Water funding is changing

As I write this, the latest appropriations from Congress indicate a cut of 19% to the Drinking Water State Revolving Fund and 25% to the Clean Water State Revolving Fund for FY2026.

While the cuts are an improvement from the 89% cut proposed by the White House in May, it still amounts to a rather significant drop in total funding for low-interest loans for water projects. Further exacerbating that problem is congressionally directed spending, often referred to as earmarks. Historically, these earmarks have come as additional line items for Congressional members to construct projects within their districts, a political tool they could then use in an election campaign.

But the earmarks as they are instated now come directly out of the SRF coffers, resulting in less money left over to states to administer their SRF programs. That means less paid back interest to return to those coffers, and a smaller fund to then loan against future projects. Put another way, there is less fuel returning to the tank each year, and the engine will eventually run on fumes.

There is, however, a glimmer of hope from those on Capitol Hill: a reauthorization of the Infrastructure Investment and Jobs Act also known as the Bipartisan Infrastructure Law. According to a lobbyer in Washington, a second infrastructure bill has bipartisan support, which could mean another large injection of funding for projects in the sector when IIJA funding appropriations end.

This could be a boon for the industry once again, but it also appears to be changing the mechanisms for how projects will be funded, especially if the SRF program continues to dwindle. Regardless of how this all shakes out, lobbying congressional leaders will become a winning strategy for utilities.

This editorial letter appears in the September/October WaterWorld digital issue live now.