A Framework for Reviewing EPA's State Administrative Cost Estimates: A Case Study

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About the Report

The Environmental Protection Agency (EPA) has a close and long-standing relationship with state governments. In addition to other responsibilities, our state partners implement a variety of programs to protect human health and the environment that are derived from federal law. As part of this ongoing relationship, EPA and state agencies routinely discuss a wide range of issues, including national, regional, and state priorities; annual work plans; barriers and drivers of success; and various management issues such as the administrative implications for states (including operational costs) of implementing new delegated programs and regulations.

EPA, the Environmental Council of the States (ECOS)

, and several participating member states recently studied the administrative effects on state programs when EPA issues a regulation requiring action by states. Information was obtained from EPA economic reports developed when the regulations were promulgated and through questionnaires provided to the states about their own estimates of the costs they incurred to administer these regulations. The report presents findings from a few case studies and attempts to draw some comparisons between state and EPA cost estimates – exploring where differences appear and investigating potential reasons for these differences.

From the outset of the report, we understood that limitations in the methods and data availability meant that neither the cost estimates of EPA nor the states could be certain to give a definitive measure of the “true costs” to the states in administering the case study regulations. We also recognized that the analytic framework EPA uses to estimate the costs of new regulations does not correspond well with the budgetary or accounting-based framework states may rely upon to track their administrative costs for these same rules. In addition, the data collected for the report do not constitute a “statistically valid” sample of states and regulations from which to draw conclusions applicable to all states and EPA regulations. Nevertheless, the report did serve as a constructive effort to investigate the variety of issues associated with collecting and reporting information on state administrative costs – both for the EPA and the states

States differ tremendously from one another in how they need to address environmental issues, and the results in the report underscore this in terms of the variation in the costs and categories of costs that participating states said they incurred relative to the EPA-based estimates. In general, the study found no consistent trends in terms of the differences between the case study state estimates and the EPA-based estimates. Looking across the case study states for a given regulation, for example, some states incurred administrative costs above the EPA-based estimates, while others incurred costs that were lower than the EPA estimates. It was also common for the individual states to report administrative costs both above and below the EPA-based estimate for the four regulations examined in the report (an exception was Oklahoma, for which EPA-based estimates of the total cost of each regulation were reported to be lower than the state cost information for all four of the regulations included in the study).

The report includes several potential follow-up activities drawn from the lessons learned in the case studies and the efforts to gather and compare EPA and state administrative cost information. They include:

Understand what gives rise to situations where a state may believe an activity to be essential for rule administration, whereas EPA may view the activity as being at the discretion of the state to undertake, and therefore the activity would not be included in an EPA cost analysis.

Assess the time requirements for performing rule-related activities, including characteristics affecting start-up and recurring activities and their costs.

Consider having a subset of states track their administrative costs for a few new regulations.

Develop a practical and transparent way to examine and consider baseline costs where there are overlapping federal and state regulatory requirements.

Explore opportunities for EPA to provide states with more training and education on the new regulations and explore how this impacts state administrative costs.

Develop a comprehensive framework for use by EPA’s program offices in assessing the costs to states of administering federal regulations.

Update internal EPA guidance to ensure uniform estimation and reporting of administrative costs.

Present administrative costs in ways that would support more focused review and comments from the states .

At the September 2007 ECOS meeting, EPA released the report and proposed establishment of a joint EPA/State Task Force to continue this investigation. Drawing on the results of the report and other information on the subject, the Task Force will help inform the development of tools and information that can improve analytic guidelines and practices EPA uses when preparing state cost estimates for regulations.

EPA greatly appreciates the time and effort provided by ECOS and the six case study states that participated in the initial phase of this study - Kansas, New Jersey, Nevada, Oklahoma, South Carolina and Virginia. EPA also appreciates the willingness of states to continue this collaborative effort and looks forward to further discussions with our state counterparts as we accelerate the pace of environmental protection while maintaining the nation's economic competitiveness.

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	Size, name of PDF file
To download all Chapters and Executive Summary of Volume 1 in one PDF file: EPA Report Number 240/R-08-001	2,792kb,Volume 1.pdf
To download only the Executive Summary in one PDF file: EPA Report Number 240/R-08-002	827kb,Executive Summary.pdf
To download entire set of Appendices: A - D (Volume 2) in one PDF file: EPA Report Number 240/R-08-003	3,375kb, Volume 2.pdf

For persons seeking to obtain sections of the report in smaller files to ease retrieval of the document, please refer to the following files:
Report Cover	277kb, cover.pdf
Preface Acknowledgements Table of Contents Executive Summary	370kb, Exec Summary.pdf
Chapter 1: Introduction Chapter 2: Overview of Concept and Approach Chapter 3: Selection of Regulations for Analysis Chapter 4: Selection of States for Case Studies Chapter 5: Analytic Framework	209kb, Ch1-5.pdf
Chapter 6: Analyzing Case Study State Costs for Administering the Stormwater Phase II Final Rule	273kb, Ch6.pdf
Chapter 7: Analyzing State Costs for Administering the Disinfection Byproducts Regulation	225kb, Ch7.pdf
Chapter 8: Analyzing State Costs for Administering the Particulate Matter 2.5 Regulation	230kb, Ch8.pdf
Chapter 9: Analyzing State Costs for Administering the RCRA Organic Air Emission Standards (Subpart CC) Rule	307kb, Ch9.pdf
Table of Contents for Appendices	32kb; Appendix Table of Contents.pdf
Appendix A: Stormwater Phase II Final Rule Documentation	490kb; Appendix A.pdf
Appendix B: Stage 1 Disinfectant/Disinfection Byproducts Rule	599kb; Appendix B.pdf
Appendix C: Particulate Matter National Ambient Air Quality Standards Rule	671kb; Appendix C.pdf
Appendix D: RCRA Subpart CC Organic Air Emission Standards Rule Documentation	1,254kb; Appendix D.pdf
References for Appendices	42kb; Appendix References.pdf

Brett Snyder (BAMDD, Division Director):	202-566-2261	snyder.brett@epa.gov
Al McGartland (NCEE, Director):	202-566-2244
Office fax numbers:	202-566-2363 & 566-2338

A Framework for Reviewing EPA's State Administrative Cost Estimates: A Case Study

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