Is The State Revolving Fund In Jeopardy?
By Christian Bonawandt
For decades, the State Revolving Fund (SRF) has served as a crucial financial backbone for water infrastructure projects across the United States. Established in 1987, the SRF provides low-interest loans to states and municipalities to maintain and improve drinking water and wastewater systems. The program, which operates under the Clean Water Act (CWA) and Safe Drinking Water Act (SDWA), has long enjoyed bipartisan support. However, recent executive actions from the Trump administration have raised concerns that even long-standing and widely supported programs like the SRF could face fundamental changes, or even outright repeal.
According to Stacy Barna, funding discipline leader and South Texas client service leader at CDM Smith, concerns about the future of the SRF surfaced as early as Day 1 of the current presidency. “One of the first executive orders that came out put a pause on the Infrastructure Investment and Jobs Act (IIJA), which has sent a lot of the additional funding over to the State Revolving Fund,” she said. “So that was a concern.”
This, combined with the pace and scope of efforts to enact changes, as well as the administration’s methods for enacting them, has raised questions about the SRF’s future.
How The SRF Works
The SRF is designed to be a semi-self-sustaining financial resource. Federal funds, allocated annually by Congress, are distributed to states, which then issue loans to local projects. About $2 billion in new federal funding is issued for the SRF each year, which comprises about 23% of the total money made available each year. States are also expected to contribute up to 20% of total project costs, although the actual figure is typically much lower. Repayments make up the remainder.
While repayments do contribute significantly to the fund’s sustainability, they are not sufficient to cover the full scope of water infrastructure needs, making continued federal appropriations essential. In 2021, the IIJA allocated $43 billion in new money for SRF projects through 2026, significantly increasing the size and volume of projects that can be financed.
The Impact Of Repeal Or Reduction
If the SRF were repealed or severely weakened, the consequences would be immediate and widespread. Cities and towns rely on SRF loans to repair aging pipes, upgrade treatment plants, and comply with environmental regulations. Paniz Miesen, an environmental scientist for CDM Smith said, even if the SRF is repealed or downsized, “These projects are still there. They still have to happen. They would just get delayed down the line or the utilities would have to shift to using rate increases or other funding sources to cover it. But the fact is the gap is still there. And without the SRF, it would just be bigger.”
Without this support, many communities –– particularly smaller and economically disadvantaged ones –– would struggle to finance essential water infrastructure projects. The burden would shift to local governments, potentially leading to higher utility rates, deferred maintenance, and greater public health risks.
A reduction in SRF funding could also disrupt ongoing projects and stall efforts to address emerging challenges such as PFAS contamination, lead service line replacements, and climate resilience. Although the private sector could potentially step in with financing options, these would come at higher interest rates, increasing costs for municipalities and ratepayers.
Process For Repealing The SRF
Technically, dismantling the SRF would require an act of Congress to amend or repeal the foundational statutes –– the CWA and the SDWA –– that authorize them. Given the SRF programs’ longstanding bipartisan support and their alignment with public health and environmental objectives, securing sufficient congressional backing for repeal would theoretically be challenging.
However, the current administration has demonstrated a penchant for using executive orders to implement policy changes, including eliminating diversity, equity, and inclusion (DEI) programs and downsizing the Department of Education. However, unlike DEI initiatives, the SRF is deeply embedded in statutory law and has a direct impact on essential public services. While the president can influence the implementation of these programs through budget proposals and administrative directives, outright repeal or significant modification would require legislative action. Moreover, attempts to unilaterally alter such programs via executive orders could face legal challenges and resistance from stakeholders who rely on SRF funding for critical infrastructure projects.
Looking To The Future
Barna is optimistic about the SRF’s future. “The continuing resolution (CR) went through,” she said, “so the annual appropriation for the SRF is there. It was about $1.6 billion for clean water and $1.1 billion for drinking water for 2025 with no earmarks. I take that as a good sign.”
For now, the SRF remains intact, but the political landscape is evolving. Whether the SRF continues to operate at full strength or is gradually weakened will depend on legislative priorities, public advocacy, and the willingness of Congress to defend the program.