White House proposes $2.4B reduction for 2026 State Revolving Fund programs

Drinking Water and Clean Water State Revolving Funds are facing a $2.46 billion reduction from 2025 figures in the White House’s 2026 fiscal year budget proposal.

In a May 2, 2025 letter to Appropriations Committee Chair Susan Collins, President Donald Trump’s FY2026 budget proposal amounts to $4.2 billion in total funding reduction across the entire agency in 2026 compared to 2025 for the U.S. Environmental Protection Agency (EPA). While the overall net balance results in a reduction, two programs would witness increases.

What the White House budget proposal changes from 2025

The proposal allocates $124 million for drinking water programs, which is a $9 million increase over the 2025 budget. Additionally, $31 million is allocated for Indian Reservation Drinking Water programs, which amounts to a $27 million increase from 2025. These programs do not appear to be related to the state revolving funds.

As for reductions, Clean Water and Drinking Water State Revolving Fund programs would see the greatest reduction of all EPA cuts. This would amount to an overall budget of $305 million, which is $2.46 billion less than the 2025 budget. It is not clear how the $2.46 billion in cuts would be split between the clean water and drinking water revolving fund programs. The President’s letter claims this change will place the onus on states to fund their own infrastructure and shared additional reasoning as to why the reduction to SRFs is on the table.

“In practice, the program has been heavily earmarked by the Congress for projects that are ultimately not repaid into the program and bypass States’ interest and planning. In addition, the SRFs are largely duplicative of the EPA’s Water Infrastructure Finance and Innovation Act (WIFIA) program and the Department of Agriculture’s (USDA) Water and Wastewater Loan and Grant program, and they received a massive investment in the Infrastructure Investment and Jobs Act (IIJA),” the letter states.

Over the past decade, local ratepayer water bills have increased nearly five times faster than inflation.
- Water Environment Federation | Source: ASCE 2025 Infrastructure Report Card

Water associations urge Congress to protect funding

The National Association of Clean Water Agencies said this proposal puts clean water agencies and public health at risk by “kneecapping the primary water infrastructure financing programs on which local utilities rely.”

The agency urged Congress to reconsider the proposal and take action to ensure funding is not reduced for “these critical programs.”

“The Budget proposed today would cut the SRF’s annual funding by nearly 90 percent. NACWA strongly opposes these cuts. Now is the time to intensify investment in our country’s critical infrastructure, job creation, and economic growth — all of which depend on water,” NACWA published in its statement.

Water Environment Federation similarly urged Congress to protect the SRF program from the proposed cuts.

“Sustained investment in local water infrastructure is essential to economic growth, job creation, and the protection of public health. It is imperative that Congress preserve robust federal funding to support water projects in communities across the country,” WEF’s statement read.

What the SRF funding reduction could mean for utilities and their customers

In its statement, NACWA wrote that the proposed reduction in funding would put the onus on utilities at the local level, meaning increase water and sewer rates to fund local departments. These rate changes, the association claims, would hit the pocketbooks of working class Americans at a time when budgets are already tight. This point was also echoed by WEF.

“According to the American Society of Civil Engineers’ 2025 Infrastructure Report Card, only about 30% of the funding needed for wastewater and stormwater infrastructure is currently being met. Meanwhile, over the past decade, local ratepayer water bills have increased nearly five times faster than inflation,” WEF wrote in its statement.

Federal programs like the State Revolving Funds help relieve pressure on ratepayers by providing water systems with access to flexible, low-cost financing options.
- Greg Kail, AWWA Communications Director

Greg Kail, director of communications for American Water Works Association, also highlighted the issue of ratepayers taking on more and more increases.

“On average, more than 90% of a water system's revenue comes from local ratepayers, and communities around the country are already investing to improve water infrastructure locally,” Kail said. “However, federal programs like the State Revolving Funds help relieve pressure on ratepayers by providing water systems with access to flexible, low-cost financing options.”

NACWA similarly noted the importance of the SRF programs to small and rural water and wastewater systems. While the President’s letter claims duplicative funding between WIFIA and SRF programs, WIFIA is commonly criticized for not providing enough funding to small and medium-size projects.

“Through the SRFs, utilities work with their states to secure low-cost financing — a critical tool for utilities of all sizes. Access to the SRF can be especially important for small utilities serving communities with fewer customers to shoulder rising costs. The SRFs work in concert with other federal financing tools, including the Water Infrastructure Finance and Innovation Act (WIFIA) program, which is aimed at larger, more complex projects and borrowers,” NACWA wrote.

What happens next

The White House proposed budget will now go to Congress for review and debate the final appropriations. What is proposed by the White House is likely to change by the time a final bill is approved.

WaterWorld will continue to cover the budget process as new information relevant to water professionals arises.

EDITOR’S NOTE: WaterWorld reached out to National Rural Water Association for comment, but did not get a response by press time.