2025 Lead Pipe Funding: The Good, the Bad, and the Big Opportunities Ahead
In late November, EPA released the Federal Fiscal Year 2025 (FFY25) Drinking Water State Revolving Fund (DWSRF) Lead Service Line Replacement (LSLR) state allotments and made some important changes to how lead pipe funds are allocated and used. This fourth of five annual funding rounds under the Infrastructure Investment and Jobs Act (IIJA), which provided a total of $15 billion for LSL identification and replacement, includes reallotments of unspent funds from prior years.
Most notably, EPA now ties IIJA LSLR funding to the newly released inventory data, something we believe will help align funding with state needs. It also broadened the types of projects that qualify for IIJA LSLR funding. We believe these decisions could help align funding with need and accelerate progress nationwide, providing more flexibility in what these dollars can be used for. EPA’s updated national estimate of 4 million lead pipes is a substantial drop from the 9.2 million estimate derived from the updated 7th Drinking Water Infrastructure Needs Survey and Assessment (DWINSA) released in 2024. While the true number of national LSLs is likely higher, this reduction is encouraging: it suggests that available federal dollars can go further toward removing the nation’s lead pipes.
This blog breaks down what changed, what didn’t, and why it matters for a faster and more efficient distribution of lead pipe funding nationwide.
The Positives
IIJA LSLR Funds Now Tied to Inventory Data
EPA’s decision to base the final two years of IIJA funding allotments on inventory data, rather than survey data, is a major improvement, and one EPIC has called for previously. This shift directs more funding toward states with higher documented lead burdens, such as the Great Lakes region and the Northeast. Under the revised allotments, the states receiving the most LSLR funds include:
Illinois ($310M)
Ohio ($203M)
New York ($192M)
Michigan ($149M)
Pennsylvania ($135M)
States receiving more funding
Twelve states saw increased allotments, including several heavily lead-burdened states, with the biggest gains going to: Michigan (+$87.5M), Illinois (+$68.7M), Indiana (+$68.1M), and New York (+$62M).
Figure 1. Allotment increases by states between Federal Fiscal Year 2024 (FFY24) and FFY25. Funding increases (x-axis) per state shown as millions of dollars ($M) and percentage increases in parentheses.
States receiving less funding
Fifteen states saw reductions in their allotments, with the following states suffering the biggest losses: Florida (-$194.5M), North Carolina (–$47.6M), Louisiana (–$38M), Tennessee (–$36.6M). These reduced allotments are almost certainly linked to lower LSL estimates than previously expected. Florida’s decrease, in particular, likely reflects corrections to flawed survey data from 2024.
Figure 2. Allotment decreases by states between Federal Fiscal Year 2024 (FFY24) and FFY25. Funding decreases (x-axis) per state shown as millions of dollars ($M) and percentage increases in parentheses.
While the use of inventory data ties funding more closely to documented state needs, challenges remain, as inventory quality and completeness varies widely. A large number of service lines are still categorized as “unknown,” and many systems have yet to submit their initial inventories. For example, one-third of New Mexico’s water systems missed the federal inventory deadline, and New York still has more than 935,000 unidentified service lines. This means that EPA still needs to rely on some degree of data extrapolation to account for these data deficiencies.
Expanded Eligibility IIJA LSLR Funding: Funding More, Replacing Faster
EPA also broadened the types of projects eligible for IIJA LSLR funds, expanding access for water systems. Specifically, eligible projects include:
Removal of galvanized lines requiring replacement and lead components. By aligning IIJA funding eligibility with the Lead and Copper Rule Improvements (LCRI), EPA is helping ensure utilities replace full service lines, not just the portion owned by the water system. The shift opens the door to more efficient, cost-effective, and health-protective replacements that eliminate all sources of lead in a single effort.
Replacing related infrastructure at the same time as LSLs. States can now allow IIJA LSLR funds to be used for projects that replace lead pipes together with other connected water infrastructure, such as water mains or meters. To qualify, these projects must serve a state-defined disadvantaged community (DAC) and make it easier for the utility to complete LSL replacement. This flexibility helps utilities do the work all at once, lowering costs, avoiding multiple rounds of construction, and directing investments to places where it can have the greatest impact.
The Negatives
Inventory Completeness and Funding Outcomes Remain Misaligned
Although EPA updated LSL estimates by using inventory data, EPA continues to estimate state-level counts using a proportionality approach. That is, EPA multiplies the ratio of reported LSLs to unknown lines rather than assessing the probability that unknowns are LSLs as EPIC has called for.
Because installation of LSLs was largely phasing out by the mid-1950s and was federally banned in 1986, all unknown or unreported service lines are not equally likely to contain lead. A service line in a pre-1950s neighborhood is far more likely to contain lead than one in a neighborhood built after 1990. EPA can improve the accuracy of state-level estimates by incorporating well-known indicators that correlate with presence of LSL, such as age of housing stock, to estimate the probability that an unknown or unreported line is actually lead.
Applying a proportionality approach results in:
States with many unknowns can appear to have more LSLs than they likely do.
States with complete or near-complete inventories can be under-counted and under-funded.
States with incomplete inventories can be rewarded with higher allotments, undermining incentives for accurate reporting.
Although EPA removed unreported lines from state estimates, likely reducing extreme overestimates, the fundamental problem remains: unknown and unreported service lines are not being treated in a statistically meaningful way.
No Improvements to the Allotment Formula
EPA did not update the underlying formula to determine state allotments. As a result, while funding is now better aligned with state needs, it remains less precise than it could be. The current allotment formula distributes funding based on each state’s estimated share of the national total LSLs. However, these estimates are shaped by how unknown and unreported service lines are treated and by how complete a state’s inventory is. When inventory data is incomplete, updating the inputs without adjusting the formula itself can lead to significant overallocations to states with lower LSL burdens.
To support a fairer and more effective distribution of LSLR funds, EPA could refine the allotment formula to account for both: 1) the likelihood that an unknown or unreported line is actually lead, and 2) the completeness of each state’s inventory. A weighted, probability-based approach would better reflect true needs and reduce misalignments driven by data gaps (more in-depth analyses coming soon).
We recognize that revising the allotment formula again would require resources and would represent yet another change in a relatively short period. However, given the scope of the remaining need and the significant federal funds still available, further improvements to the formula would be warranted.
Minimum Allotment Requirements Amplify Funding Mismatches
This funding mismatch is amplified by the Safe Drinking Water Act’s (SDWA) 1% minimum allotment requirement.
This is mainly because many states now have far fewer LSLs than expected, yet still receive the same minimum share of funding. For example, Alaska is slotted to receive the minimum 1% allotment despite having a total of four estimated LSLs. Over the five years of IIJA funding, that adds up to over 200,000% of the state LSL replacement needs.
Figure 3. Projected percentage of LSL replacements that can be completed per state funded exclusively through IIJA LSLR funds based on EPA’s old LSL estimates (FFY24) and new LSL estimates (FFY25). Toggle between the figures to visualize the differences. Diagonal shading indicates states that have declined IIJA LSLR allotments at least once over the two previous funding cycles. An average cost of $12,500 per lead service line replacement, as reported by Kutzing et al. (2023), was used to calculate the percentage of service lines each state could replace.
Our previous analysis shows that removing the 1% minimum allotment requirement would substantially reduce these overallocations, lessen the administrative burden associated with reallotments, and get these funds to the communities that need them most, faster. EPIC has suggested Congress consider waiving this 1% requirement for LSLR funds. Sixteen states receiving overallocations, including ones with presumably low lead burdens, have already declined their LSL allotments in the last two fiscal years, demonstrating the feasibility of waiving this minimum requirement.
Our Take: Moving Toward Smarter, More Impactful Investment
DWSRF Reauthorization: A Chance to Remove Bottlenecks
The upcoming DWSRF reauthorization, expected in 2026, offers an opportunity to revisit how IIJA LSLR dollars are allocated. Congress could use this moment to waive the minimum 1% allotment requirement for any remaining IIJA LSLR funds, including reallotments, allowing funds to flow more directly to the communities with the greatest needs.
Revisit Allotment Formula for Reallotments
Even with just one year of IIJA LSLR funding left, we believe it would still be worthwhile for EPA to revisit the allotment formula for FFY2026. Changes made now would have impacts well beyond this final funding round, since the same formula will also determine how unspent dollars are reallocated through 2028–2030. Getting the formula right could help ensure that remaining funds flow to communities that are ready to move quickly on LSL replacements.
Balancing Inventory Completeness and Risk of LSLs
EPA’s new approach to handling unreported service lines is a step forward. It reduces risk of severe overestimates and encourages systems with suspected lead to complete their inventory reporting. But this method is still a blunt instrument that treats all unreported lines as equally likely to contain lead, even when we know that this varies widely by housing age and geography.
EPA should also consider rethinking how inventory requirements apply in areas with low likelihood of LSLs. While inventories are an important step in addressing lead exposure, requiring systems to fully identify service line materials in areas where LSLs are rare– such as post-1990 constructed neighborhoods— diverts limited resources that could go toward actual replacements. Many utilities are already addressing this by using predictive models, incorporating variables such as age of housing to identify where LSLs are most likely. EPA could adopt a similar, risk-based approach to strengthen inventory guidance and direct funding where it matters most.
Specifically, EPA can:
Request states to clarify the age of housing in unreported systems
Waive inventory requirements for newer developments
Encourage states to ensure inventory completion where the likelihood of LSLs is high—providing technical assistance when needed.
At the end of the day, this isn’t just about funding formulas and data—it’s about protecting public health, and making sure every dollar counts.
We’ll dive into the new LSL inventory data and what we have learned since the last DWINSA in our next blog.