Analysis: Before More State Forest Drilling, Ask What Happened To The Money The First Time
Before authorizing more drilling on DCNR’s State Forest land, let’s remember what the General Assembly did with the upfront revenues from State Forest Shale gas drilling authorized by Gov. Rendell in 2008-2009-- they immediately took the money to fill holes in the General Fund budget and it was never seen again.
In 2009, $60 million in revenue from those leases was transfer to the General Fund without restriction on its use, an additional $143 million was transferred to the General Fund in the General Supplemental Appropriations Act that same year, there was a $180 million transfer to the General Fund in 2010 and in 2014 a transfer of $95 million to the General Fund. Click Here for more.
Since 2009, a total of $1.1 billion was diverted from DCNR’s Oil and Gas Lease Fund generated from upfront payments and royalties from leasing Shale gas drilling rights on State Forest lands and used balance the budget or to pay DCNR’s administrative expenses.
In 2017, the PA Supreme Court, citing the state’s Environmental Rights Amendment to the state constitution, found the General Assembly’s use of State Forest land drilling revenues to fund the General Fund and operating expenses unconstitutional because it violated the constitution’s requirement for the General Assembly to act as a public trustee for these resources. Click Here for more.
Since the 2017 decision, the General Assembly and the Governor have continued to make and propose diversions from the Oil and Gas Lease Fund and other similar special funds to pay operating costs or to balance the state budget; including in Gov. Wolf’s budget proposal on February 5.
The PA Supreme Court case, brought by the PA Environmental Defense Foundation, was remanded to Commonwealth Court to determine what specific transfers were unconstitutional and what the ultimate remedy will be consistent with the PA Supreme Court’s opinion. Click Here for more.
Here’s a thought-- the best remedy would be for the General Assembly to return ALL $1.1 billion in State Forest drilling revenues it took and fund much-needed green infrastructure and conservation projects.
That way we avoid more drilling on State Forest land and have green infrastructure funding for community-based restoration projects.
By the way, only about 35 percent of the EXISTING Shale gas leases on State Forest land have been developed and there has been very little recent activity, according to DCNR Secretary Cindy Adams Dunn.
$2.7 Billion Transferred
Or course, while we’re at it, why shouldn’t ALL of the $2.7 billion in environmental funding taken away from community-based environmental, recreation and restoration project and program funding in the last 16 years by the General Assembly and various Governors and used to balance the state budget or for other purposes be returned?
This ugly track record is why environmental groups take the positions they do on environmental funding, because they know if they don’t, those who make the funding decisions will take the easy way out and grab special fund dollars to balance the budget or divert community project funding elsewhere.
It’s important to note, the direction of funding to support local environmental projects and programs had been on a steady upward curve, with a few bumps, prior to the last 16 years.
Just some of the largest cuts or diversions include--
-- $1.1 billion diverted from DCNR’s Oil and Gas Lease Fund generated from upfront payments and royalties from leasing Shale gas drilling rights on State Forest lands and used balance the budget or to pay DCNR’s operating expenses;
-- $843 million (so far) from the elimination of the Act 339 wastewater treatment plant operations grants ($52 million a year);
-- $185.7 million from the Environmental Stewardship (Growing Greener) Fund to pay debt service on the Growing Greener 2 bond, and payments continue until 2031;
-- $100 million from the Underground Storage Tank Indemnification Fund to balance the budget, although this was supposed to be repaid and some of it actually was;
-- $69.7 million total transfer from the Keystone Recreation, Parks & Conservation Fund in 2 separate years to balance the budget;
-- $58.6 million total from the Marcellus Legacy Fund transferred to the Hazardous Sites Cleanup Fund over several years because the funding source for HSCA dried up;
-- $30.4 million from Attorney General Settlement from Volkswagen for vehicle testing violations transferred to balance the budget;
-- $20 million from State Forest Timber sales to balance the budget; and
-- $19 million total transferred from the Recycling Fund over 2 different years to balance the budget.
A more comprehensive list of cuts, diversions and reallocations is below.
Over the last 16 years, General Fund support for DEP environmental programs has been cut by more than 40 percent, and the agency’s staff reduced by nearly 30 percent.
General Fund support for DEP is now, with the Governor’s latest budget request, $30.5 million BELOW where it was in 1994-95-- $165.6 million. Now it’s proposed to be $135.1 million in FY 2019-20.
If the General Fund appropriation from 1994-95 had just kept up with inflation with no other increase, the appropriation to DEP would now be $274 million (in 2017 dollars).
DEP has had to replace those General Fund dollars by increasing fees charged on permit reviews and obviously cutting positions. In December, the Environmental Quality Board took action to raise DEP permit fees by $22 million in that one meeting alone.
Of course, not being content to just cut DEP’s General Fund budget by 40 percent, some legislators are urging the Independent Regulatory Review Commission to disapproved permit review fee increases that make up the difference.
This squeezes DEP at both ends of the funding spectrum and guarantees permit review times will continue to falter. Click Here for more.
In the FY 2019-20 budget proposal is adopted, less than 20 percent of DEP’s funding will come from the General Fund, 30 percent from the federal government and 50 percent from permits fees and some fine money.
In 1998, one-third of DEP’s budget came from the state General Fund, one-third from the federal government and one-third from permit fees, fines and penalties, a balanced partnership.
Biggest (Proposed) Cut In History
In 2017, House Republicans passed their version of the state budget which would have transferred over $317 million out of environmental and energy special funds used to support local environmental improvement projects and instead proposed to use it to pay agency operating costs.
That was actually a scaled back version of an earlier plan that would have taken over $450 million from environmental funds and applied the money to agency operating costs.
Needless to say, if either of these proposals would have been adopted in the final budget, it would have crippled funding for community-based environmental improvement projects.
As it was, the final FY 2017-18 budget included a provision requiring the Governor to transfer $300 million from special funds of his choice to balance the state budget. Gov. Wolf choose to take $10 million from the Keystone Recreation, Parks and Conservation Fund that supports local recreation and land conservation projects as part of that bundle.
Minimum Federal Standards
Over the past several years federal agencies have issued warnings to DEP that it doesn’t have the resources to meet minimum federal standards to administer certain federal programs like Safe Drinking Water, Air Quality, Surface Mining, Stormwater, Chesapeake Bay Watershed cleanup obligations and others.
In addition, the Trump Administration has threatened to cut funding to states for administering many of these same programs.
The FY 2018-19 budget did provide additional funding to add 35 new staff in some critical areas at DEP, but General Fund budget cuts still have several programs DEP administers for the federal government not meet minimum federal standards.
Drilling Impact Fee
The one notable positive addition to the ledger is the Act 13 drilling impact fee which has generated a total of $1.7 billion since it was established in 2012.
However, most of the 60 percent of the revenue from the impact fee given to county and local governments went to non-environmental purposes.
The PUC reported county and local governments received $610.536 million in drilling impact fees and reported spending just over $11.5 million on environmental projects through calendar year 2016. [Spend numbers are based on reports filed by local governments, which aren’t complete.]
What did help restore some of the project funding money cut or diverted over the years was money from the Act 13 impact fee program deposited in the Marcellus Legacy Fund.
About $442.9 million was allocated for community project funding through the Commonwealth Financing Authority ($194.9 million), Environmental Stewardship (Growing Greener) Fund ($180.6 million) and PA Infrastructure Investment Authority ($67.4 million).
The drilling impact fee should keep generating about $45 to $60 million a year to these agencies to fund local projects as long as the fee is in place.
In addition, about $58.6 million of the monies in the Legacy fund were allocated to the Hazardous Sites Cleanup Fund to pay for administrative and cleanup costs because most of the money going to this Fund disappeared when the Capital Stock and Franchise Tax was phased out.
Additional annual funding to cover administrative costs also comes from the Legacy Fund to DEP, the Fish and Boat Commission and county conservation districts.
Growing Greener 2 Bond
The $625 million Growing Greener 2 bond issue approved in 2005-06 did not add any new money for funding community projects. All it did was take 25 years of future revenues from the fee on municipal waste disposed in the state originally supporting the Environmental Stewardship Fund on a pay-as-you-go basis and bring it into the present to be spent over 6 years.
Once the funding ran out after those 6 years, project funding fell off a cliff because there was no more annual revenue from the fee to spend on projects. The original pay-as-you-go revenue source for the Environmental Stewardship (Growing Greener) Fund programs now mostly all went to pay debt service on the bond.
The Growing Greener 2 bond not only capped the Growing Greener project funding program, it took away future revenues for community-based projects and devoted it to debt service.
And the rule of thumb is if you float a bond-- say $625 million-- you pay back nearly 60 to 75 percent of the principal in interest, and fees give or take.
In very rough numbers, the lost revenue devoted to debt service interest on the Growing Greener 2 bond-- about $375 million-- nearly balances out the project funding gains from the Act 13 impact fee so far..
The prospect of this bond-debt payments-project-funding-falling-off-a-cliff scenario has been raised again in the $4.5 billion infrastructure bond proposed by Gov. Wolf.
The Growing Greener Coalition’s open letter to the General Assembly and the Governor on February 11 clearly outlines the need for funding to support community projects.
Funding needs for critical water infrastructure-- both hard and green-- to meet Pennsylvania’s obligations to cleanup our rivers and streams alone, is estimated to be, well, huge.
The increasing frequency of heavy precipitation events like happened last summer all across the state is driving the need for better ways to deal with stormwater to reduce pollution and flooding.
These are real needs real people and communities have and they’ve all but been ignored.
So given this appropriations track record of ups and mostly downs lately, it is no wonder environmental groups are fighting to keep and increase project funding for communities, local governments, watershed, land trust, mine reclamation, farm preservation, farmers, recreation and other local groups..
All these projects are the original P3s-- Public-Private Partnerships.
Without this backbone of funding, these projects simply won’t get done, and Pennsylvania is the poorer for it, both from an environmental and economic point-of-view.
These are investments in our communities that generate real economic return as well as improve the environment.
Solving this problem requires a New Cleaner & Greener Environmental Partnership between state government, communities, local governments and local groups to get these jobs done.
These groups are fighting for each one of us and our communities.
You can’t keep eating your seed corn, because if you do, next year’s harvest doesn’t come.
Itemized List Of Cuts/Diversions
Here's an itemized list of $2.747 billion (or so) in cuts and diversions of environmental funding over the last 16 years--
-- $843 million in Act 339 grants intended to support wastewater plant operations over the last 16 years were eliminated to balance the budget ($52 million or so each year);
-- $143 million diverted from the DCNR Oil and Gas Fund to balance the FY 2008-09 budget;
-- $79 million cut from the DEP and DCNR General Fund budget during FY 2009-10;
-- $60 million diverted from the DCNR Oil and Gas Fund to balance the FY 2009-10 budget;
-- $100 million in 2002 from the Underground Storage Tank cleanup insurance fund to balance the budget (although this was supposed to be repaid over 10 years);
-- $52.7 million “one-time” diversion from the Keystone Recreation, Parks and Conservation Fund in 2006 to balance the budget;
-- $50 million in 2007 and 2008 from the Environmental Stewardship Fund, which supports mine reclamation and watershed restoration, to fund the Hazardous Sites Cleanup Program because there was no agreement on how to fund that program;
-- $185.7 million in FY 2007-08, 2008-09, 2009-10, 2010-11, 2011-12, 2012-13, 2013-14, 2014-15, 2015-16, 2016-17, 2017-18, 2018-19 (thru 2031) from the Environmental Stewardship Fund to pay debt service on the Growing Greener II bond issue and taking funding away from restoration projects each year for the next 25 years – reflecting a pattern of only environmental programs being required to address their own bond debt service;
-- $15 million “one-time” transfer from the Recycling Fund to the General Fund to balance the FY 2008-09 budget;
-- $18.4 million put into budgetary reserve in 2008-09 from the Department of Environmental Protection and Department of Conservation and Natural Resources;
-- $5 million reduction in Resource Enhancement and Protection (REAP) farm conservation tax credit program in FY 2009-10;
-- $102.8 million cut from the DEP and DCNR General Fund budget in FY 2010-11 budget;
-- $180 million diverted from the DCNR Oil and Gas Fund to General Fund in proposed FY 2010-11 budget;
-- $5.5 million reduction in Resource Enhancement and Protection (REAP) farm conservation tax credits in FY 2010-11;
-- $5 million in additional cuts to the agencies to balance the FY 2010-11 budget;
-- $3.9 million in across-the-board cuts to help fill gaps caused by reduced federal Medicaid appropriations-- $2.4 million from DEP, $1.5 million from DCNR;
-- $669,000 from the Safe Water line item in DEP's budget;
-- $102.8 million cut continued from the FY 2010-11 DEP and DCNR General Fund budget in FY 2011-12 budget;
-- $8.3 million mid-year budget freeze cuts additional resources for environmental programs: Agriculture: $2.6 million; DCNR: $1.5 million; and DEP: $4.2 million;
-- FY 2012-13 budget eliminates $11.8 million in General Fund monies from DEP, and $2.5 million from DCNR;
-- FY 2012-13 budget continues the $102.8 million cut in FY 2010-11;
-- FY 2012-13 budget for the State System of Higher Education zeroes out funding again for the PA Center for Environmental Education ($368,000) and McKeever Environmental Center ($213,000);
-- FY 2013-14 budget continues the $102.8 million cut in FY 2010-11;
-- FY 2013-14 budget for the State System of Higher Education zeroes out funding again for the PA Center for Environmental Education ($368,000) and McKeever Environmental Center ($213,000);
-- FY 2013-14 budget diverts $106.5 million from the Oil and Gas Fund to support DCNR operations;
-- FY 2014-15 budget diverts $73 million from the Oil and Gas Fund to support DCNR operations.
-- FY 2014-15 budget diverts another $95 million in royalties and payments from the Oil and Gas Fund to balance the state budget;
-- FY 2014-15 budget diverts $20 million from State Forest Timber operations to balance the state budget;
-- FY 2014-15 budget diverts $6.2 million from the Alternative Fuels Incentive Grant Fund to balance the state budget;
-- FY 2014-15 budget continues the $102.8 million cut beginning in FY 2010-11;
-- FY 2014-15 budget for the State System of Higher Education zeroes out funding again for the PA Center for Environmental Education ($368,000) and McKeever Environmental Center ($213,000);
-- FY 2014-15 budget cuts $500,000 for Delaware River Basin Commission;
-- FY 2015-16 transfer of $31.9 million to pay for DCNR operations from Oil and Gas Lease Fund;
-- FY 2015-16 budget cuts $15 million coming from Environmental Stewardship Fund for watershed restoration projects;
-- FY 2015-16 budget cuts $900,000 for Sewage Facilities Grants;
-- FY 2015-16 budget continues the $102.8 million cut in FY 2010-11;
-- FY 2015-16 budget for the State System of Higher Education zeroes out funding again for the PA Center for Environmental Education ($368,000) and McKeever Environmental Center ($213,000);
-- FY 2016-17 budget cuts $35 million coming from Environmental Stewardship Fund for watershed restoration projects;
-- FY 2016-17 budget for the State System of Higher Education zeroes out funding again for the PA Center for Environmental Education ($368,000) and McKeever Environmental Center ($213,000);
-- FY 2017-18 budget transfers $9 million from Recycling Fund to General Fund
-- FY 2017-18 budget transfers $5 million from Alternative Fuels Incentive Fund to General Fund
-- FY 2017-18 budget cuts transfer from Marcellus Legacy Fund to Hazardous Sites Cleanup Fund by $5 million;
-- FY 2017-18 budget transfers $12 million from CBF High Performance Green Buildings Program to new CFA Natural Gas Infrastructure Program;
-- FY 2017-18 Governor puts $1.125 million from DCNR in budgetary reserve;
-- FY 2017-18 transfers $30.4 million from Attorney General settlement from Volkswagen to General Fund;
-- FY 2017-18 transfers $20 million from DCNR Oil and Gas Lease Fund to Marcellus Shale Legacy Fund for distribution to the Environmental Stewardship Fund;
--FY 2017-18 transfers $15 million from Marcellus Shale Legacy Fund to Hazardous Sites Cleanup fund;
-- FY 2017-18 appropriations for Susquehanna and Delaware River Basin Commissions and Interstate Commission on the Potomac River cut by half - $477,000;
-- FY 2017-18 $10 million transfer from the Keystone Recreation, Parks and Conservation Fund to the General Fund as part of a larger $300 million set of transfers to help balance the state budget;
-- FY 2017-18 budget for the State System of Higher Education zeroes out funding again for the PA Center for Environmental Education ($368,000) and McKeever Environmental Center ($213,000);
-- FY 2017-18 transfer of $61.2 million to pay for DCNR operations from Oil and Gas Lease Fund;
-- FY 2018-19 appropriations for Susquehanna and Delaware River Basin Commissions and Interstate Commission on the Potomac River cut by half - $477,000; and
-- FY 2018-19 transfer of $48.7 million to pay for DCNR operations from Oil and Gas Lease Fund.
(Written by David Hess, former Secretary of DEP. Send comments to: PaEnviroDigest@gmail.com.)
More Recent Related Stories:
[Posted: June 2, 2019]
|Go To Next Article|