Vermont Environmental Trust Fund Establishment

An Analysis of Potential Strategies
PRS Briefs
PRS Policy Brief 1415-02
Thursday, March 12, 2015

In 2013, Vermont developed the Lake Champlain TMDL Phase 1 Implementation Plan to reasonably assure the U.S. Environmental Protection Agency that Vermont will reduce phosphorus loading in Lake Champlain attributable to nonpoint sources. This plan proposes the establishment of the Vermont Clean Water Improvement Fund (VCWIF) to assist the Vermont Agency of Natural Resources in delivering financial and technical support to communities, businesses, farmers and other stakeholders to help improve the clean water of Vermont. This report proposes a variety of potential funding mechanisms for VCWIF. VCWIF will require a budgetary expenditure of $156 million per year for ten years to fulfill the plan laid out by the State, which at the same time excludes broad- based taxes as a possible source of funding. Given the fact that Vermont’s entire existing Municipal Pollution Control Budget is approximately $51 million, the goal of $156 million per year is an ambitious objective to attain. Regardless, Vermont’s Department of Environmental Conservation currently offers a wide array of grants and loans for watershed planning and water pollution control projects into which VCWIF could tap. Furthermore, the specifics of fund administration need to be developed.

Beyond analyzing existing in-state and federal sources of financing, this report utilizes a comparative methodology to analyze environmental trust fund models adopted by the states of North Carolina, Nebraska, and Maryland. Operating on diverse funding schemes and intriguing administrative methods, the aforementioned states manage to accumulate annual revenues ranging from $14 million to $50 million. Synthesizing those findings into a set of recommendations applicable to Vermont, this report also examines various fees, taxes, and other sources of revenue that may be uniquely suited to Vermont. Additionally, it also provides further recommendations on viable fund administration strategies and ways of ensuring buy-in from Vermont’s voters. Given the constraints placed on VCWIF’s funding sources, the report concludes that additional research into more comparable environmental trust funds, such as at the county level, is necessary and that reaching the goal of $156 million for even one year will be extremely difficult, if not impossible, without state appropriations or the use of broad-based taxes.