CONTENTS:

To ratify the Great Lakes-St. Lawrence River Basin Water Resources Compact and to establish related requirements

State Fiscal Highlights

STATE FUND	FY 2007	FY 2008	FUTURE YEARS
General Revenue Fund – Department of Natural Resources, Office of the Governor
Revenues	- 0 -	- 0 -	Potential additional funding for Compact implementation if needed
Expenditures	Potential increase in administrative costs to assist in implementation of the Compact and Council activities	Potential increase in administrative costs to assist in implementation of the Compact and Council activities	Potential increase in administrative costs to assist in implementation of the Compact and Council activities
Water Management (Fund 516) – Department of Natural Resources
Revenues	- 0 -	- 0 -	Potential additional funding for Compact implementation if needed
Expenditures	Potential increase in administrative costs to assist in implementation of the Compact	Potential increase in administrative costs to assist in implementation of the Compact	Potential increase in administrative costs to assist in implementation of the Compact

Note: The state fiscal year is July 1 through June 30. For example, FY 2007 is July 1, 2006 – June 30, 2007.

· If the Department of Natural Resources experiences any costs associated with implementation of the Compact, such costs are likely to be paid from either the Division of Water’s GRF appropriation item 733-321, Division of Water, and/or appropriation item 725-620, Water Management (Fund 516). An estimate of such costs is unknown. It is possible any additional costs could be absorbed within the Department’s existing budget. Future funding may offset any costs associated with state-specific programs and database development since these activities are not expected to be implemented until two to five years after the effective date of the Compact.

· Any costs associated with the Governor’s involvement in the Great Lakes-St. Lawrence River Basin Water Resources Council and other related duties will likely come from the General Revenue Fund.

· Any costs associated with Ohio's role in balancing the budget of the Council including partially funding the salaries and administrative expenses of any professional and administrative staff hired to assist the Council in implementing the Compact will likely come from the GRF and/or specific funds from the Department of Natural Resources.

Local Fiscal Highlights

LOCAL GOVERNMENT		FY 2006	FY 2007	FUTURE YEARS
Various Political Subdivisions
Revenues	- 0 -		- 0 -	- 0 -
Expenditures	Potential increase in administrative costs to assist in implementation of the Compact		Potential increase in administrative costs to assist in implementation of the Compact	Potential increase in administrative costs to assist in implementation of the Compact
Local Courts
Revenues	Potential minimal gain from court fees		Potential minimal gain from court fees	Potential minimal gain from court fees
Expenditures	Potential minimal increase to adjudicate case related to the Compact		Potential minimal increase to adjudicate case related to the Compact	Potential minimal increase to adjudicate case related to the Compact

Note: For most local governments, the fiscal year is the calendar year. The school district fiscal year is July 1 through June 30.

· Various political subdivisions may or may not experience additional increases in administrative expenses depending on their involvement in the Compact and assistance provided to the Council. Any additional costs are estimated to be minimal at this time.

· Local court systems may experience a minimal increase in administrative expenses to adjudicate cases where persons or entities have violated any of the provisions of the Compact or felt they have been aggrieved by any action of ODNR relative to implementation of the Compact. Any costs are likely to be offset by court costs and/or monetary relief provided by the prevailing party.

Detailed Fiscal Analysis

Background on the Great Lakes-St. Lawrence River Basin Water Resources Compact

The purpose of the Great Lakes-St. Lawrence River Basin Water Resources Compact is to protect the watershed of the Great Lakes and certain portions of the St. Lawrence River. The eight Great Lakes states that are part of the Compact include: Illinois, Indiana, Michigan, Minnesota, New York, Ohio, Wisconsin, and Pennsylvania, together with the Canadian provinces of Ontario and Quebec. The Compact will not become binding and effective until each state ratifies it by enacting identical concurring legislation and Congress consents to it. The bill is the means by which Ohio may ratify the Compact.

Under the Compact the governors of the Great Lakes states are to serve on a regional body that is to be responsible for receiving certain information and for approving or disapproving certain proposals regarding the withdrawal, diversion, or consumptive use of water in the Great Lakes-St. Lawrence River Basin. The Compact prohibits, with certain exceptions, all new or increased diversions of water resources from the watershed of the Great Lakes and certain portions of the St. Lawrence River into another watershed. In addition, it establishes a decision-making standard for the management and regulation of new or increased withdrawals and consumptive uses of such water resources. The decision-making standard is designed to ensure that such withdrawals and consumptive uses will result in no significant individual or cumulative adverse impacts to the quantity or quality of the waters and water dependent natural resources of the source watershed.

Organization and Procedure of the Council

The bill requires the Compact to be implemented by a Council consisting of the governors of each of the eight Great Lakes states and the provinces of Ontario and Quebec. Furthermore, the Council is empowered to adopt a budget. The amount required to balance the budget is to be apportioned equitably among the parties by unanimous vote of the Council. Finally, the Council may employ or appoint professional and administrative personnel, including an Executive Director to carry out the purposes of the Compact.

Currently, the amount of the Council's annual budget as well as the amount paid to any professional and administrative staff to carry out the purposes of the Compact is unknown at this time. Hypothetically, say the annual budget for the Council was $500,000, each participating state in the Compact would presumably pay a share of this cost. In Ohio's case this could equate to approximately $50,000 considering there are eight states and the Canadian provinces of Ontario and Quebec that will be part of the Compact. This amount could be more or less depending on the annual budget adopted. The budget would likely pay for administrative staff salaries and necessary supplies, equipment, rent, etc. It is possible that some of the Council's administrative expenses may be offset by any grants or gifts the Council receives. Ohio's share of these expenses would likely come from the General Revenue Fund or appropriations to the Department of Natural Resources.

Implementation of the Compact

Each of the Great Lakes states that are a party to the Compact must develop and maintain a water resources inventory regarding the location, type, quantity, and use of water resources in the watershed of the Great Lakes and certain portions of the St. Lawrence River, including withdrawals, diversions, and consumptive uses of the water resources. Each state that is a party to the Compact also must develop and implement a water conservation and efficiency program, either voluntary or mandatory, within its jurisdiction. Prior to development of a mandatory program, the bill requires the Governor to obtain authorization via a concurrent resolution adopted or bill enacted by the General Assembly. The program must be consistent with basin-wide goals and objectives. The Compact provides for public notice and participation in many matters as well. It also requires the parties to the Compact, together with the provinces to conduct a periodic assessment of the cumulative impacts of withdrawals, diversions, and consumptive uses from waters of the Basin for purposes of future implementation of the Compact.

Fiscal Impact on the Department of Natural Resources and Governor’s Office

After the General Assembly provides authorization, the bill requires the Director of Natural Resources to adopt rules to enforce the Compact and take appropriate actions to effectuate its purposes and intent. The bill also requires any appropriate state agency or governmental officer to enforce the Compact and take appropriate actions to effectuate its purpose and intent. The bill also requires the governors of participating states to assist in administration of Great Lakes-St. Lawrence River Basin Water Resources Council.

The Department of Natural Resources. The Department of Natural Resources could incur costs associated with the following duties:

Ø The Director of Natural Resources attending Great Lakes-St. Lawrence River Basin Water Resources Council meetings;

Ø Studying the cumulative impacts of withdrawals from the Basin and developing a mechanism to assess any impacts;

Ø Providing staffing and technical assistance to the Council;

Ø Adopting and enforcing rules to implement the Compact;

Ø Managing and regulating new or increased withdrawals, consumptive uses, and diversions from the Basin;

Ø Reviewing and approving proposals for applicants to withdraw, divert, or conduct consumptive use of water in the Basin;

Ø Creating a program for management and regulation of withdrawals and consumptive uses of water in the Basin (within five years);

Ø Maintaining a water resources database of the water resources in the state (within five years);

Ø Developing water conservation and efficiency goals and objectives regarding a water conservation program and submitting annual reports (within two years); and

Ø Providing technical assistance to the Great Lakes-St. Lawrence River Basin Water Resources Compact Advisory Board.

The Department indicates that any costs associated with adopting rules and/or implementing the provisions of the Compact will be handled with current budgeted resources and current staff. Also many of the costs associated with the implementation of a consumptive use program, creation of a water resources database, and submission of annual reports will not be required until two to five years after the Compact’s effective date. By that time the Department may capture additional budgetary appropriations, if needed, and/or reallocate existing program funds to cover such costs.

Any costs will likely come from the Division of Water’s GRF appropriations or non-GRF appropriations. The Division of Water is already using existing funds to develop assessments of water supplies in principal drainage basins to identify the source of supply needs for all uses, deficiencies, and alternative solution recommendations. The Department also currently maintains a Water Withdrawal Facility Registration Program database and is engaged in various water education and awareness programs. These current activities may help in fulfilling any of the Department’s responsibilities in implementation of the Compact.

The Office of the Governor. The Governor may experience costs associated with the following duties:

Ø Attending Great Lakes-St. Lawrence River Basin Water Resources Council meetings;

Ø Consulting with, advising, and aiding Ohio, other states, and political subdivisions in the formulation of such agreements;

Ø Making any recommendations to the General Assembly, legislatures of other states, governmental agencies, and political subdivisions that the Governor considers desirable in order to effectuate the purposes of the Compact; and

Ø Consulting with and cooperating with the Compact administrators of other states that are parties to the Compact.

Any expenses associated with the Governor's duties are likely to be paid for from the General Revenue Fund. The Office of the Governor is supported by GRF appropriation item 040-321, Operating Expenses which would likely be used as a source of funding to support a portion of the Governor's duties.

Fiscal Impact on Local Governments

Local governments may experience costs associated with the following:

Ø Attending, assisting, and or providing information for Council advisory committees;

Ø Submitting an application if the local government withdraws, diverts, or conducts consumptive use of water in the Basin;

Ø Cooperating with ODNR and providing information for a statewide water resources database;

Ø Annually reporting on the volumes of water withdrawn, consumed, or diverted from the Basin;

Ø Assisting in ODNR’s cumulative impact assessment of withdraws from the Basin; and

Ø Adjudicating any cases related to enforcement and implementation of the Compact.

It is uncertain how many local governments would actually be involved in implementation of the Compact and the associated fiscal impacts, if any, from that association. At this time it appears that any additional administrative expenses costs would likely be minimal. Presumably local governments in the Northern Ohio region would be primarily affected. Any costs to local court systems for cases filed regarding an action related to the Compact may be offset by court costs and/or any relief provided by the prevailing party.

Water Resources Compact Advisory Board

The bill establishes the Great Lakes-St. Lawrence River Basin Water Resources Compact Advisory Board. The board will consist of the Director of Natural Resources or the Director's designee, the Director of Environmental Protection or the Director's designee, various experts and representatives from the private sector, two members from the Senate who are not members of the same political party, two members of the House of Representatives who are not members of the same political party, and one representative of a municipal government in the Lake Erie Basin.

The bill requires the Advisory Board to meet on a regular basis; members of the board will receive no compensation for serving on the board, and the Department of Natural Resources shall provide technical support to the Advisory Board. The Board shall be convened for the purposes of developing recommendations for the legislation that is necessary to implement and effectuate the requirements and purposes of the Compact. The Advisory Board shall present its final recommendations to the Governor and the General Assembly no later than 18 months after the effective date of this section.

Any administrative expenses such as filing, printing, and copying documents are expected to be minimal. It is unknown which DNR fund will cover these minimal costs. Any costs will likely be absorbed into DNR's existing budget.

LSC fiscal staff: Jonathan Lee, Senior Budget Analyst

HB0574HR.doc/rh

BILL:	Sub. H.B. 574		DATE:	December 8, 2006
STATUS:	As Reported by House Economic Development & Environment		SPONSOR:	Rep. Dolan
LOCAL IMPACT STATEMENT REQUIRED:		No —	Minimal cost