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2nd Senate Budget Hearing: DEP: 12 Special Funds Will Have Funding Shortfalls By 2018

DEP Secretary John Quigley Monday told the Senate Appropriations Subcommittee on Infrastructure, Environment and Government Operations DEP will have 12 special funds running in the red by 2018 and at least two of those funds will require legislative action to fix.

He said to make up for the shortfalls in the other funds, DEP will be proposing permit fee increases to cover administrative costs in the absence of more General Fund support for the agency.

Secretary Quigley said DEP needs a major investment in information technology capacity to not only become more efficient and effective, but to potentially reduce the need for more staff in the future.

He pointed to a proposal by Gov. Wolf to increase DEP’s Oil and Gas Program staff by 50 positions last year, saying if the agency can invest in iPads and mobile technology and the systems to back them up, perhaps DEP would not need all those new positions.

Secretary Quigley said DEP has been looking at many other opportunities to cut costs by consolidating functions within the agency, partnering with other agencies to share costs, reviewing the need for office space and closely reviews filling every single staff vacancy.

He told Senators, however, that DEP has been the victim of relentless and debilitating budget cuts for more than a decade.

“This agency isn’t lean, it’s emaciated, and we can’t cut our way to cleaning up the environment,” Secretary Quigley said. “We are perilously close to not meeting the agency’s mission. 

“Every function of the agency has been compromised” by the cuts in DEP’s budget.

He added, regulatory requirements don’t go away, if anything they expand.

[Note: DEP administers over 40 state environmental protection and public health and safety laws assigning responsibilities to the agency.  None have ever been repealed, but many have been replaced with new and more significant requirements.]

At the same time, Secretary Quigley said, DEP’s employees have been doing an outstanding job, in spite of the lack of resources, meeting Permit Decision Guarantee Program review deadlines 89 percent of the time, where the agency is given complete applications, and 80 percent of the time even when applications are incomplete.

Secretary Quigley said, overall, 22 percent of DEP’s costs are funded by the General Fund, 28 percent are federal funds and 50 percent come from permit review and administration fees and a small percentage from penalties. 

He said DEP has a complement of about 2,683 positions, down from 3,200 in 2002-03.

This second hearing on DEP’s budget by the Senate Appropriations Committee was chaired by Sen. John Eichelberger (R-Blair).  He noted the Subcommittee is bipartisan, but Democratic members choose not to attend this hearing.

Click Here to watch the Subcommittee hearing online.

While much of the hearing was a rehash of the original Senate hearing on DEP’s budget, here’s a quick summary of some specific questions asked during this hearing--

-- Special Funds Shortfalls: Sen. Eichelberger (R-Blair) said there were 12 or 13 special funds associated with DEP that will go into the red shortly and asked if DEP had any proposals for dealing with the issue.  Secretary Quigley said 12 special funds at DEP will go into the red sometime in 2018.

He said DEP will propose fee increases to address the shortfalls in most of these funds, but legislative action will be needed in at least two cases-- the Hazardous Sites Cleanup and Storage Tank funds.  He noted fee increases are in a 3 year review schedule and always lag behind costs because of the nature of the regulatory process used to increase fees.

In a related question, Sen. Elder Vogel (R-Beaver) said the proposal to increase the state waste tipping fees would only result in the fee being paid by consumers.  Secretary Quigley said the reason for the fee increase was to provide enough money to transfer $35 million to the Environmental Stewardship (Growing Greener) Fund and Hazardous Sites Cleanup Fund.

If the fee increase is not enacted, these funds would do without or alternatives would have to be found.

Sen. Scott Wagner (R-York) said he can’t support increased fees, or any appropriations increase, until agencies “turn over every rock” to reduce costs.

-- How Much Work Does DEP Do That Isn’t Mandated By Statute?: In response to this question by Sen. Eichelberger (R-Blair), Secretary Quigley said all of what they do is required by federal or state laws.  “DEP got rid of all the extras a long time ago.”

-- Level Of Effort To Meet Federal Funding: Sen. Robert Mensch (R-Montgomery) asked about the level of effort needed to keep federal funding coming in for DEP programs.   Secretary Quigley said the agency has seen slight increases in some federal funds, but most of the federal funds require matching state funds which has caused problems.  He pointed to two examples: the mining program had to turn back $6.5 million in federal funding because they didn’t have state match over the last 6 years and EPA withheld $3 million in Chesapeake Bay Program funding because DEP did not have adequate staff.   He noted the Bay Program funding has since been released because of the Chesapeake Bay Program eboot announced in January.  (Click Here for more information on shortfalls in DEP funding and staff  identified by federal agencies.)

-- Information Technology: Sen. Robert Mensch (R-Montgomery) asked again about investments in information technology noting the cost of hardware has dropped significantly over the years.  He said he recognizes “we are dropping the ball on investments in information technology” and would like to help address the issue since he comes from an IT background.

Secretary Quigley said DEP is still using 1990s technology, like the eFACTS database that will shortly not be supported by the company who wrote it.  As a result, he said, DEP’s ability to do its basic work is being hamper.  

He noted there was a $2 million information technology line-item in the Governor’s budget-- $1 million to replace eFACTS and $1 million for mobile technology like iPads for inspectors.

Staff Buy Their Own Technology: Sen. Mensch suggested, and Sen. Scott Wagner (R-York) supported, the idea that DEP employees might be asked to buy their own technology.  Secretary Quigley pointed out that technology needs to connect to and that’s where there is a real challenge for DEP.

-- Measuring Agency Performance: Sen. Eichelberger (R-Blair) said one of the general issues the Subcommittee is looking at is to identify more accurate agency performance measures.  Secretary Quigley said he would like to have a management dashboard, but DEP isn’t built for that sort of approach and needs a major investment in new information technology, like replacing eFACTS, to get to that level.

-- Severance Tax Lobbying: Sen. Wagner (R-York) questioned why Secretary Quigley was spending so much time lobbying for the Governor’s natural gas severance tax proposal.   Secretary Quigley said he responds to questions when asked, but he doesn’t spend time lobbying for the severance tax.  [Note: None of the severance tax revenue generated by Gov. Wolf’s proposal would go to support DEP programs.]

Sen. Pat Browne (R-Lehigh) later commented the Wolf Administration keeps saying the state doesn’t have a severance tax and asked if changing the name of the Act 13 drilling impact fee to severance tax would deal with the problem or doesn’t the impact fee raise enough money?

Secretary Quigley said the state needs to find additional new, sustainable sources of revenue to deal with a $2 billion structural deficit in the state budget.  He said he believes the existing impact fee has an effective tax rate of 1.5 percent and disputed the 5.5 percent tax rate published by the Independent Fiscal Office.  

He noted the CEOs of 5 different natural gas companies recently pointed to how uniquely positioned they were in Pennsylvania because of the low cost of production and proximity to market to deal with the current natural gas market.  He said the severance tax proposal, which includes a credit for impact fees paid and certain production costs, would place Pennsylvania squarely in the middle of the pack of those states with severance taxes.  

Secretary Quigley said Gov. Wolf wants the gas industry to succeed and said the Administration is addressing one of the industry’s biggest problems-- getting natural gas to market.  About one-third of finished wells cannot be connected to any market because the pipelines are not there.  The Governor’s Pipeline Infrastructure Task Force made 184 recommendations, including 84 for which DEP has responsibility, to help with the pipeline development in a responsible way.  He said the first recommendation was for DEP to have more staff.

-- Privatizing Oil and Gas Regulatory Program: Sen. Browne (R-Lehigh) asked if it was possible to get along with privatizing parts of the Oil and Gas Program to avoid hiring some permanent staff given the ups and downs of the industry.  Secretary Quigley said while the number of new permits have declined by about one-third, DEP still has vacancies in the program.  He said he believes permit reviews are a basic function of government and in some instances DEP may be prohibited from having private, third parties do reviews of permit applications.  He noted DEP has to justify filling every single vacancy in his agency.  In earlier budget testimony, Secretary Quigley, pointed out DEP has also not been inspecting conventional and unconventional wells with the frequency they believe is necessary.

-- EPA Clean Power Climate Rule:  Sen. Scott Wagner (R-York) asked if DEP should  discontinue any work on plans to meet EPA’s Clean Power Plan Climate Rule until the courts have reviewed the issue.  Secretary Quigley said DEP has put work on a Pennsylvania Plan on a “low boil,” but was continuing to work on a plan at a reasonable pace until there is some clarity from the federal courts.  He said DEP is also “wrapping up” its work with a National Governor’s Association project on modeling alternative compliance strategies for the state. 

However, Secretary Quigley said if DEP stops work altogether, the state would be behind the curve if the EPA rule is upheld.  He noted renewable energy and cheap natural gas will continue to replace expensive and inefficient coal-fired power plants in the future regardless of what the state does.  There is also a concern, he said, about defining the role nuclear power plants will play because they represent 95 percent of carbon-free energy generation now in the state.

-- Nutrient Credit Purchases By State: Sen. Wagner (R-York) asked about the program suggested by Sen. Vogel to have the state buy nutrient credits to meet Chesapeake Bay requirements.  Secretary Quigley said having the state buying nutrient credits would be unprecedented and very expensive.  The technology advocated by Sen. Vogel’s legislation, he said, would require the state paying an estimated $11 per pound of nutrient reduction, when currently credits are selling for less than $1 for practices like forested buffers.  DEP is actively looking at market-based solutions and is proposing changes to its market-based Nutrient Credit Trading Program to make it more competitive.

-- New Growing Greener Program: In response to a question from Sen. Vogel (R-Beaver), Secretary Quigley said the Governor’s Office has had discussions about a new Growing Greener funding initiative with stakeholders and would be anxious to continue that dialogue with legislators.

-- Recycling Law Update: Sen. Eichelberger (R-Blair) said waste haulers in his district have expressed concerns about finding markets for all the recycled materials they pick up and asked if it wasn’t time to take another look at the Act 101 recycling law.  Secretary Quigley said he would like to have a conversation about increasing the state’s recycling targets and pointed to a specific concern now is changing the electronics waste recycling law to deal with electronics recycling issues.

-- Permit Reviews: In response to a question from Sen. Wagner (R-York), Secretary Quigley said a number of factors have affected permit review times.  He said DEP lost 671 positions over the last decade--  441 of those were permit writers and inspectors.  He pointed to the Harrisburg Regional Officer as an example of the impact of these reductions where 4 permit writers have 200 permit applications on their desk with new ones coming in every day.  He said DEP has also lost people to the private sector because of higher private salaries and is having difficulty filling  positions. 

In addition, in the near future, 30 percent of DEP’s workforce-- about  800 people -- will be old enough to retire and their experience will be lost to the agency.

In spite of these difficulties, Secretary Quigley said DEP, under its Permit Review Guarantee Program, meets the deadline for permit reviews 89 percent of time when applications are complete and even 80 percent of the time when they aren’t complete.

He also explained, permit reviews at DEP, he said, are not “box checking operations,” they require actual review.

Secretary Quigley said 39 percent of the permit applications coming in the door at DEP have deficiencies, according to a recent study by DEP, and the private sector needs to “up their game,” but, he added,  “I will own any problems in my agency.”

Sen. Wagner followed up by saying there should be an “Angie’s List” for consulting firms and understood the issue because he was personally involved in a permit issue where he was not well served by a consultant.

Status Of Permit Reviews: Sen. Eichelberger (R-Blair) expressed concerned about permit applications moving at their own pace and going into a “black hole.”  Secretary Quigley said the Permit Decision Guarantee Program provides deadlines for review where applications are complete. He said he also understand there will be applications that have significant economic development opportunities behind them.  It all comes back to limited staff, he said.

Length Permit Review Times: Sen. Mensch (R-Montgomery) asked if there are other ways to address the permit review issues by lengthening permit review times a bit, for example.  Secretary Quigley said they have been looking at a variety of ideas for refining DEP’s permit review programs including electronic permitting.

--Restructuring Programs:  Sen. Browne (R-Lehigh) asked about opportunities to restructure programs and the agency to save money, create synergies and make staff more effective.  Secretary Quigley said they have reorganized to meet Chesapeake Bay commitments, but there was no opportunity to save money.   He pointed out again water quality-related programs in particular have been hard hit by budget cuts and “we are underwater” as the agency.  He pointed to the 25 percent reduction in staff in Safe Drinking Water Program as another example.

-- Controlling Overtime: In response to a question from Sen. Pat (R-Lehigh) about the steps taken to control overtime, Secretary Quigley said he has authorized some overtime for permit processing.  He pointed out DEP staff responds to emergencies that frequently involve work on weekends or outside normal work hours and overtime is authorized in those circumstances.

Click Here to watch the Subcommittee hearing online.


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