Negotiators use water funds despite EPA warning

JEFFERSON CITY, Mo. -- Ignoring warnings of potential financial penalties from the federal government, Missouri budget negotiators have gone ahead with a plan using a water loan fund to help balance the budget.

The Environmental Protection Agency has said Missouri could lose as much as $74 million in water funds because of the move.

But budget negotiators said Thursday that the EPA's warning came too late in the budget process to make a change.

Negotiators agreed on a compromise version of the budget early Thursday and lawmakers face a 6 p.m. Friday deadline to send a fiscal 2003 budget to Gov. Bob Holden.

At issue with the EPA is a state fund that provides loans to cities, counties, water districts or other government units for public drinking water projects or water pollution control projects.

Using $19 million

Budget negotiators have agreed to use $19 million from the fund to help pay principal and interest on state water pollution control bonds.

That frees up $19 million in general revenue to be used for other purposes throughout the budget.

But the EPA, which also channels federal money to the state fund, said using the money to pay off the state general obligation bonds would violate the federal Clean Water Act and a federal regulation.

As a result, the EPA would withhold $74 million in federal water funds intended for Missouri, said U.S. Sen. Kit Bond, R-Mo. Bond sent a letter to Gov. Bob Holden encouraging him to try to stop the diversion of state water loan funds.

The letter "came so late that it was difficult to deal with," said Senate Appropriations Committee Chairman John Russell, R-Lebanon.

"We didn't have time to argue."

Holden spokesman Jerry Nachtigal said Wednesday the governor understands why lawmakers would want to tap into the water fund as they face multimillion-dollar budget cuts.

But "the governor has never supported taking $19 million from that fund, and he has voiced those objections to those in the Legislature who are proponents of doing it," Nachtigal said.

Russell said if the EPA continues to press its case, Holden would have to decide how to settle the problem.

"The EPA, they're always kind of threatening things," Russell said.

"Sometimes they yield, and sometimes they don't."

Missouri law states that money from the Water and Wastewater Loan Fund can be used to pay principal and interest on state revenue bonds or general obligation bonds.

House Budget Committee Chairman Tim Green also expressed frustration that the EPA was intervening at the end of the state budget process.

"We have the laws that say we can" use the water fund to pay off state bonds, said Green, D-St. Louis.

"We have the bureaucrats in Washington who say we can't."

The public debt bill is HB1101 (Green).