Earmarks Will Cut $19.4 Billion from America’s Water Infrastructure Financing
March 27, 2026
Media Contacts:
Janet Pritchard, Director of Water Infrastructure Policy: janet@policyinnovation.org
Ekta Patel, Senior Policy Analyst, Water Program: ekta@policyinnovation.org
Denise Schmidt, Director of Water: denise@policyinnovation.org
Washington, D.C. — The Environmental Policy Innovation Center (EPIC) released a new report today, Revolving No More: How Earmarks Are Draining America’s Water Funds, detailing how congressional earmarks are weakening one of the nation’s most successful infrastructure financing tools: the State Revolving Funds (SRFs).
For decades, SRFs have provided nearly $230 billion in financing for drinking water, clean water, and stormwater projects through loans that are repaid and reinvested. Since 2021, Congress has increasingly converted these funds into earmarked grants, eroding the revolving structure and shrinking long-term investment capacity.
Over 20 years, earmarking is projected to result in a net loss of $19.4 billion in water infrastructure funding - enough to finance approximately 5,700 projects. Thirty-nine states are expected to lose more than they gain, with an average loss of $550 million per state.
In addition to long-term losses, earmarks reduce resources that pay the salaries of state employees who keep water clean and safe. They also reduce support for under-resourced communities. Over three years, state agencies lost a combined $59 million annually in funds used primarily to pay salaries for staff who operate SRF programs. Critical assistance that helps make water projects more affordable for small, rural, and under-resourced communities declined by an estimated $480 million to $1.9 billion.
States lost a combined $59 million annually in support to pay the staff who operate their clean water and drinking water SRF programs.
Temporary increases in federal funding through the Infrastructure Investment and Jobs Act (IIJA) have masked these impacts. When that funding expires after federal fiscal year 2026, states could face a sharp drop in SRF funding - roughly 90% when combined with continued earmarking.
“State Revolving Funds work because they recycle capital, not spend it down,” said Denise Schmidt, EPIC’s Director of Water. “When Congress converts these funds from loans into one-time grants through earmarks, it breaks the system’s ability to sustain itself. The result is fewer projects, higher costs for communities, and less reliable investment in the infrastructure people depend on every day.”
“By taking loan program dollars and earmarking them into grants, Congress is eliminating about $20 billion in water infrastructure financing without saving a single federal taxpayer dollar,” said Dr. Timothy Male, EPIC’s founder.
EPIC emphasizes that while earmarks are often framed as short-term wins, they frequently result in net losses for most of the states receiving them. By interrupting the compounding nature of SRF financing, earmarks reduce future investment capacity and shift resources away from established, need-based allocation systems.
EPIC outlines several recommendations to restore and protect the integrity of SRFs, including ending the practice of earmarking SRF programs, funding earmarks through separate appropriations, issuing earmarks as loans rather than grants, and increasing transparency around long-term impacts.
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About the Environmental Policy Innovation Center
At the Environmental Policy Innovation Center (EPIC), we build policies that deliver improvements in the speed of environmental progress. We imagine a future where environmental and public health outcomes dramatically outpace the scale and speed of their threats, where healthy communities and ecosystems thrive, and where governments effectively serve their people. In partnership with government, private, and nonprofit partners, we are standardizing a new pace so environmental innovation moves faster. https://www.policyinnovation.org/
