2005: Allocating Scarce Environmental Funds: The Case Of Watershed Funding In the US

Rebecca Toseland (Economics) Yale University

As the world's fresh water resources become increasingly scare, understanding the way in which money is allocated to protect these precious resources becomes progressively more important. In summer 2005, a study was conducted to investigate the environmental and socio-political factors impacting the allocation of federal funds to states for domestic watershed projects. Project level data from the years 1990-2005 was collected from ten of the largest federally funded watershed aid programs run by the EPA, USDA, NOAA, Fish and Wildlife Service and the Army Corps of Engineers. The projects from each program were then organized by state and year and categorized as either "environmental" or "commercial" aid. Environmental and commercial shares of watershed aid were then calculated for each state for each year included in the study. The data set of environmental shares was run in two ordinary least square regression models, one for all fifty states and one for only coastal states, with a set of environmental and socio-political independent variables. A significant positive correlation was found in the fifty state model between Great Lake or coastal state status and environmental aid share and in both models between state GDP and per capita income and environmental aid share. In addition, a significant positive correlation was found in both models between high river water quality and environmental aid share while a significant negative correlation was found between high lake water quality and environmental aid share. This result may indicate an environmental policy balance between environmental benefit and probability of project success or speak to differing river and lake water management practices resulting from spillover issues associated with river watersheds located in multiple states.