Maryland officials pledged a one-time $25 million contribution to the Susquehanna River Basin Commission, novel Pay-for-Performance Model to be tested.
Debates regarding pollution and nutrients in the Chesapeake Bay have been ongoing for decades. The most extensive action to date has been the implementation of the Chesapeake Bay Cleanwater Blueprint, a multijurisdiction plan aimed at reducing pollution in the bay watershed. Much more work remains if the watershed is to meet the 2025 reduction goals. When the Blueprint was developed, it was believed that the reservoir behind the Conowingo Dam would not be near capacity until 2025 or later. Calculations of pollution reduction totals specifically factored in greater storage capacity behind the dam, meaning reduced targets for affected states. In 2012, researchers found that the reservoir was already near capacity, and far fewer nutrients were being blocked from entering the bay. To avoid new reduction targets from the EPA, stakeholders negotiated a separate agreement to address the dam. The new plan would require $53 million annually and be administered by the interstate Susquehanna River Basin Commission. During the 2022 legislative session, Maryland pledged a one-time $25 million investment into the plan, the catch being that the funds would need to be distributed using a pay-for-performance model. To date, no other jurisdiction has pledged any funds, stakeholders are persuing possible sources of investment.
What is Pay-for-Performance?
Pay-for-performance, also referred to as performance-related pay, refers to company programs that pay employees based on how they perform their job. Companies using pay-for-performance initiatives typically provide guidelines that explain what behaviors or performance evaluation results lead to increased pay.
The model can also be used to better incentivize desirable project outcomes. Many federal and state government programs seek to achieve certain goals through the use of grants, contracts or cost-share programs. In contrast to these models, pay-for-performance requires actors to develop, build, and operate projects before they receive any public funding. Only after projects are shown to have results will the government reimburse developers.
What does it mean for Maryland?
Pay-for-performance is a unique policy tool that can be used by both state and local jurisdictions to try and attain better policy outcomes. One of the major drawbacks of this model is that it restricts governments from investing in novel schemes that will likely not receive funding from private markets.
The $25 million investment from Maryland represents a good first step in tackling the Conowingo Dam issue. Maryland cannot and should not be forced to act alone when it comes to restoring the bay. Other jurisdictions need to do their part and find funding for their share of the annual $53 million price tag. If Maryland’s experiment with pay-for-performance proves successful, then it may represent a novel method to fund future programs. If the experiment should fail, we are still left with the question of how to best meet the Blueprint’s 2025 goals and address the Conowingo Dam reservoir.