Proposed 2015 Budget in New Jersey Raises Public Policy Questions About Environmental Cleanup Settlement Funds

Contributed by Christopher D. Barraza.

All politics is local, or so the saying goes.  But a change hidden in New Jersey’s proposed budget for the 2015 fiscal year raises broad policy questions about whether a state should be able to divert funds from environmental cleanup settlements for completely unrelated purposes, and whether courts should approve settlements that do not attach strings on the use of settlement funds.

The budget provision in question states: “Except as otherwise provided in this act and notwithstanding the provisions of any other law or regulation to the contrary, the first $50,000,000 in natural resource, cost recoveries and other associated damages recovered by the State, along with such additional amounts as may be determined by the Director of the Division of Budget and Accounting, in consultation with the Attorney General, to be necessary to pay for the costs of legal services related to such recoveries, shall be deposited into the Hazardous Discharge Site Cleanup Fund established pursuant to section 1 of P.L.1985, c.247 (C.58:10–23.34), and are appropriated for: direct and indirect costs of remediation, restoration, and clean up; costs for consulting, expert, and legal services incurred in pursuing claims for damages; and grants to local governments and nonprofit organizations to further implement restoration activities of the Office of Natural Resource Restoration.  Recoveries in excess of the amounts appropriated pursuant to this paragraph, consistent with the terms and conditions of applicable settlement agreements or court rulings, shall be deposited in the General Fund as general State revenue” (emphasis added).  Put in plain language, New Jersey would reserve the first $50 million in natural resource recovery settlements for cleanups, remediation and legal fees.  Any settlement money over $50 million could be diverted to the state’s general fund and used for any purpose; however, court rulings and/or the terms of a settlement agreement could limit New Jersey’s ability to divert cleanup funds.  

While ostensibly intended to give New Jersey flexibility in addressing a larger than expected revenue shortfall, the budget provision raises significant questions about whether states should be permitted to divert cleanup funds for unrelated purposes, particularly where doing so risks significantly underfunding clean up efforts. By way of reference, consider that (i) the list of in-state contaminated sites identified by NJ DEP is 477 pages long and (ii) clean up of a heavily contaminated site can cost tens of millions of dollars.

The budget provision also raises questions about whether courts should approve cleanup settlement agreements that do not require the settlement funds to be used for remediating contamination and compensating affected parties. Indeed where a state files suit on behalf of its citizens seeking recovery for clean up and natural resource damages, one questions whether a settlement, or a verdict after trial, that does not require the state to remediate a site or compensate affected landowners is truly in the public’s best interest.  

Environmental litigation is meant to address damages to the environment, not as a revnue source to fill a budget deficit.  If New Jersey’s 2015 budget is enacted as it currently stands, other states facing budget shortfalls could be tempted to follow New Jersey’s lead and raid environmental cleanup funds for unrelated purposes, thus calling into question the purpose for which the environmental litigation was brought in the first place.