LUST FUND REIMBURSEMENT DELAYS & FUND SOLVENCY

Many state sponsored LUST funds do not receive sufficient revenues to reimburse claims in a timely manner. In financial terms, the fund may be suffering from an “Asset – Liability Mismatch”, a financial term that describes a periodic imbalance when the dollar volume of submitted claims exceeds the fund’s revenues. What happens is that the fund’s cash balance is eventually depleted and a payment queue results*. This results in RP's waiting months or years receive reimbursement. Nationally, the problem of LUST fund reimbursement delays totals approximately $1.6 billion.

EVERYBODY LOSES WITH LONG PAYMENT DELAYS

Long delays in reimbursement create problems for the private sector, which can eventually lead to public policy problems for state fund administrators and political leaders:

• Small Regulated Tank Owners: For small businesses, tying up significant amounts of working capital for long periods can materially impair profitability & balance sheets, depress property values, impede real estate transactions & slow job creation.
• Large Regulated Tank Owners: Large regulated tank owners are not immune from payment delays, which when combined with the real-world reality of annual environmental budget constraints, can cause inefficiencies that slow the clean up process (ex. spreading work over several budget cycles). This can result in higher total costs to the RP and, inevitably, to the LUST fund.
• State Fund Administrators & Political Leaders: Payment delays can cause a breakdown in the marketplace when RP's simply run out of financial capacity to continue clean up's, and environmental consultants are no longer able to wait many months to receive the reimbursement check.
• Reduced voluntary cooperation can sometimes result in delays in identifying & removing LUSTs, which can result in increased public health risks & higher total clean up costs.
• Regulators may spend their already limited management resources pursuing enforcement actions against financially strapped RP's rather than pursuing actual clean ups.
• Payment delays can lead to delays in closing real estate transactions.
• Payment delays increase the risk that the LUST fund may no longer be deemed viable for meeting EPA’s financial responsibility regulations.
• Payment delays can lead to increased risk that the legislature acts to eliminate the fund.