Update: Clean Water State Revolving Fund Program Reauthorization

Congressional reauthorization of the Clean Water State Revolving Fund (CWSRF) presents an opportunity to strengthen a cornerstone of clean water infrastructure investment. The Clean Water For All coalition has developed a set of policy recommendations to enhance the transparency, accessibility, and impact. EPIC played a central role in shaping proposals related to data reporting, decentralized wastewater systems, and technical assistance. 

Why are government clean water loans important? 

Communities across the country face mounting challenges: a widening clean water infrastructure investment gap on one side, and increasingly unaffordable water rates on the other. The EPA’s Clean Watersheds Needs Survey estimates $630 billion of unfunded upgrades and repairs over the next 20 years to meet health and environmental standards. Meanwhile, another EPA report found that 15% of people already face a high water rate burden.

Seventy-six percent of Americans support increased water infrastructure investment. Instead of the current program’s $4-5 billion in authorized funding, we agree with the Coalition that $6 billion per year is needed.

By financing infrastructure improvements while keeping costs manageable and rates affordable for residents, the Clean Water State Revolving Fund (CWSRF) is an important tool to help relieve both cost and affordability pressures. Congress is now considering reauthorization of the CWSRF, a process led by the House Transportation and Infrastructure Committee, with full House and Senate action expected later this year. 

In addition to reauthorizing funding for the CWSRF for upcoming years, reauthorization provides a key opportunity to update federal policy and strengthen the program’s reach and effectiveness.

Policy Recommendations for the CWSRF 

EPIC is focused on making state revolving loans programs function more efficiently and fairly so that more communities can access affordable water infrastructure solutions. As detailed in A Fairer Funding Stream, just 5.53% of U.S. municipalities received a CWSRF award between 2011 and 2020.  These are some of the recommendations that we believe will help broaden the program’s impact.

1. Set minimum standards for states’ data reporting. 

This change should cost almost nothing: Congress should require states to use a consistent, unique project identifier across all phases of CWSRF funding—from initial eligibility and prioritization to finalized funding agreements. Only eleven states use a unique, consistent identifier across all project phases. Intended Use Plans typically include projects eligible for assistance and those the state intends to fund, while Annual Reports—which feed into EPA’s reporting portal - capture projects with finalized funding agreements. However, many states lack a consistent method to track the same project over time or across funding cycles. This fragmented reporting makes it difficult to assess whether and how projects advance through the pipeline, how long they take, or why some stall. 

Requiring a consistent project identifier would provide a simple but powerful tool to help EPA, Congress, state leaders, and other stakeholders assess how well CWSRF funds are being used and how efficiently they’re flowing to municipalities, identify trends in project delays or drop-off, and understand where additional support may be needed. It would also allow for better tracking of high-priority projects that fail to receive funding due to challenges like meeting “ready to proceed” criteria, highlighting where technical assistance or policy adjustments could have a meaningful impact.

This modest but strategic improvement would strengthen oversight, improve accountability, and support more effective use of federal infrastructure investments—without placing significant new burdens on state programs. It would also enhance our collective ability to understand how the program is addressing the nation’s most urgent water infrastructure and affordability needs.

2. Ensure CWSRF eligibility for decentralized wastewater projects.

More than 21 million U.S. households, particularly in rural areas, rely on decentralized wastewater systems, many of which are failing. These failures can lead to raw sewage exposure, water contamination, and public health risks for both nearby and downstream communities. Yet decentralized systems are often too complex and costly for individual households to repair or replace on their own, and most are not served by a utility that can apply for funding on their behalf.

Federal law allows nonprofit organizations to apply for CWSRF assistance to support decentralized wastewater projects for households that meet affordability criteria. However, many states prohibit or restrict this use of funds. As of 2021, only two states had provided such assistance, often due to state-level legal barriers. Congress should prohibit states from categorically excluding federally eligible decentralized wastewater projects from CWSRF funding. States would still retain the authority to prioritize among eligible projects, but this change would remove a significant obstacle to addressing a widespread infrastructure challenge.

The policy would lay the groundwork for additional action to meet the magnitude of the decentralized wastewater infrastructure challenge. In the future, Congress could take a further step by authorizing dedicated funding for decentralized wastewater systems, following the successful model used for lead service lines and emerging contaminants in the Infrastructure Investment and Jobs Act. Creating a distinct funding stream would prevent decentralized projects from competing directly with traditional infrastructure needs, allowing states to better support these long-overlooked systems and move more projects from planning to construction.

3. Create a technical assistance set-aside for all communities that meet state affordability criteria.

Under current law, states may use up to 2 percent of their annual CWSRF capitalization grants to provide technical assistance—but only for rural, small, and Tribal systems. While these communities often need support, they are not the only ones. Many larger or non-rural systems that meet a state’s affordability criteria also face challenges navigating the CWSRF application process due to limited technical, managerial, or financial capacity.

We recommend that Congress create a second set-aside of up to 4 percent to provide technical assistance for systems of any size that meet a state’s affordability criteria. This expanded set-aside would allow states to tailor assistance based on local conditions and needs, helping more high-priority projects advance toward funding agreements. Congress recognized this fact in its Drinking Water State Revolving Fund program, which provides a 2% capitalization grant set-aside for small drinking water systems, a 4% set-aside that can be used to provide technical assistance for systems of any size, plus another 10% for local assistance and capacity building. 

Without this kind of support, communities with significant infrastructure needs may be unable to complete the many steps required to qualify for SRF funding, including needs assessments, capital planning, or environmental reviews. As a result, SRF dollars can end up flowing to applicants who already have the capacity to develop competitive proposals, rather than to communities facing the most significant barriers.

While increasing the set-aside would modestly reduce the funds available for direct lending, states can leverage their revolving loan funds and other financing tools to preserve and even expand lending capacity. More importantly, investing in technical assistance helps build a more robust and responsive pipeline of fundable projects, ensuring that SRF resources are used effectively to address the most urgent wastewater and stormwater infrastructure needs. More, and more flexible, technical assistance gives states the ability to support communities of all sizes based on state priorities and knowledge of local conditions and barriers, furthering the CWA’s cooperative federalism model. 

Additional ideas 

In addition to the three recommendations above, the Clean Water for All coalition presented the following policy recommendations to the Transportation and Infrastructure Committee: 

4. Create a separate authorization for CWSRF emerging contaminants projects.

5. Increase the proportion of CWSRF funding provided as additional subsidization by raising the floor and ceiling for additional subsidization to 30% and 50% respectively, to allow states more flexibility and ensure more of the communities reliant on additional support can execute water infrastructure projects. 

6. Set minimum standards for state CWSRF public input and engagement processes, including comment opportunities and outreach during the development of intended use plans.

7. To ensure more under-resourced communities access CWSRFs, require states to provide additional subsidization when the area served by the project meets the state’s affordability criteria, even if the jurisdiction or utility district as a whole does not.

8. Codify the Tribal CWSRF set aside at 2 percent of the total annual program appropriation to provide more robust funding and reduce uncertainty for Tribal authorities and project applicants.