Final Report of the Federal Facilities Environmental Restoration Dialogue Committee: CHAPTER 5
April 1996

FUNDING AND PRIORITY SETTING

Introduction

As federal agencies continue to implement cleanup programs at an increasing number of sites, and as these sites proceed through the cleanup process, the scope of the federal government's cleanup obligations will mount. As sites proceed through the cleanup process and there is a shift from cleanup studies into the more costly remedial construction phase, the government's annual cleanup funding needs will also increase. The ability of each agency to obtain sufficient funds to ensure execution of projected environmental cleanup activities in a given year will be an important factor in determining the overall success of the federal government's cleanup program.

The question of how to best set priorities and ensure adequate funding for federal facility cleanups was on the forefront of the Federal Facilities Environmental Restoration Dialogue Committee's agenda before it was even chartered as a federal advisory committee (see Appendix C). When the Committee released its Interim Report in February 1993 an entire chapter, "Recommendations for Improving Accountability Through Enhanced Stakeholder Involvement Throughout the Federal Budget Process," was devoted to this subject.

At the time the Interim Report was released it was anticipated that the overall federal budget context would become increasingly constrained as the pressure to reduce the deficit mounted. This expectation has come to pass and the federal budget will likely become even more constrained in the future. As many agencies shift from a study and assessment mode to actually conducting cleanups, the need for reconciliation between budget realities and constraints and ever increasing cleanup needs and desires is now ever more apparent and necessary.

The recommendations contained in the other chapters of the Committee's 1993 Interim Report that addressed information dissemination and public stakeholder involvement, particularly those that called for the establishment of SSABs, have been widely accepted and implemented. In contrast, at least some of the recommendations contained in chapter 4 of the Interim Report were more controversial. These recommendations addressed two subjects: consultation between the lead or regulated agency that is the recipient of cleanup funds and responsible for conducting cleanup, and the regulating agencies and other stakeholders on budget and funding matters; and allocation of cleanup funds in the event of a funding shortfall.

The recommendations that addressed consultation issues were far less controversial than those that addressed allocation issues. In fact, these recommendations have, with some exceptions, been accepted and are in the process of being implemented, similar to the recommendations contained in the other sections of the Interim Report. The Committee believes that the recommendations that addressed allocation issues, while admittedly complex, have been widely misunderstood. As described more fully below, the Committee called, and continues to call for, a flexible "fair share" approach to the allocation of funding shortfalls under certain circumstances, rather than an inflexible pro-rata allocation of funding shortfalls as many have interpreted the Committees recommendations.

The recommendations contained in this chapter update and revise those contained in the Interim Report. The primary objectives of the recommendations contained in this chapter are to:

• promote a credible process for planning and conducting federal facility cleanups at a reasonable pace that is protective of human health and the environment; and

• address funding shortfalls in a timely, open, understandable and cost-effective manner.

In order to meet these objectives, this chapter includes recommendations for a process whereby stakeholders are informed of, and to the greatest extent feasible, participate in important decisions that will affect the scope and schedule (i.e., pace) of work to be performed at federal facilities.

In contrast to the recommendations contained in the 1993 Interim Report, these recommendations focus even more strongly on building consensus, at the local facility level on cleanup priorities and budgets at early stages of the budget process, rather than relying solely on the expectation that the agencies responsible for conducting the cleanup will ask for sufficient funds to meet their cleanup obligations and, if Congress does not appropriate sufficient funds, the possibility of modifying cleanup schedules.

Background on the Nature of the Problem

Funding and priority setting for federal facility cleanups involve a dynamic and complex interplay between:

• cleanup studies and remedy selection decision making, including:
  • initial site identification and assessments;

  • remedial investigations and feasibility studies;

  • future use determinations; and

  • interim and final remedy selection;

• federal budgeting and appropriations;

• negotiation and implementation of formal cleanup agreements; and

• the stakeholder involvement process.

Several of the principles set forth in chapter 2 address elements of this complex interplay, including the role of negotiated cleanup agreements (Principle 8), risk assessments (Principle 9), future use determinations (Principle 11), cleanup studies (Principle 12), and stakeholder involvement (Principle 14). The sections that follow explain aspects of the federal facility funding and priority-setting process that were not addressed in the principles and are necessary to understand the recommendations contained in this chapter.

The Federal Budget Process

The connection between the federal budget process and the need to set priorities for federal facility cleanups is an obvious one funding constraints in combination with other factors, as described below, require the sequencing of cleanup activities. Even if the resources available for federal facility cleanups were unlimited, there would still be a need to set priorities. However, the availability of funds plays an obvious and ever increasing role in determining how cleanup priorities are established. Notwithstanding the obviousness of the connection between budgeting, funding, and priority setting, it is a connection that is fraught with a high degree of controversy and complexity.

The "Top-Down" Dimension

The federal budget includes both entitlement programs, such as Medicare, and discretionary programs under which all federal facilities cleanup programs are funded. In the context of the overall federal budget, the resources that are made available for federal facility cleanups are often seen as competing for a shrinking pool of discretionary resources.

Discretionary funding is controlled through annual appropriations bills. The Balanced Budget and Emergency Deficit Control Act of 1985 limits discretionary spending by placing caps on budget authority and spending for each fiscal year. If appropriations would exceed the budget cap, the Act establishes a procedure for across-the-board budget cuts. In recent years, Congressional action, through adherence to budget caps on appropriations bills, has limited the funding available for cleanup, as well as for many other needs of the Federal government. Congress makes funding decisions among many priorities, including the amount of funding to comply with Congressional mandates to agencies to meet environmental cleanup requirements. Thus, unlike non-Federal and private sector entities, the financial ability of Federal facilities to comply with Congressional mandates is determined by the President and Congress.

This "top down" dimension to the overall federal facility cleanup decision-making and priority-setting process manifests itself in the issuance of agency, department, or program budget "targets" and out year budget projections by OMB. These OMB budget targets and projections play a very important role in the overall federal facility cleanup decision-making and priority-setting process.

The top-down dimension is made even more complicated by virtue of the fact that each Administration handles the budget building process differently. Furthermore, even within a given Administration, OMB may treat one agency differently than another, or treat the same agency differently over the course of an Administration, in terms of the level and scope of cleanup programs and activities to which budget targets apply.

The Cyclical Dimension

In addition to the top-down dimension, another important feature of the federal budget process is the highly complex cyclical nature of the process. At any one moment in time, three budget cycles are occurring in an overlapping and simultaneous fashion. This includes the current execution fiscal year (FY), the upcoming fiscal year (FY+1), sometimes referred to as the budget year, and the following fiscal year (FY+2), sometimes referred to as the planning year. When all goes well, each cycle takes approximately two years to complete from beginning to end. When there are continuing resolutions, such as is the case for the FY96 budget, the process can take longer. The President's budget also includes budget projections that cover the five-year period beyond the year for which the budget is being produced.

The federal budget process when viewed in its totality is a highly complex process, but it can be simplified to its most basic features, as is done in Figure 2. As this chart shows, the fall of any given year marks the beginning of the budget cycle for FY+2, the middle of the budget cycle for FY+1, and the end of the budget cycle for the immediately upcoming fiscal year (FY). As will be discussed later, the cyclical nature of the budget process has implications for regulator and public stakeholder involvement in budget related decisions.

The "Bottom-up" Dimension

Added to these top-down and cyclical dimensions is a very important "bottom-up" dimension. This dimension starts at the local facility and affected community level and includes not only budget formulation and submission, but the site assessments and remedy selection decisions that form the basis of budget estimations and submissions. It is also important to note that INSERT .FIGURE 2 -- Lotus Chartthe "top-down" dimension comes full circle and completes itself when execution occurs at the local facility and affected community level. In its 1993 Interim Report, the Committee spent a considerable amount of time addressing the "bottom-up" dimension of the overall federal facility cleanup decision-making and priority-setting process. The Committee's recommendations on improving information dissemination, stakeholder involvement through the use of SSABs and other means, and improved consultation and sharing of information on federal facility cleanup budget matters were all intended to build the "infrastructure" that is necessary to support and enhance this "bottom-up" dimension and to improve execution at the conclusion of the "top-down" dimension.

Environmental Requirements and the Role of Executive Order 12088 and Negotiated Cleanup Agreements

Federal agencies must comply with certain laws and rules and regulations when implementing cleanup programs and activities. The laws that most frequently come into play include CERCLA (popularly known as Superfund), RCRA and applicable state law, and the Federal Facility Compliance Act (FFCA) which waives the sovereign immunity of federal facilities for enforcement actions under RCRA. In contrast to a budget-driven, top-down perspective, compliance with these laws is required but the pace of this compliance may be negotiable.

Executive Order 12088

In the development of the consensus that led to the 1993 Interim Report, as well as the consensus the led to the production of this Final Report, the Committee has spent considerable time discussing the role of Executive Order (EO) 12088 in the overall federal facility cleanup decision-making and priority-setting process. This executive order has, both a "bottom-up" and, because it is an executive order, "top-down" quality.

EO 12088, which was issued by President Carter in 1978, requires the heads of federal agencies to request sufficient funds in their budget submissions to OMB to meet all "pollution abatement" requirements. It is commonly understood that this executive order was intended to ensure that OMB was fully cognizant of such requirements as the President's budget was being developed and finalized.

Since this executive order was issued before the passage of CERCLA and before most federal agency cleanup programs were put into place, it was necessary to clarify its relationship to federal facility cleanup activities. In a 1983 letter to Congressman John Dingell, and then again in a 1991 letter to DOE, Department of Justice (DOJ) officials stated that EO 12088 can be extrapolated to cleanup requirements. Since this order cannot be subjected to judicial review and the President has not issued any orders that countermand the DOJ opinion, the Committee acknowledges that this executive order applies to federal facility cleanups, including those requirements that are specified as milestones set forth in negotiated cleanup agreements.

All of the major pieces of federal environmental legislation which have been created over decades of bipartisan effort (Clean Air Act, Clean Water Act, RCRA, CERCLA, Safe Drinking Water Act) contain provisions waiving the federal government's sovereign immunity from the application of analogous state laws, which are typically required for a state to be delegated federal authorities. EO 12088 is a Presidential directive that helps to ensure that Executive Branch decision makers are informed of the cost of complying with these laws. This is consistent with the principle that the federal government should comply with environmental laws in the same manner as private entities, as is recommended by the Committee in Principles 1 and 4 of chapter 2.

The Committee recognizes, however, that federal agencies are also required by OMB directives to submit budgets that do not exceed predetermined funding levels (i.e., budget targets). In addition many of the requirements that compete with cleanup funds are also required by executive orders, and federal law, as well as domestic and foreign policy objectives established by the President.

Although there are differing views on the Committee of the relative standing or importance of EO 12088 compared to these other requirements, the Committee acknowledges that federal agencies are finding it increasingly difficult to satisfy all of these requirements within either OMB funding targets or the amounts appropriated by Congress. In crafting the recommendations that follow, the Committee has tried to provide some balance between the pressures on federal agencies to satisfy the myriad of policy objectives and legal requirements.

These conflicting requirements come to a head at the level of the agency head. This is the person who is required to submit budgets within the budget targets established by OMB that comply with all legal environmental cleanup requirements, and other federal laws, executive orders, and domestic and foreign policy objectives established by the President. Agency heads often pass this conflict on to agency comptrollers and national program managers, upon whom they must rely when formulating and executing their agencies' budgets.

In addition to OMB targets, agencies have direct relationships with the Congressional committees that ultimately appropriate the funds to meet their cleanup obligations. These relationships typically entail communications between the relevant committee and agency at the early stages of the budget process as to expected funding levels, as well as decisions at the end of the budget process which actually set the funding levels. Members of Congress expect agency heads and national program managers to take these projected funding levels seriously.

Negotiated Cleanup Agreements

In the case of sites or facilities that are on the CERCLA National Priorities List (NPL), legally mandated cleanup requirements manifest themselves in negotiated cleanup agreements that are required by Section 120(e) of CERCLA. Although enforceable cleanup agreements are not required under CERCLA until after a Record of Decision (ROD) has been signed, in Principle 8 of chapter 2, the Committee recognizes the important role that negotiated agreements play in establishing and maintaining a credible federal facility environmental cleanup program, and as a mechanism for setting cleanup priorities and schedules even before an issuance of a ROD. The Committee also acknowledges that where regulatory authorities of states and EPA overlap, as they do at many federal facilities (e.g., the so-called RCRA/CERCLA "interface"), negotiated cleanup agreements can play a very important role in coordinating those authorities to minimize differing, inconsistent or conflicting requirements (see Principle 8 in chapter 2).

While the Committee believes that negotiated cleanup agreements can play an important role in establishing and maintaining a credible federal facility environmental cleanup program, it is aware of criticisms about negotiated cleanup agreements. These criticisms include statements that negotiated cleanup agreements are "unwieldy" and frequently contain "unrealistic schedules" with cleanup milestones extending years or decades into the future. The Committee believes most of these criticisms to be unwarranted and based on misperceptions of the agreements. The Committee attempts to address these criticisms and the tension between the importance of negotiated cleanup agreements and the requirements of the federal budget process in the recommendations on "Budget Consultation and Milestone Setting" that are found below.

The Importance of Strategic Planning, Life-Cycle Cost Analysis, and Project Baselines

Notwithstanding the criticisms of negotiated cleanup agreements, the Committee believes that significant progress has been made in recent years to establish credible environmental cleanup programs and agreements that are based on:

• facility-specific strategic plans that are developed and agreed upon by regulating and regulated agencies, and other stakeholders;

• life-cycle cost analysis of cleanup projects and activities; and

• "baselines" that reflect the agreed upon technical requirements, schedule, and cost of cleanup projects.

Strategic plans typically include a "vision" that guides cleanup efforts at individual facilities toward the achievement of statutory, regulatory and other agreed upon goals that have been developed through consultation with regulators and participation of other stakeholders.

At most facilities, life-cycle cost analysis is applied to a project baseline that is based not only on cost information, but technical and schedule considerations as well. The technical component of the project baseline considers factors such as design requirements and performance standards. The schedule component of the project baseline considers factors such as the logic used for sequencing activities, constraints, assumptions, duration and resources. The cost component of the project baseline considers factors such as direct and indirect costs, management reserve, and cost contingency. The project baseline is established according to a set of planning assumptions that should be developed in consultation with public stakeholders and agreed to by regulators and regulated agencies.

The Committee believes that the use of these three tools have significantly improved the quality of the cleanup decisions in general and provided for improved consultation with regulators and involvement of other stakeholders. This belief has affected the Committee's recommendations that follow.

The Importance of Stakeholder Involvement

The importance of adequate and meaningful stakeholder involvement has been stressed throughout both the Committee's 1993 Interim Report and this Final Report. Success for improved decision making and building crucial public support hinges on involvement of public stakeholders in the decision-making process. For the purposes of this chapter, suffice it to say that without the support of regulators and affected communities on cleanup priorities and schedules, the agencies responsible for conducting cleanups are not likely to succeed in accomplishing the cleanup tasks that are needed, nor in obtaining the funds that are necessary to accomplish the task.

It is important to note, however, that similar to negotiated cleanup agreements, stakeholder involvement is at different stages of development at different facilities. This is especially true with regard to the establishment and utilization of advisory boards. It is also true that trust issues are more pronounced at some facilities in comparison to others. Notwithstanding these differences, the recommendations that follow are premised on proactive and strong efforts to involve regulators and other stakeholders in the intricacies of the federal budget process as it relates to the establishment and implementation of agreed-upon cleanup priorities.

Summary of the Problem

In summary, the basic problem that is addressed in this chapter of the Committee's report is that a tension exists among the requirements of the federal budget process and the federal facility cleanup decision-making and priority-setting process. The recommendations outlined below include a number of checks and balances that the Committee believes will help reconcile the potential conflict between budget targets on the one hand and cleanup requirements and schedules on the other.

Given the complexities inherent in the nexus between the various steps in the cleanup decision-making process, the federal budget process, the negotiated cleanup agreement negotiation and implementation process, and the stakeholder involvement process, the following recommendations are not intended to specify a detailed or prescriptive approach to priority setting. Instead they point to some key principles, features and options that the Committee believes will help to enhance trust, establish reasonable, credible and successful environmental cleanup programs, and reconcile the inherent conflict between "budgets versus requirements."

Recommendations

I. Overview

In recognition of the important linkage between funding availability and work to be performed, the Committee strongly recommends the active engagement of public stakeholders in the cleanup decision-making process. This applies to all decisions regarding scope, timing, and priority of activities to be performed, and to the greatest extent feasible, budgetary and funding matters. Where public stakeholders cannot provide direct input to the decision-making process because of timing constraints or other reasons, they should be advised of relevant decisions so that they retain confidence in federal agencies' efforts.

To involve public stakeholders in a meaningful manner, advisory boards at federal facilities should be used wherever they exist. In all instances, broad community involvement efforts, as described in chapter 3, should be used.

In addition to meaningful stakeholder involvement, federal facility cleanups depend upon a high degree of communication, cooperation, and consultation between regulated and regulating agencies. Furthermore, the success of federal facility cleanups requires that where multiple regulators exist (e.g., state, federal, tribal) they work together to eliminate or minimize imposing differing, inconsistent, or conflicting requirements.

The partnerships and relationships that have evolved during recent years are critical because they allow for public stakeholder and regulator "buy-in" to cleanup priorities and schedules during the early stages of the budget cycle. This early buy-in can be critical during later stages of the budget process in the event that a funding shortfall occurs and priorities need to be reestablished.

The recommendations contained in this chapter are designed to apply where negotiated agreements are required by law or otherwise should be used, as well as in instances where negotiated agreements are not appropriate.

II. Pre-appropriation Priority Setting of Cleanup Activities

Prior to appropriation of funds by Congress to an agency and the allocation of those funds to facilities and/or sites, a complex set of activities and interactions occurs that involve regulated and regulating agencies, and other stakeholders. These activities and interactions, which result in the development of cleanup budgets for sites, facilities and agencies, involves prioritizing and scheduling cleanup activities.

The Committee has developed a set of recommendations for a process to set priorities in a consistent, equitable, and understandable manner prior to appropriation and allocation of funds. These recommendations are intended to allow stakeholders to be informed of, and to the extent feasible, participate in important decisions that will affect the scope and timing of work to be performed at federal agency facilities.

A. Prioritize Activities Rather than Sites or Risk

The Committee recommends that priority setting at the facility level should not be limited to prioritizing the relative risks posed by site contamination but should go further to include prioritizing the activities that are designed to clean up the contamination. Thus, any effort to sequence cleanup priorities as needing to be done now, sooner, or later, or as being of high, medium or low priority, or whatever other priority-setting scheme is utilized, should ultimately focus on setting priorities for cleanup action rather than setting priorities based on the relative risks posed by site contamination. Relative risks will no doubt have a bearing on the setting of priorities for cleanup activities but, as described more fully below as well as in Principle 9, relative risk rankings should not become the de facto priorities. Other factors warrant careful consideration in addition to risk. Furthermore, as current law provides [CERCLA 120(e)(3)], required activities should not be put off indefinitely. Thus, even "low" ranking activities will require action as soon as practicable.

B. "Risk Plus Other Factors" Priority Setting

For some people the term "risk management" is understood to mean the consideration of factors in addition to risk to human health and the environment when making decisions about how to best manage or reduce such risks. For others, risk management still connotes too strong of an emphasis on human health risk. In other words, in certain instances factors that may have very little to do with human health risk may become the overriding factors in setting cleanup priorities. For this reason, the Committee has come to use the term "risk plus other factors" to refer to the consideration of risk to human health and the environment along with other important factors.

The Committee supports efforts of the regulated agencies to use risk-based priority setting to build their cleanup budgets, as long as priorities are set with the agreement of the regulators and in consultation with other stakeholders. In general, high-priority activities should be funded before medium-priority activities, and those should be funded before low-priority activities.

The assignment of priority levels to all agreed-upon activities or sites should provide the basis for reconsidering out year milestones and altering programmatic plans when appropriated funding does not match requested levels and when the affected facility has demonstrated it is developing and implementing cost savings measures. This applies to increases as well as decreases. Thus, even when agencies must respond quickly to Congressional actions, their changes should reflect regulator and public stakeholder input, to the greatest extent possible.

Even within the realm of human health and environmental risks, one of the most important functions of consultation and stakeholder involvement is to weigh the relative significance of dissimilar health impacts. For example, even if the "experts" agree that a specific chemical, as delivered to a specific population, cause N cancers, M miscarriages, and Q learning disabilities, there needs to be a process by which the seriousness of each problem is agreed upon. While the risk evaluation may indicate potential impacts, it does not indicate what action to take.

As stated in Principle 9, the Committee believes that in many circumstances "risk to human health and the environment is an important and well-established factor that should continue to be a primary consideration in federal facility cleanup decision making, including setting environmental cleanup priorities and enforceable milestones." Principle 9 goes on to state that "other factors warrant consideration in setting cleanup priorities and enforceable milestones."

In this section, the Committee wishes to elaborate on these points by stating that risk to human health, or its corollary, protection of human health is, at many sites, only a starting point for establishing cleanup funding priorities. The Committee also believes that in many other instances protection of the environment is the appropriate starting point for establishing cleanup funding priorities. Furthermore, in other cases, protection of human health and the environment is the appropriate starting point for establishing funding priorities for cleanup. The Committee strongly recommends that in those instances where protection of the environment is not used as a starting point for establishing cleanup funding priorities, it should be considered as one of the factors that are listed below.

Regardless of whether protection of human health or the environment (or both) is the starting point for establishing cleanup funding priorities, the Committee affirms that numerous other factors must be considered in setting priorities for sites and projects. As set forth in Principle 9 in chapter 2 the factors listed below should be considered in setting cleanup priorities:

a) cultural, social, and economic factors, including environmental justice considerations;

b) potential or future use of the facility, its effect on the local communities' economy, vitality, livability, and environmental quality;

c) the ecological impacts of the contamination and the proposed action to address it (in those instances where protection of the environment is not used as a primary basis for establishing cleanup funding priorities);

d) intrinsic and future value of affected resources (e.g., groundwater and fisheries);

e) pragmatic considerations such as availability and continuity of skilled workers, labs, cleanup contractors to complete the activity or the feasibility of carrying out the activity in relation to other activities at the facility (i.e., capacity and work flow logic), or both;

f) the overall cost and cost effectiveness of a proposed activity and especially the relative risk reduction value obtained by the proposed expenditure;

g) making land available for other uses, recognizing that land uses may change over time;

h) the importance of reducing infrastructure costs (e.g., $300 million is spent each year to monitor tanks at Hanford and $130 million is spent each year at Rocky Flats to safeguard special nuclear material);

i) the availability of new or innovative technologies that might accelerate or improve the ability to achieve a permanent remedy;

j) Native American treaties, statutory rights (e.g., American Indian Religious Freedom Act), and trust responsibilities;

k) regulatory requirements and the acceptability of the proposed action to regulators and other stakeholders;

l) supporting accomplishment of other high priority agency objectives;

m) life-cycle costs; and

n) actual and anticipated funding levels (the congressional budget appropriation, OMB apportionment, allotments of funds to agencies or departments and the facilities, and out year funding targets).

With regard to anticipated funding levels, the Committee recognizes the constraints on federal agencies to submit budget within OMB target levels, and also recognizes that there may be circumstances that warrant challenging those constraints.

The Committee believes that there is no widely accepted mechanism for integrating human health and environmental risk with other important factors. However, the Committee recommends, for a risk plus other factors prioritization system to work, the following conditions must be met: