When Federal Earmarks Undermine State Priorities: Why Texas Loses Big Under SRF Earmarks
By Janet Pritchard and Danielle Goshen
Texas voters and state leaders have made one thing abundantly clear: water infrastructure is a top priority for the future of the state. Over the past two years, Texas has moved decisively to deploy more state funding—not less—toward water supply, water system upgrades, and drought resilience. Yet at the federal level, EPIC’s new report Revolving No More: How Earmarks Undermine Funding for Water Infrastructure shows that congressional SRF earmarks are moving in the opposite direction, stripping Texas of critical federal water dollars at the exact moment communities need them most.
This mismatch between what Texans are willing to invest in themselves and what Congress is inadvertently taking away is striking. Texans know that more investment is needed to protect water resources and ensure safe, reliable, affordable water for all, and they are stepping up to the challenge. But EPIC’s new report shows how SRF earmarks are counteracting Texans’ efforts to increase investment in water infrastructure. SRF earmarks cost Texas $93.3 million in direct federal funding in 2023 and 2024, even when accounting for earmarks received by the state. Moreover, EPIC’s report projects the state will suffer a net loss of more than $1.2 billion across its Clean Water and Drinking Water SRF programs over twenty years when the loss of funds revolving back to the state is factored in.
Texas Is Investing Heavily in Water While Congress Is Quietly Cutting Texas’ Share
At the ballot box and in the legislature, Texas has shown overwhelming support for water investment:
In November 2023, voters approved a $1 billion Texas Water Fund (TWF) to address aging infrastructure, water loss, drought, and long-term water supply challenges.
And this month, two years after the creation of the TWF, on November 4, 2025, Texans passed Proposition 4 (HJR 7)—with over 70% support—to establish a dedicated revenue stream for the TWF, using state sales and use tax revenue of up to $1 billion per year.
These are historic, transformative commitments. Texas is one of the fastest growing states in the country, and its communities—from urban centers to rural, unincorporated areas—face severe water challenges. In fact, the Texas Water Development Board estimates that the capital cost to design, construct, and implement the more than 2,400 recommended water management strategy projects included in the State Water Plan by 2070 is $80 billion in 2018 dollars, without accounting for future inflation. State lawmakers and voters have chosen to confront those needs head-on.
But while Texas is stepping up, federal dollars are being siphoned away through SRF earmarks.
How SRF Earmarks Hurt Texas
EPIC’s research in Revolving No More shows that the rise of congressional earmarking in the Clean Water and Drinking Water State Revolving Fund (SRF) programs has created sweeping inequities. Large states, fast-growing states, and states with fewer representatives per capita—like Texas—lose the most.
Earmarks divert funding from the core SRF formula, which is designed to fairly allocate dollars based on state drinking water, wastewater, and stormwater infrastructure needs. When Congress sets aside large chunks of SRF money for specific projects, the remaining funding gets distributed using the formula—dramatically reducing the amount available to Texas.
Texas gets hit twice:
1. Texas receives fewer formula dollars because earmarks shrink the pot.
While Texas has received some earmarks since Congress resumed earmarking federal SRF funds, total earmarks for all states have ballooned since Congress resumed this practice in fiscal year 2022 (FY22). Consequently, the formula-based portion of the SRF—the portion Texas depends on—shrinks significantly. This means fewer federal dollars flow to the Texas Water Development Board (TWDB) to support community drinking water, wastewater, and stormwater projects through the state’s Clean Water and Drinking Water SRFs.
The result? A dramatic net loss for Texas.
Texas lost out on a staggering $90.3 million across both SRF programs and fiscal years (FY23 and FY24). This includes $44 million in FY23 DWSRF funding over FY23 and FY24, despite receiving $4.5 million in earmarks.
Figure 1: Total net change (in millions) in funding for Clean Water and Drinking Water projects, including CWSRF and DWSRF allotments and earmarks received by the state, for FY23 and FY24. Net winners—compared to the allotments that would have been allocated in the absence of earmarks—are shown in green and net losers in brown.
2. Texas sees fewer dollars revolving back into its Clean Water and Drinking Water revolving funds
The most profound impact of contiguous congressional earmarking of water infrastructure funding will unfold over the coming decades, however, because earmarks undermine the long-term durability of SRF programs by eroding the revolving fund mechanism. Most SRF awards are loans that generate principal and interest repayments that revolve back into SRF accounts and can be awarded again to new water infrastructure projects. In contrast, earmarks are grants that never revolve back into the funds. Thus, earmarks permanently undermine state infrastructure programs by reducing the capital base available for future projects.
EPIC’s analysis projects that, when the loss of direct funding is coupled with this loss of revolving funds, Texas will lose over $1.2 million over 20 years. In the graphics below, the brown bars indicate the projected loss of direct formula funds over 20 years if earmarks continue at FY23 and FY24 levels, while the brown lines indicate how this is compounded by a loss of repayments. In the case of the CWSRF, the state’s loss of formula-allotted funds (brown bar) is somewhat offset by the DWSRF earmarks received by the state (purple asterisk). Because these earmarks do not return repayments to the state’s revolving funds, however, the projected repayment loss (brown line) is greater than the immediate net loss.
Figure 2: Projected impact of earmarks on CWSRF federal funding and repayments by state over 20 years.
Figure 3: Projected impact of earmarks on DWSRF federal funding and repayments by state over 20 years.
For Texas, the loss of formula-allotted funds and the loss of repayments combine for a double blow to Texas communities in need of water infrastructure upgrades. As the graphics above illustrate, however, even states that appear to be “earmarks winners” because the earmarks they receive exceed their loss of formula-allotted funds (indicated by green bars above) still lose out when the loss of revolving funds is factored in. And, because repayment losses will compound year–on-year, earmarks undermine the durability of the SRFs across all states over time—eventually turning the green diamonds above into brown.
Earmarks Undermine What Texans Are Asking For
The surge of SRF earmarks is not just bad policy—it actively conflicts with what Texas residents and elected officials have said they want:
Texans want major water investment.
The overwhelming approval of the Texas Water Fund and Proposition 4 reflects deep bipartisan support for addressing water infrastructure and long-term water security.
Lawmakers across the aisle agree on the urgency.
During the 2023 legislative session and beyond, state legislators repeatedly stressed the importance of directing resources toward critical water supply projects, water system upgrades, and resilience planning.
But SRF earmarks take away Texas’ federal funding—forcing Texans to pay more out of pocket.
The reduction in revolving fund capacity compounds other pressures created by the earmark process. As explained in EPIC’s report, when Congress strips Texas’ federal SRF formula dollars, local utilities are left with fewer low-cost loans, fewer principal forgiveness opportunities, less technical assistance for struggling water systems, fewer resources to administer water infrastructure funding, and fewer tools to address aging infrastructure and regulatory compliance.
Earmarks create a perverse outcome: Texas taxpayers contribute to the federal SRF program—but Texas receives diminished returns because of congressional earmarking.
A Lose-Lose for Texas Communities
Earmarks shift SRF funding away from high-need communities and into projects selected for political reasons. EPIC’s research shows:
Small communities lose the most access to traditional SRF assistance.
Communities that receive earmarks tend to be wealthier.
Because earmarks do not revolve—unlike SRF loans—Texas permanently loses future repayments that would otherwise support additional investment.
Large programs like Texas’ will lose hundreds of millions in capacity to meet statewide water challenges.
This is the exact opposite of what Texans are trying to do with the Texas Water Fund: build a long-term, sustainable funding source to secure the state’s water future.
Texas Is Doing Its Part, But Additional Support is Needed From Congress
Texas is taking major, bipartisan, voter-backed steps to secure water for the next century. But the federal government is moving backwards by reducing Texas’ SRF funds and undermining state SRF policies aimed to direct funds where they are needed most.
If Congress wants to support water resilience in states that are doing the hard work themselves, it needs to:
Maintain stable base funding levels. Congress should sustain federal appropriations for SRF capitalization grants at adequate levels and ensure they are not reduced to accommodate earmarks.
Prioritize need in targeted funding. Congress should base project selection on need to ensure that earmarks support the statutory policy objectives of SRFs.
Clarify institutional roles. Congress should require clear and consistent protocols for the EPA and states to administer earmarked funds and provide additional resources commensurate with this burden.
Revise the allotment of SRF funds to calculate allotments first, and then deduct each earmark from the receiving state's allotment. This change would ensure that the long and short-term costs of earmarks are not unfairly shifted onto states that receive few earmarks.
Continue impact assessments. This report shows that reductions to the revolving fund mechanism are likely to have serious long-term impacts, which will undermine the public health and environmental aims of SRF programs. There should be regular assessments of the impacts of earmarks on SRF programs.
Establish separate appropriations for targeted funding. If Congress opts to continue providing earmarked funds for water infrastructure projects, it should fund earmarks through a distinct appropriation line, separate from and in addition to SRF capitalization grants.
Texas communities—from the Panhandle to the Gulf Coast—deserve a federal partner that strengthens their efforts, not one that redistributes their share of funding elsewhere and undermines the durability of the state revolving funds, a federal-state partnership that has been—and must continue to be—a major source of water infrastructure funding.