. Nonetheless, the division has taken numerous steps to improve its operations. For example, three years ago. the division had a 50 percent backlog in discharge permits. Today, that backlog is under 20%, and we are committed to attaining the U.S. EPA goal of a maximum 10% backlog by 2004.

In my last budget testimony, I spoke about the TMDL program - which stands for Total Maximum Daily Load. This is a detailed analysis of a stream segment that is not meeting its water quality goals. We evaluate how much pollution is impacting the stream, and where it is coming from. Then we develop strategies to correct the situation, ideally in consultation with local stakeholders.

Ohio is under a federal mandate to complete TMDLs in approximately two-thirds of the state's 331 watersheds over the next 10 years. I stated at the beginning of this biennium that failure to provide the funding necessary to make suitable progress would likely result in a lawsuit. It has.

Although the litigants are supportive of our process to complete these studies, they are attacking the pace - which is directly related to a lack of funding. Several states have already lost similar suits in court, and have been ordered to complete this work in as little as 17 months. This is, in essence, wasted effort. A meaningful study with reasonable strategies for improving streams cannot be done in such a short time frame. States are forced to fall back upon the one solution they can readily control, which is more permit restrictions on community sewage treatment plants and industries. The financial burden on communities and businesses can be considerable. This is not the result we are seeking.

With existing resources, Ohio EPA estimates it will complete only about 135 plans -two-thirds of the total needed - by 2013. During that same time frame, collection of new water quality data is likely to result in identification of nearly 100 additional impaired watersheds that would require cleanup plans. At current funding levels, 135 cleanup plans would represent less than half (45 percent) of the total work required.

It is crucial that we preserve the GRF funds in this budget for the Division of Surface Water so we can continue to perform comprehensive studies that result in the best solution for our waterways and our local communities. Already, budget cuts have impaired our ability to process water quality samples in our laboratory, so we will need to cut back on sampling this coming summer. That will mean less real world data on which to base our recommendations, making information from the local communities that much more vital in developing workable plans. If Ohio defaults on its TMDL obligation. U.S. EPA will do the plans with minimal information or public comment. The results will be binding on the regulated community and could result in substantial expenditures by cities and businesses to meet new requirements.

In addition to funding staff, GRF dollars match federal grants. Millions of dollars of federal funds potentially will be lost without required state matches, impacting programs that clean up Lake Erie and deal with diffuse sources of water pollution such as parking lots, roadways and farms.

HWFB
Finally, I am proposing to eliminate the Hazardous Waste Facility Board. The Board, a separate entity from Ohio EPA, is charged with issuing permits for new hazardous waste facilities and processing major modifications at existing facilities. Frankly, the Board's workload no longer justifies its continued operation. When it was created in 1981, there were 336 hazardous waste facilities in Ohio. Today there are 44. Because businesses are reducing the amount of waste they generate, there is no longer a growing market for new facilities. In the past two years, the Board has been working on one permit application.

Ohio EPA currently provides most of the upfront review of permit applications and modifications before they are transferred to the Board. We also process permit modifications that were exempted by the legislature from needing Board approval. We can assume the Board's responsibilities without additional staffing or expense.

Currently, the Board is supported from the same fee account that supports our Division of Hazardous Waste Management. By preserving the $380,000 annually the Board currently spends, we will maintain our ability to fund overall oversight of hazardous waste facilities in Ohio.

Mr. Chairman, members of the Committee, this is a very abbreviated overview of our funding request. I look forward to working with members of the House as the budget proceeds. Please feel free to contact me or my legislative staff for any information you may need. Thank you.