Funding Water Quality Improvement

Clean water is essential to Vermonters’ health, economy, and way of life. It is important to the State’s ecology, tourism industry, drinking water, and property values. But right now over 350 Vermont lakes, ponds, rivers, and streams have unsatisfactory water quality. The legislature has sought to address this complex issue over the past three Bienniums.

The Vermont Clean Water Act (Act 64) of 2015 was an important step in addressing water pollution statewide and meeting the State’s legal obligations under the federal Clean Water Act. Act 64 did not, however, include a necessary element for the successful implementation of the Vermont Clean Water Act: a long-term and stable funding source for the Clean Water Fund.

The State Treasurer, in a Clean Water Report submitted in January 2017, estimated that it will cost $2.3 billion over 20 years to achieve compliance with water quality requirements. The Treasurer projected that revenue from current sources available for water quality improvement over that period would be approximately $1.06 billion, leaving a 20-year total funding gap of $1.3 billion. To fill this gap, the Treasurer recommended that the State raise $25 million in additional revenues per year to dedicate to water quality. The gap in funding would initially be filled through bonded debt. The Treasurer evaluated a host of other revenue options to meet the funding needs starting in fiscal year 2020.

Based in part on the Treasurer’s report, the legislature in 2017 established a working group on water quality funding to develop draft legislation by December 2017 to implement an equitable and effective long-term funding source to support clean water efforts. The Working Group unfortunately failed to recommend a long-term funding method and instead proposed that the legislature continue to rely on government bonding for the next five years.

Recognizing that relying on bonding is not a sustainable long-term funding solution, the legislature made incremental progress last Biennium on identifying other revenues for the Clean Water Fund. It decided to continue a property transfer surcharge that was a component of Act 64 and to use unclaimed deposits on returnable beverage containers (called escheats). These sources of funds were still not sufficient, however, to cover the shortfall in necessary funding.

This year, the legislature reached agreement on an additional dedicated long-term funding source, which the Governor is expected to accept. The legislature decided to allocate 6% of the existing rooms and meals tax to the Clean Water Fund, resulting in $7.5 million in the upcoming fiscal year and almost $12 million annually thereafter. The tax is not being raised, but rather being reallocated. With these appropriations, along with funding included in the Capital Bill (bonded debt), the total available for clean water will be $50 million for fiscal year 2020 and $55 million per year thereafter.

These funding sources are not necessarily the revenue streams that I would have preferred to fund water quality improvements. I would have favored a revenue source that would promote mitigation (in other words, one that would encourage positive or discourage negative behavior) and would have a more direct relationship with water quality. An excise tax on fertilizers (reflecting the impact of phosphorous runoff) or a per-parcel fee (taking into account the impact of impervious surfaces on stormwater runoff) would have been more apt. Nevertheless, I did support the proposed solution because it relies on identified, dedicated and sustainable funding streams that the State can count on to protect this vital resource.