WASHINGTON - State and local officials generally support reauthorizing the Clean Water Act, but states need more money to finance increasing federal mandates, the officials told Congress yesterday.

"Current funding levels are clearly inadequate in the face of projected needs. The governors support an annual appropriation of $5 billion" through fiscal 2000, Nebraska Gov. E. Benjamin Nelson told a House Public Works and Transportation Committee hearing.

The most recent Environmental Protection Agency survey conducted puts water infrastructure needs at $137 billion. Since the conception of the state revolving loan funds program in fiscal 1988, the program has "made available $11 billion in federal and state funds for vital water quality projects," said EPA administrator Carol M. Browner.

The revolving funds give states the opportunity to stretch their federal dollars by using the federal money they receive to leverage tax-exempt bonds to help pay for the remaining costs of projects.

The House version of the Clean Water Act reauthorization would authorize $3 billion for the state revolving funds in fiscal 1995 and increase that amount by $500 million annually through fiscal 2000. The Senate version would start with $2.5 billion in fiscal 1995 and increase $500 million annually through fiscal 2000.

The Clinton Administration has proposed considerably less for the revolving funds than either the House or Senate versions of the bill. For fiscal 1995 President Clinton has proposed $1.6 billion. The revolving funds would receive $2 billion from fiscal 1996 to 1998, and then the funds would begin to trail off with capitalization totaling $11.25 billion by the end of fiscal 2004.

State and local officials want to move away from more federal mandates to more freedom for the states in choosing priority programs, said Jeffrey N. Wennberg, mayor or Rutland, Vt., speaking for the National League of Cities.

"Our perception now is that federal requirements are moving beyond protection [of the public health] and into the esoteric realm of seeking and mandating perfection, always and everywhere," Wennberg said.

He suggested that the federal government combine grants and loans to make state compliance with the sewage treatment legislation simpler.

"While the NLC continues to support the state revolving loan fund, we do so with reservation," Wennberg said. "We do not consider programs financed with repayable loans a ~funded' mandate."

He also found fault with the revolving loan program because "repayable loans from federal resources generally mean that federal assistance goes to those least in need and with the best credit rating." Grants are needed, he concluded, for the poorest communities with little means to repay a loan.

Further, many states have complained that the revolving loan program has not provided flexibility to let states make loans to poor communities. The reauthorization bill allows states that flexibility, said Rep. Norman Y. Mineta, D-Calif., chairman of the House Public Works and Transportation Committee.

The Association of State and Interstate Water Pollution Control Administrators also found fault with the current funding levels for sewage treatment infrastructure.

"The resources envisioned [in the bill] will be a significant increase over existing levels, but are not adequate to even bring the existing program up to a base level of services," said Roberta Haley Savage, executive director of the pollution control administrators' group. "Any new federal mandates must be accompanied by increased flexibility and funding."

But unlike the National League of Cities, Savage's association opposes resurrecting a grant program for the construction of wastewater treatment facilities. "To reestablish a 'give away' program undermines the [state revolving funds] and delays national compliance with the requirements" of the clean water bill, Savage said.

"State and local governments have responsibility here, too," said Leon E. Panetta, director of the Office of Management and Budget. Local water systems are ultimately the responsibility of the local governments, but while the federal government is willing to help with costs, it cannot be expected to pay for each state's program, Panetta said.

"I do not accept the notion that all water pollution costs to state or local government are federal mandates. To accept that idea, one would have to believe that it is perfectly appropriate for municipalities to just dump raw sewage into the river, and let the town downstream deal with it," Mineta said.

A lot of compromise work has gone into both versions of the legislation, which improves the chance for passage before the new fiscal year begins Oct. 1, congressional aides say.

The Senate version of the bill is expected on the Senate floor in June. The House Public Works Committee will schedule a markup after the upcoming congressional recess, and a House vote should come in midsummer, a committee aide said.

Senate Majority Leader George J. Mitchell, D-Maine, told reporters yesterday morning that he expects enactment of the legislation this year.

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