CIFA Policy Solutions
Water utilities face a funding cliff for affordable financing to build infrastructure that protects water quality and provides safe drinking water.
Since 2022, Congress has diverted $3.65 billion in federal funding from the Clean Water and Drinking Water State Revolving Funds (SRFs) to pay for congressional earmarks. Thankfully, supplemental funding in the Infrastructure Investment and Jobs Act (IIJA) has mitigated the impact of these draconian cuts, providing a temporary safety net for utilities.
However, the one-time funding in the IIJA runs out in just two years, leaving utilities with limited access to affordable financing to rehabilitate, replace and modernize aging infrastructure. Without restoration of federal funding to the SRFs, water utilities will be forced to finance projects through the municipal market which have the highest interest rates in decades or delay investments until rates come down.
The higher costs of financing will be passed on to residents through higher household water bills, which increases the financial burden for basic services on many families who are already struggling to make ends meet.
Congress can prevent this looming public health crisis.
Policy Solution I: Close the gap between authorizations and appropriations.
Congress reauthorized the Clean Water and Drinking Water SRFs in the Infrastructure Investment and Jobs Act (IIJA). However, Congress has yet to fund the SRFs to these new levels. Compounding this persistent underfunding is the diversion of annual federal funding for the SRFs to pay for congressional priority projects which has further reduced funding for state priority water infrastructure projects.
Fully funding the Clean Water and Drinking Water SRFs to congressionally authorized levels of $3.25 billion each for fiscal year 2025 will provide fiscally responsible, affordable financing for water infrastructure projects that protect public health in thousands of communities across the nation every year.
*SRF capitalization grant minus congressional earmarks.
**Difference between the congressional authorization and annual SRF funding (not including congressional earmarks).
Policy Solution II: Establish a separate authorization for congressional priority projects (congressionally directed spending/community funded projects).
Congress should fund their priority projects without cutting funding to the SRFs for state priority projects, especially projects in small and rural communities. Establishing a separate authorization for congressional priority projects for water infrastructure will provide greater transparency and equity for funding water infrastructure projects.
