California has failed to spend $455 million in federal safe-drinking-water funds and isn't adequately managing the program that administers the money, U.S. Environmental Protection Agency officials said.
"Nearly half a billion dollars that could be actively used today is being held and basically parked," said Jared Blumenfeld, EPA regional administrator.
Blumenfeld's office on Friday sent a notice of noncompliance to the California Department of Public Health, warning that if the state doesn't take corrective action within 60 days, the EPA may suspend grant payments to the program.
The Safe Drinking Water State Revolving Fund primarily is used to pay for treatment systems and other facilities to improve drinking-water quality in small rural communities that have contaminated wells or other problems.
The state provides a 20% match for the federal funds, which then are distributed as grants or loans to local water agencies. The loan repayments go back into the fund.
As of the end of the last fiscal year, California had spent a smaller portion of its federal money than any other state, the EPA said. Much of the unspent $455.4 million had been committed to projects that were not shovel-ready. An additional $260 million of repaid loans had not been earmarked for any project.
The EPA also said the health department lacks adequate fiscal controls, leading to "errors or confusion in tracking commitments, calculating outstanding balances and determining the program's funding capacity."
Since 1998, the federal government has paid about $1.5 billion into California's revolving fund. An EPA infrastructure assessment found that the state will need $39 billion to make necessary water system improvements through 2026.
"On the one hand, there's a great need," Blumenfeld said. "On the other hand, a great amount of money isn't being actively spent."
In a letter to the EPA released Friday evening, state public health director Ron Chapman said he would "take all steps necessary to address the compliance issues."
"We have been faced with challenges in meeting the EPA requirements in the past," he wrote. "But this administration has made significant progress in resolving those challenges and getting more money to local communities to improve their drinking water. However, as you note, there is more work to be done."