Budget Deal and the Environment

[Gawain Kripke <gkripke@foe.org>]

Economics for the Earth
A Friends of the Earth Publication
On Issues Linking People, Prosperity and the Planet
May 30, 1997

 SHADES OF GREEN:
 Environmental Components of the Balanced Budget Deal

SUMMARY

Both the House and the Senate have now enacted very similar budget
resolutions that lay out how Congress intends to implement the five-year
balanced budget deal between President Clinton and Congressional leaders.
There is good news, bad news, and a lot of question marks for the
environment. 

Although they did not receive a lot of press coverage, environmental
concerns played a role in the long budget negotiations between the White
House and Congressional leadership. Some important environmental spending
programs are explicitly "protected" as part of the deal. However, many
important issues remain to be decided by the future actions of the
Congressional committees on appropriations and tax. 

PROTECTING ENVIRONMENTAL PRIORITIES

Through the budget negotiations, the White House fought to protect a set
of priority spending programs including environmental programs, education,
early childhood programs, and job training. Not all of the White House
priorities made it into the final agreement. The environmental priorities
that are "protected" in the final balanced budget deal are:

* Environmental Protection Agency Operating Programs: 
The Environmental Protection Agency (EPA) is the flagship of environmental
protection in the federal government. The budget agreement protects the
EPA's operating programs, which are the core regulatory, enforcement,
research, and policy efforts. The budget deal provides for funding of EPA
operating programs at the President's FY98 budget request of $3.5 billion,
an increase of $300 million above FY97. According to Administration
sources, the agreement mandates this funding level with an adjustment for
inflation for the next five years. This stable funding is a welcome
contrast to the budget attacks EPA suffered in 1995.

* Interior Department Priorities -- National Park Service, Land
Acquisition, Everglades: 
The balanced budget deal protects several priority programs and
initiatives lumped under the Interior Department. This includes
protecting the President's FY98 request of $1.2 billion for National Park
Service operations (an increase of $66 million over FY97). In addition,
the balanced budget deal protects the President's FY98 funding request for
restoration of the Florida Everglades in the National Park Service and
Army Corps of Engineers budgets. The balanced budget deal assumes $700
million in additional funds from the Land and Water Conservation Fund for
land acquisitions and exchanges (in addition to existing Administration
budget request of $166 million). According to White House sources, $315
million of this amount will be dedicated to resolving the disputes related
to the New World Mine near Yellowstone National Park and protecting
the"Headwaters" old growth forest. The remaining $385 million will be
available for other "high priority" federal land acquisitions and
exchanges. 

* Superfund Cleanups: 
The budget agreement provides $2.1 billion for the EPA's Superfund
hazardous waste cleanup program in FY98 and $8.4 billion over five years
(FY98-FY02). This is a major increase over the $1.3 billion provided in
FY97. The Clinton Administration has made accelerating cleanups a high
priority and proposed a major funding increase in its FY98 EPA budget
request. Whether this funding will actually materialize is in some doubt
because vague language has been included making the funding available "if
policies can be worked out." The balanced budget deal is not explicit on
whether this requires a full legislative reauthorization of the Superfund
program.

* Superfund II: Orphan Shares: 
Separately from the increased Superfund program funding, the budget
agreement provides for $200 million per year ($1 billion over 5 years) for
"orphan shares" of Superfund hazardous waste cleanups. Under the federal
Superfund program, "responsible parties" are liable to clean up hazardous
waste contamination. However, at some hazardous waste sites, financial
liability belongs to parties with limited or no ability to pay -- such as
bankrupt companies. Debate over how to handle these "orphan shares" has a
been a major issue in reforming the federal Superfund program. As with
the increased spending on Superfund, this new funding is contingent on a
poorly defined "policy agreement."

While these "protected" priorities are good things, enforcement of these
funding levels is not certain. Funding for these priorities relies on the
independent action of the House and Senate Appropriations Committees.
Assuring that these Committees provide the agreed-upon levels of funding
is a political matter that will require vigilance and cooperation between
the White House, the Committee Chairs, and the Congressional leadership. 

THE CRUNCH

While some environmental priorities were protected by the budget deal,
many others were not. Large areas of environmental protection face an
uncertain future under the balanced budget deal. Programs and priorities
that are not protected in the balanced budget deal face a budget crunch
that will set critical environmental, conservation, and energy programs in
a desperate competition with other national priorities this year and in
future years. Examples of important federal programs that may face severe
budget cuts include:

* energy conservation and renewable energy technology programs;
* fisheries management and coastal protection efforts;
* environmental research in many federal agencies;
* toxic and radioactive cleanups under the Departments of Defense
 and Energy;
* federal transit and livable communities programs;
 wetlands protection;
* wildlife and habitat protection in our National Forests, wildlife
 refuges, and other public domain lands. 

Aside from the cleanup programs under the Department of Defense and the
Department of Energy, virtually all federal environmental efforts are
funded from the broad category of "domestic discretionary" spending. From
FY97 (this year) to FY02, this pot of money will shrink considerably. 

More specifically, most environmental priorities are funded through the
"Function 300 - Natural Resources and Environment" account within the
broader category of "domestic discretionary" spending. Overall, "Function
300" will decline from approximately $21.5 billion in FY97 (this year) to
$21.2 billion in FY02 under the balanced budget deal. Accounting for
inflation, this means that there will be approximately 13 percent less
money available for environmental priorities in FY02.

[GRAPH NOT ATTACHED, PLEASE SEE <http://www.foe.org/act/bba.green.html>]

TRANSPORTATION AND TAXES: UNCERTAINTIES OF LIFE

When the budget resolution was considered by the House and Senate,
amendments were offered to increase transportation funding outlays by $12
billion over the amounts included in the balanced budget deal. Both
amendments failed, but only after aggressive lobbying by the Congressional
leadership to preserve the balanced budget deal. In the House, the
Shuster (R-PA)-Oberstar (D-MN)-Petri (R-WI)- Rahall (D-WV) amendment
failed by 214 to 216. In the Senate, the Warner (R-VA)-Baucus (D-MT)
amendment failed on a 51-49 vote. 

The failure of these amendments, and the strength of their support, raise
questions about the future of the budget and the looming reauthorization
of the Intermodal Surface Transportation Efficiency Act (ISTEA). Most of
the key players in the transportation debate have been pushing to increase
the money available for highway and other transportation spending. They
have been pursuing several strategies to increase spending from the
federal highway trust fund, including: shifting more gas tax revenues to
highway spending, taking transportation spending "off-budget," and
mandating increased spending out of the highway trust fund. The recent
budget vote represents a major setback to their effort. Whether and how
this will affect important environmental priorities within transportation
spending - like transit, air quality, and alternative transportation 

In the area of taxes, the balanced budget deal provides for $85 billion in
net tax cuts over five years. This includes a gross amount of $135
billion in tax cuts and $50 billion in "offsets." The specifics of the
tax cuts and offsets were left very vague in the budget deal, partly to
accommodate key Congressional Committee Chairs who insisted on having
discretion on how to allocate the tax cuts. However, the balanced budget
deal directed that the final tax legislation should include capital gains
tax reductions, estate tax reductions, education tax incentives, child tax
credits. (Friends of the Earth has produced a short analysis of how some
of these proposals could be structured to improve their environmental
impact. See <http://www.foe.org/act/bba.tax.html>) 

Documents released with the balanced budget deal indicate that efforts
will be made to include the Clinton proposal to provide tax incentives for
brownfields redevelopment. In addition, these documents indicate that
Superfund taxes will not be used to offset other tax cuts, assuring that
these revenues will be used for cleanups. 

For more information, please contact:
 Gawain Kripke <gkripke@foe.org>
 Brian Dunkiel <bdunkiel@foe.org>
 Dave Hirsch <hirsch@foe.org>
 Friends of the Earth
 1025 Vermont Avenue, NW - Suite 300
 Washington, D.C. 20005
 (202) 783-7400 ext. 212

To see more information on the world wide web, check out
<http://www.foe.org>