Impact of SRF Earmarks

Short-Term “Wins,” Long-Term Losses

The State Revolving Funds (SRFs) are one of America’s best ideas in infrastructure finance. For decades, the SRF programs, the Clean Water SRF (CWSRF) and the Drinking Water SRF (DWSRF), have been the government’s primary tool for financing water infrastructure, providing almost $230 billion for safe drinking water, clean water, and stormwater management projects through 2023.

Since 2021, Congress has earmarked SRF appropriations and distributed them as grants instead of loans. Earmarks break the core feature that makes SRFs so effective: their ability to revolve.

There is almost no way to earmark funds from a revolving loan program to grants without harming its ability to revolve.

Over a 20 year period, states will experience a net loss of $19.4 billion if earmarks continue at their recent levels. That’s enough to finance approximately 5,700 projects.

Revolving No More:

How Earmarks Drain America’s Water Funds

Earmarking SRFs is not a marginal policy choice—it is a structural change. Policymakers face a clear decision: preserve the revolving model that has sustained water infrastructure investment for decades, or continue carving out funds for earmarks and accept a steady erosion of long-term capacity. The evidence in this report shows that earmarks are not a neutral addition to SRFs. They fundamentally degrade how the programs function.

The following recommendations are designed to protect the revolving model while addressing Congress’s continued use of earmarks.

Stop earmarking SRFs.
Fund earmarks through separate appropriations.
Use loans, not grants, for earmarked projects.
Deduct earmarks from the receiving state’s allotment.
Require ongoing impact assessments.
Increase visibility of SRF-supported projects.

Water infrastructure requires steady, compounding investment. Earmarks do the opposite. Continuing to earmark the SRFs will leave states with less funding, fewer projects, less affordable water services, and a weaker system over time.