The last several years have marked a period of abundance for water, wastewater, and stormwater systems across the United States seeking external funding to supplement existing internal funding mechanisms. Many systems have capitalized on a variety of low-interest loan and grant opportunities at the Federal and State-levels, many stemming from the Bipartisan Infrastructure Law (BIL) and Infrastructure Investment and Jobs Act (IIJA).
“Systems have exerted significant energy to be able to benefit from the unique windfall of infrastructure funding made available in the last few years. It has been one of the most rewarding periods of my career, to help communities make the most of these opportunities. Our projects have ranged from traditional water and wastewater pipe replacements to advanced treatment technology that targets emerging contaminates, such as PFAS,” says Abby Ritz, AE2S Senior Funding Program Specialist. “We have worked hard to position numerous clients across the upper Midwest and Rocky Mountain regions to capitalize on these unique opportunities. In the back of our minds, however, we knew that this renaissance period would not last forever.”
In early May, the Trump Administration released its proposed FY26 Federal Budget. Within the proposal, funding professionals like Ritz immediately noted proposed cuts to various agencies and critical funding programs for water, wastewater, and stormwater systems. For example, the proposal includes U.S. Environmental Protection Agency (EPA) budget cuts of over 50%, with 90% reduction in funding for the Clean Water and Drinking Water State Revolving Funds (SRFs). SRF programs are one of the primary funding sources for water, wastewater, and stormwater projects in the United States.
On May 14, the National Association of Clean Water Agencies (NACWA) sent an advocacy alert to its members stating in part: “These drastic cuts would reduce annual SRF funding from $2.76 billion to just $305 million, undermining decades of bipartisan work to ensure a long-term funding mechanism that helps ensure affordable, resilient clean water and wastewater services nationwide.” The NACWA letter continues, “It is critical that public clean water utilities and NACWA’s private sector members weigh in NOW with their Members of Congress to oppose these reductions… It is vital that Members hear directly from utilities in their states and districts about the real-world consequences of these cuts. NACWA is calling on all clean water agencies to act now.”
Historically, SRF programs have offered low-interest loans and principal forgiveness and have been highly beneficial for systems planning to pay for projects over time and lacking capacity and resources to pursue private financing.
“I think it’s important to note that, historically, SRF programs have been designed with the flexibility to provide subsidized low-interest loans and principal forgiveness to communities with the overriding goal of keeping project costs affordable for residents”, says Kayla Mehrens, AE2S Financial Consultant. “Without a sizable contribution from the EPA each year, many SRF programs may be forced to reduce lending and principal forgiveness awards. If the proposed budget is accepted as is, the capacity for SRF programs to issue beneficial funding opportunities may decrease and become more competitive due to increased prioritization.”
It’s widely known that Federal Budget processes are notoriously chaotic, political, and hard to predict. Rachel Schultz, AE2S Consultant, notes, “Yes, the initial release of information from the Administration is concerning; however, there are months of negotiations ahead of us that could change the course of action.” She went on to explain that the FY25 Budget was never approved, and we are currently operating under a continuing resolution from the year prior. “It’s difficult to predict what is to come, but this news does underscore the need to stay informed, channel your energy into articulating the value of your system to your community, and be vocal with your elected leaders about the need for these funding programs, especially with cost-escalation and inflation already delaying projects and impacting budgets.”
John Kuosman, AE2S Strategic Client Leader, says these are uncertain times where the recent approach to fiscal responsibility may need to change slightly. Kuosman stated that, “As scary as this budget proposal may feel initially, it presents a different, but critically important opportunity for water systems to demonstrate fiscal responsibility to their community.” He went on to note, “The proposed budget can be interpreted as a ‘prompt’ to begin rebalancing the focus of fiscal stewardship activities from an outward (State and Federal) focus to an inward (within their community) focus.”
Many communities are already mobilized and working hard to acquire and administer the external funding they have received. The proposed budget may signal a subtle shifting of focus and energy to utility planning, asset management, community engagement, communications planning, and capital improvement program (CIP) prioritization. It may also signal a need for systems to better communicate the true costs of water and wastewater services within their communities, and the important role local revenue streams play in keeping services safe and reliable.
Systems concerned about future funding and financial changes are encouraged to reach out and have a conversation with the team at AE2S. “We have a well-versed group of professionals ready to take action,” said Marie Owens, AE2S Client Program Leader. “We certainly love to design great projects, but we also stand ready to help our clients complete comprehensive utility planning and financial assessments to keep important projects moving and the proverbial lights on.”
Before AE2S, Owens led the Utah Division of Drinking Water for many years. In her time there, she learned a valuable lesson in working with systems across the State. “It’s not always about getting everything done all at once.” Owens continued, “Instead, a strategic approach is often necessary, and systems must prioritize the right project, at the right time, and, most importantly, for the right reasons. This is especially important when money gets tight, and hard decisions need to be made.”
Please contact Abby Ritz or Kayla Mehrens to learn the latest regarding funding changes or for more information regarding how AE2S can assist you and your system.