Revealed preferences of a state bureau: Case of New Mexico's underground storage tank program

Leaking underground storage tanks (USTs) are a pervasive national environme ntal problem. Cleanup of leaking USTs is largely publicly financed and unde r the control of state agencies. In the transition to new compliance standa rds, individual states have taken advantage of provisions in federal regula tions to implement their own programs. This mises the policy question of en vironmental federalism and the appropriate locus ofgovemment control. The o bjectives of this study are to examine the revealed preferences of a state UST bureau. New Mexico was one of the first stare programs to use risk asse ssments in setting funding priorities. We analyze the statistical determina nts of funding decisions and find strong evidence that risk information is used. Although our case study provides a measure of support for state contr ol the argument is strengthened if public financing is limited to the clean up of historical pollution, rather than a means for providing insurance for prospective pollution. (C) 1999 by the Association for Public Policy Analy sis and Management.