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KEY POINTS
Funding for an important federal water infrastructure loan program is expected to decrease around 80 percent after a five-year supplement ended in September.
This program provides key funding to states for water infrastructure projects like replacing lead service lines. But even at its peak, federal funding fell far short of national need.
Congress must figure out how much to appropriate in its annual budget. But newly elected lawmakers will also need to weigh the future of the loan program.
Communities across the country are facing a federal water infrastructure funding cliff following the expiration of a bipartisan, multibillion-dollar cash infusion that Congress approved during the Biden administration.
The State Revolving Funds (SRF) — which assist projects like lead pipe replacement and sewer repairs — are expected to decrease around 80 percent from last year’s levels. Congress will need to approve next year’s budget for the loan program, a foundation of federal support for local water systems, when lawmakers return on November 9.
Advocates are sounding alarm bells after the recent sunset of the Infrastructure Investment and Jobs Act of 2021. A bipartisan feat, the law quadrupled the amount of money states received via the SRF. It was a major federal effort to support the gaping need to fix water infrastructure across the country.
But the extra funding — around $43 billion over five years — ended in September, and Congress doesn’t have clear plans for an extension.
“We’ve headed towards a cliff that we have now fallen off of,” says Mae Stevens, CEO of Current Strategies, a firm that advocates for water infrastructure policy.
Action In Congress
When Congress returns, lawmakers will need to make a series of key decisions about the future of the SRF.
The SRF comprises two programs, the Drinking Water State Revolving Fund (DWSRF) and the Clean Water State Revolving Fund (CWSRF). States can use the clean water funding to finance wastewater treatment plants, sewer systems, stormwater projects, and more. The drinking water fund supports treatment facilities and pipe upgrades, as well as lead pipe removal.
Once in session, Congress will first need to “reauthorize” the funds, meaning deciding the ceiling for appropriations. Lawmakers will then approve annual funding amounts through future budget processes. Lawmakers are likely to reauthorize the SRF via the Water Resources Development Act, which the House has already passed by a large 415 to 9 margin. The Senate still needs to pass its version.
The House draft authorizes roughly $1.2 billion for the CWSRF and around $911 million for the DWSRF.
Those numbers are generally on par with prior years’ base appropriations. Could the reauthorization boost the SRF closer to the level of IIJA funding? Despite lobbying from water infrastructure groups and a coalition of mayors, counties and cities, Stevens said Congress is not likely to favor such an expansion.
There hasn’t been the necessary “sustained level of advocacy” in the five years since the IIJA to ensure additional SRF funding once the supplemental money ended, Stevens said. She contrasts this with the major push to pass the IIJA in the first place.
The SRF drop-off will not be immediate. Bluefield Research finds that over half of IIJA allotments haven’t yet reached project-level agreements. At the current pace, IIJA-backed SRF funds will continue to trickle out to states through the early 2030s.
Still, eventually, the decline in dollars will be felt, unless Congress acts.
The programs produce real benefits. In Darlington County, South Carolina, for example, industrial sludge spread on farm fields as fertilizer led to high levels of PFAS contamination in many private wells. A $4 million dollar DWSRF loan funded by the IIJA allowed the Darlington County Water Authority to construct water main and service lines to connect 60 homes to the public water utility — which treats its water for PFAS.
In Painesville, Ohio, a $17.4 million DWSRF loan enabled the town to replace the aging and damaged primary water intake structures at a water treatment plant, after sand and zebra mussels created problems for the plant. The new intake pipe extends further into Lake Erie to limit impacts from debris and algal blooms — ensuring the water treatment plant has enough capacity to provide drinking water to 32,000 residents. And in Newark City, New Jersey, the DWSRF and other federal programs funded the replacement of 1,500 lead service lines, reducing the lead exposure risk for the 280,000 residents.
The funding, supplemented by state match requirements, is designed to provide loans that are below market rate to protect public health via water infrastructure improvements.
Though an important source of funds, the SRF, even at its peak, does not come close to meeting the national need. U.S. Environmental Protection Agency surveys in 2022 and 2023 estimate $60 billion per year over 20 years, or $1.2 trillion total, for drinking water and wastewater capital investment.
The IIJA “was the largest-ever investment in the history of the United States in water infrastructure. It was also 5 percent of what we needed,” Stevens said.
Other needs estimates are even higher. The American Water Works Association, an industry group, reckons that the country needs around $90 billion per year for 25 years just to fix drinking water infrastructure.
One major area of need has been lead pipes. The EPA is requiring major changes to many water systems to comply with its Lead and Copper Rule Improvements by November 1, 2027. Water systems need to have an approved replacement plan in place and begin replacing lead service lines. The task is supposed to be completed in 10 years. Around 4 million lead service lines remain to be replaced nationwide — which will cost around $50 billion, according to the Environmental Policy Innovation Center (EPIC).
PFAS and Lead Service Lines
In addition to increasing the SRF, the 2021 infrastructure law designated funds for specific purposes — $15 billion for lead service line replacement, $5 billion for emerging contaminants in drinking water, and $1 billion in emerging contaminants in wastewater.
Robert Hayes, senior director of Clean Water Environmental Advocates NY, explained that the set-asides provide certainty for communities. Without them, lead service line replacements and PFAS decontamination projects have to compete with all projects that are eligible for SRF funds.
Members of Congress have sought to reinstate some targeted funding. Rep. Laura Gillen, a Democrat from New York, introduced a bill to authorize SRF money for PFOA/PFAS contamination.
Stevens, who has worked on this bill for client the Clean Water Construction Coalition, says it’s too late in the process to get into the authorizing bills for this year, but the proposal is a “definite possibility” for next Congress.
She says advocates are also working on a similar effort for lead service line replacements, to replace the provision that expired with the IIJA.
Water issues often gain bipartisan support in Congress, but Stevens notes that the elections may provide a bump. After winning both chambers, Democrats “will want to show that they can get things done and govern (especially going into the presidential election), and water is low-hanging fruit.”
