Environment Department outlines state aid grant liabilities and PFAS funding; warns of long-term commitments

The New Hampshire Department of Environmental Services told the Finance Committee that the agency’s responsibilities include large, multi‑year grants and loans for water and wastewater infrastructure, and that existing commitments create long-term state payment obligations.

Why it matters: The committee was shown that the state’s obligations on previously awarded State Aid grants extend decades into the future — a point DES officials used to explain why large grant and loan balances can exist even when annual appropriations appear lower.

State aid grants and loan picture: DES staff explained that many wastewater projects are built using a mix of federal grants, state loans and local bonds. Under statute the state pays a portion of local debt service for state aid grant projects; DES reported that its committed obligations across existing grants total roughly $140 million of future state payments (across many years) tied to projects already complete or underway. The agency showed two appropriations pots used for grant maintenance: a prior law appropriation source and a supplemental HB2 appropriation (the packet listed roughly $7.8 million from HB398 and $27.9 million from an HB2 allocation as existing balances in different pots).

Timing, encumbrances and accounting: DES emphasized accounting nuances: FY24 “actuals” in the operating table understate funds the agency has encumbered (DES reported roughly $404 million in encumbrances at the FY24 close, primarily loans and grants). Many SRF and loan awards are disbursed as reimbursement and spend by towns can take multiple years; the agency said loans once issued are typically spent over three to five years while the state’s reimbursement requests to federal sources follow actual disbursements.

PFAS funding and settlements: The agency outlined a proposed $55 million one-time allocation tied to expected settlement proceeds from litigation against chemical manufacturers; DES said the governor’s budget included that allocation to an emerging‑contaminants trust to pay for public water system PFAS remediation efforts. The department said that settlement money is expected to be directed mainly to public water systems that incurred remediation costs, and cautioned the committee that settlement proceeds would be “pennies on the dollar” compared with total cleanup costs already incurred by systems.

Federal and state interplay: DES staff said the federal and state programs that fund projects operate differently: the U.S. Environmental Protection Agency’s grant and SRF programs reimburse spending on a reimbursement basis, whereas certain one-time state appropriations can be set aside for future obligations. DES noted the effect of an unusually large federal infrastructure infusion since the pandemic — which led to higher loan and grant activity and to the higher encumbrance totals the agency reported.

Outlook and risks: Committee members pressed DES on the risk that continuing to approve awards with limited budget flexibility could leave the state with ongoing maintenance liabilities. DES said its forecasts assume current awards and expected pipeline demand; officials asked the committee to consider the long‑term footprint of commitments when assessing FY26–27 general fund cuts because many programs require the state share as projects are completed.

Follow-up requested: Committee members requested DES provide a program-level list showing federal grants that require a state match, the potential sources of matching funds, and a clearer breakdown of the portion of general fund that covers contractual/administrative costs versus pass-through grant and loan obligations.