SENATE BILL REPORT

                  ESHB 1837

              As Reported By Senate Committee On:

                Ecology & Parks, March 30, 1995

Title:  An act relating to water quality account distributions.

Brief Description:  Establishing limitations on distributions from the water quality account for the period July 1, 1995, through June 30, 2000.

Sponsors:  House Committee on Agriculture & Ecology (originally sponsored by Representatives Chandler and Dellwo).

Brief History:

Committee Activity:  Ecology & Parks:  3/22/95, 3/30/95 [DPA-WM].

Ways & Means:  4/3/95.

SENATE COMMITTEE ON ECOLOGY & PARKS

Majority Report:  Do pass as amended and be referred to Committee on Ways & Means.

  Signed by Senators Fraser, Chair; C. Anderson, Vice Chair; McAuliffe, McDonald, Spanel and Swecker.

Staff:  Cathy Baker (786-7708)

Background:  In 1986, the Legislature created the water quality account and funded it through sales taxes on cigarettes, tobacco, and water pollution control equipment through fiscal year 2021.  Most of the funds available from the water quality account are appropriated to the Department of Ecology (Ecology).  State law directs Ecology to distribute the water quality account funds in the following way: 

!No more than 50 percent for water pollution control facilities that discharge directly into marine waters;

!No more than 20 percent for groundwater projects, of which two-thirds must be devoted to the Spokane-Rathdrum Prairie aquifer;

!No more than 10 percent for freshwater lakes and rivers;

!No more than 10 percent for nonpoint water pollution control projects; and

!A 10 percent discretionary category for projects determined by the department.

This statutory distribution formula expires on June 30, 1995.

In addition, state law requires that 2.5 percent of the total distribution must be appropriated to the state Conservation Commission.  The commission uses this appropriation to fund water pollution control activities conducted by local conservation districts. The statutory provision dedicating 2.5 percent of the water quality account distribution to the Conservation Commission expires on December 31, 1995. 

Ecology is authorized by law to enter into extended grant payments with local governments.  The amount of the grant payment cannot exceed 50 percent of the project's eligible cost.   The grant payments can occur over a maximum of 20 years.  Money appropriated by the Legislature from this account first must pay the department's contractual obligations for the extended payment.  Currently, Ecology is making extended grant payments of $12.5 million per year for the construction of the West Point sewage treatment plant in Seattle. 

Under current law, if the taxes that fund the water quality account do not generate $45 million per year, the State Treasurer must transfer state general funds to the account in an amount sufficient to equal $45 million.

Summary of Amended Bill:  The Department of Ecology is directed to distribute water quality account funds according to a new formula.  Eighty percent of the funds is distributed for grants or loans for implementation of water pollution control facilities and activities.  Twenty percent is distributed for grants or loans for comprehensive planning related to water quality.  A definition of implementation and comprehensive planning is provided.  This 80/20 distribution formula applies until June 30, 2008.

The factors that Ecology must consider in awarding grants and loans are modified. 

The Conservation Commission receives an appropriation equal to 10 percent of the total funds that are appropriated to the Department of Ecology for distribution according to the 80/20 formula.  In calculating the commission's 10 percent share, the funds dedicated to extended grant payment contracts are not included.  Of the funds appropriated to the commission, no more than 30 percent may be used for water quality allocation grants to qualified conservation districts.  The remaining funds are provided as grants or loans to conservation districts through a competitive program.  Of the funds administered through the competitive program, 80 percent must be distributed for implementation and 20 percent for comprehensive planning.  No more than 8 percent of the commission's total appropriation may be used for administration.  This formula also applies until June 30, 2008. 

The commission must consider certain factors in awarding grants or loans from the water quality account.  The commission must also submit a biennial report to the Legislature on its use of the funds in the water quality account.   

Conservation districts may apply for grants and loans through Ecology, as well as through the commission.  However, in order to be eligible to apply through Ecology's program, a conservation district must demonstrate that it will plan or implement the water quality project jointly with another public body. 

Starting July 1, 1995, Ecology must obtain prior legislative approval before entering into any new extended grant payment contracts. 

If general state revenues are not transferred to the account as provided in current law, the appropriations to Ecology and the commission are each reduced proportionately. 

Amended Bill Compared to Substitute Bill:  The 50 percent point/50 percent nonpoint distribution formula proposed in the original bill is replaced with a new formula.  The amended bill includes specific provisions dealing with how the water quality account funds are to be administered by the commission.  The amended bill also modifies the factors that Ecology is to consider in awarding grants and loans from the account. 

The amended bill does not contain any explicit provisions directing Ecology to enter into an extended grant payment contract with the city and county of Spokane.  The amended bill does not limit the dollar amount that may be dedicated to extended grant payments in any given year, although it does require that Ecology obtain legislative approval prior to entering into any new extended grant payment contracts. 

The original bill eliminated the requirement that general fund revenues be transferred into the water quality account if tax receipts are less than $45 million per year.  The amended bill retains this requirement.  

Appropriation:  None.

Fiscal Note:  Available.

Effective Date:  The bill contains an emergency clause and takes effect July 1, 1995.

Testimony For:  The bill will help direct more funding to nonpoint water pollution control projects and it will help support conservation district water quality programs.  Conservation district programs are an effective, voluntary means of addressing nonpoint problems.  The extended grant for Spokane is important in helping to prevent contamination of the sole source aquifer in that area.

Testimony Against:  Water quality dollars should be spent on the highest priority needs.  Providing an automatic set-aside for one type of program will mean that other high priority needs do not get funded.  Everyone should have to compete for these scarce dollars.  The removal of the general fund transfer will mean even fewer dollars will be available.  The distribution formula should be 80 percent for implementation and 20 percent for planning.

Testified (on Engrossed Substitute bill):  PRO: Jaclyn Reed, Conservation Commission; Bob Haberman, Assoc. of Conservation Districts; Bill Taylor, Mason Co. Conservation District; Paul Nee, Pierce Co. Conservation District; Mark Stiltz, Spokane County; CON: Mayor Tim Douglas, City of Bellingham; Curt Eschels, Assoc. of Counties; Maureen Morris, Assoc. of WA Cities; Bennie Barnes, City of Seattle; OTHER: Kathleen Collins, King Co. METRO; Linda Crerar, Dept. of Ecology; Dave Monthie, Dept. of Health.

SENATE COMMITTEE ON WAYS & MEANS

Staff:  Susan Lucas (786-7711)

Testimony For:  The striking amendment passed by the Ecology and Parks Committee has good provisions, including the addition of reclamation projects to the list of eligible types of projects, allowing for site-specific planning under the implementation category, maintenance of the general fund transfer, provision for competitive grants and the split between implementation and planning projects.  The provisions in the bill relating to the Conservation Commission are appropriate and should be amended to allocate funding before the extended grant payments are deducted.  The Conservation Commission already does partnering and obtains matching funds from a wide range of entities.  These provisions in the bill limit the commissions in this area. 

Testimony Against:  The Conservation Commission should receive funding commensurate with its current level, not an increased amount as provided for in the striking amendment.  The extended grant payment to Spokane should be addressed in the bill.  Water Quality Account funds should not be diverted to purposes other than water quality projects.  Provisions in the bill move the statute away from the original intent of the Water Quality Account, specifically the provision that priority is given to small communities, that areas outside of water quality standards receive priority, that nonpoint activities receive priority and that the distribution should be geographically based.

Testified:  Ted Bottiger, Linda Arcuri, Washington Association of Conservation Districts; Jim Blundell, City of Yelm; Curt Eschels, Washington State Association of Counties; Maureen Morris, Association of Washington Cities; Ed Thorpe, Coalition for Clean Water.