Maryland Releases Assessment of Future Financing Needs for Bay Restoration

The State of Maryland released a long overdue report on Monday regarding the state’s plan to finance its implementation of the Chesapeake Bay Total Maximum Daily Load (Bay TMDL) requirements.  The report was prepared by the Environmental Finance Center at the University of Maryland on behalf of the Maryland Department of the Environment, the Department of Natural Resources, and several other agencies in response to a 2014 request by the budget committees of the Maryland General Assembly.

Originating from a request in early 2014 by the joint chairs of the budget committees, the report was supposed to be released along with a companion report on past expenditures associated with restoring the Chesapeake Bay in time for preparation of the fiscal year 2016 budget this past winter.  However, in the preface to the report on historic expenditures, the agencies indicated that the report on future funding needs would be delayed until after review by the new Administration.  As such, the report may provide a glimpse at future strategies for Bay restoration in Maryland.

The report highlights three “takeaway” points, including:

1. The State is currently on track to meet Bay TMDL obligations for 2017 and 2025;  
2. No new State-based taxes or fees are needed in the future;  
3. There is an opportunity in the future to emphasize greater “cost efficiency, innovation, and project effectiveness.”

Another likely point of interest to the budget committees and other legislators is this figure: $4.4 billion, which is the estimated cost to reduce pollution from existing sources through 2025 when all practices must be in place to meet the Bay’s water quality standards.  This does not include the additional cost of mitigating future pollution resulting from economic and population growth, estimated to be an additional 10 percent to 20 percent.  For context, the state’s previous cost estimate for implementing the Bay TMDL was more than $14 billion, albeit over a longer time period between 2010 and 2025.  It’s unclear whether the “no new State-based taxes or fees” claim would remain valid if the $4.4 billion price tag for bay restoration is revised back upward in the future.

The report lists several important caveats accompanying the $4.4 billion estimate.  First, the cost estimate assumes that the numerous funding streams intended to focus on Bay restoration are, in fact, reserved for that purpose and not diverted by the state in setting the budget.  Second, the authors caution that additional costs may be needed to expand Bay restoration efforts if existing programs and activities are not properly enforced.  The report’s authors emphasize an interesting balancing equation for policymakers between regulating pollution sources and funding pollution controls – the more stringently the state enforces its pollution control regulations, the less it must spend on new or expanded pollution control programs and projects. 

Finally, the report may have tipped off a future shift in the way that Maryland constructs its Bay TMDL strategy around the 2017 midpoint assessment.  To date, the State’s “Phase II” Watershed Implementation Plan (WIP) has been written with a nod to what it referred to as "equity," which comes at the expense of “efficiency.”  In other words, the state chose to spread the cost and effort among the pollution source sectors more evenly than would be the case if it were to focus solely on the most cheap and efficient means to restore the Bay.  It has long been known that many agricultural best management practices are among the cheapest ways to achieve water pollution reductions, while many stormwater and septic system upgrades are relatively expensive.  But the state chose to de-emphasize agricultural reductions in its WIP strategy and focus disproportionately on the stormwater and septic system sector in an effort to more “equitably,” shift the burden to more Marylanders.  A shift toward greater efficiency likely means asking the agriculture sector to do more, while compensating farmers by purchasing nutrient credits – a potentially dangerous proposition, as nutrient trading can lead to pollution “hot spots” and other issues if the trading rules aren’t crafted very carefully.

The report’s findings and recommendations will no doubt provide a framework for Maryland policymakers going forward as the General Assembly debates how to allocate budgeted resources in the 2016 and 2017 legislative sessions and as the Department of the Environment and the Administration craft modifications to the State’s Bay TMDL strategy as part of the Phase III WIP to be released after the 2017 midpoint assessment. 

CPR will provide additional analysis of this important report and its implications as part of an ongoing series of blog posts covering the progress of each jurisdiction through 2014.