Is NRCS “EQIPed” to Get the Most from EQIP? State Allocation and Ranking Procedures Ralph Heimlich

1. Is NRCS “EQIPed” to Get the Most from EQIP? State Allocation and Ranking Procedures Ralph Heimlich Agricultural Conservation Economics for Environmental Defense

2. EQIP Expansion After 2002 • Four-fold EQIP funding expansion • average of $200 millon/year in 1996-2001 • average of $830 million/year after 2002 • Shift in emphasis from conservation priority areas to more open enrollment • Confusion about the role of cost and cost-effectiveness

3. Environmental Defense Analyses • In January 2003, Environmental Defense issued “Getting More Bang for the Buck” analyzing the 2002 EQIP program • We followed up with “Getting a Bigger Bang for the Buck”, analyzing allocation and ranking procedures for all states in the 2003 EQIP program (see handout for URLs)

4. Principles for Ranking

5. Pre-screen Applications • Evaluate the best, cut your losses on the rest • Develop a few screening questions for each resource concern to prioritize applications • Do a good, thorough evaluation on the highest priority group for each resource concern • Customers will thank you for NOT wasting THEIR time

6. Address National Priorities • The National priorities for EQIP are: • Reducing nonpoint source water pollution • Reducing air emissions • Reducing soil erosion • Promoting at-risk species habitat • State EQIP program resource concerns should relate directly to these priorities • Additional resource concerns can be addressed

7. Rank Resource Concerns Separately • It’s difficult to compare “apples” and “oranges” • Allows you to focus on the appropriate evaluation for the resource concern • Much easier if you allocate funds to resource concerns

8. Evaluate All Aspects of the Concern • Be fair to all farms that might contribute to the concern • Example--water quality • Cropland--sediment, nutrient, pesticides • Pasture--sediment, nutrients • Barnyards, animal concentrations--nutrients • Interception practices--buffers, wetlands, controlled drainage

9. Measure Performance Existing resource condition Expected resource condition after approval Degree of Improvement from funding this application = • Award points for: • The magnitude of the environmental benefits • Shown by the degree of improvement • Reflecting the level of performance of conservation practices • Measure actual environmental conditions, e.g., Tons of soil erosion • Use levels of management intensity as a surrogate, if necessary

10. Calculate Cost-effectiveness • Award appropriate points for environmental benefits, other rule requirements • Divide by the total cost, not just the cost to government (avoids “bidding down”) • Fund the applications with the highest cost-effectiveness ratio • Most “bang-for-the-buck” by definition

11. Use True Scale Neutrality • Once cost is considered, scale must be taken into account • Scale (acres, animal numbers) matters because larger operations can be more damaging to the environment • Simply leaving out scale does NOT ensure that your ranking is scale-neutral • Treating larger operations costs more, so you need to scale up points to be neutral

12. Incorporate All Other Rule Requirements • Address multiple resource concerns • Use longer-lived practices or agreements • Leverage human resources, incentive, education, and on-farm research programs • Bolster multi-county or multi-state collaborative efforts • Use ways to measure performance and success • Consider the degree of difficulty producers face in complying with environmental laws

13. Use of Ranking Principles In FY 2003

14. Model Ranking Templates Incorporate key ranking mechanics for performance, cost-effectiveness, all rule requirements To be adapted to the State’s or District’s situation and conservation goals Provide a starting point for effective ranking Parts can be adapted to your existing ranking sheets

15. Broad and Narrow Ranking Sheets

16. Each Summary Sheet Has Four Major Categories: 1. Improved on-farm management benefits 2. Special project benefits 3.Environmental significance multipliers 4. Total environmental points Example: General Water Quality

19. Scaling by acres

20. Why Scale? Once cost is included, must consider scale Costs increase with scale (acres, animals) Need to weight points by scale of operation to be fair Points reflect improvements on the farm

29. Why Percentage Multipliers? These factors increase the value of a plan in proportion to the other benefits of the plan All multiplier factors are mandated by the rule All multiplier factors help determine the likely magnitude of success

31. Costs Use standard costs approved for project practices and elements Estimate final “engineering” project cost later--a preliminary cost estimate is fine for ranking Using TOTAL costs (not just the federal cost) avoids “bidding down” True size neutrality requires: • Scaling benefits • Accounting for cost

32. Cost-effectiveness Add points from all sections, appropriately scaled, and divide the total by the total cost Calculating the degree of cost-effectiveness is the only way to ensure that EQIP funds give the most “bang for the buck” The plan with the highest ratio of points to cost is THE BEST plan evaluated in this category because it provides the most benefits (points) for each dollar spent

33. Four Key Improvements • Rank resource concerns separately • Measure levels of performance or management intensity • Calculate the degree of cost-effectiveness • Reward special projects that incorporate cooperative, leveraged, multi-county, multi-state or regulatory relief elements

34. For More Information... Contact Ralph Heimlich, 301-498-0722, aceheimlich@comcast.net Suzy Friedman,202-572-3376 sfriedman@environmentaldefense.org