By Denise Schmidt
The United States is approaching a water infrastructure funding cliff just as a key financing tool is being weakened.
State Revolving Funds (SRFs) are one of the most effective infrastructure financing tools in the United States. The revolving nature of SRFs enabled $81 billion in federal capitalization grants to provide just under $230 billion for more than 68,000 safe drinking water, clean water, and stormwater management projects through 2023. Since 2021, however, Congress has earmarked a significant share of SRF appropriations and distributed those funds as grants that do not revolve.
What Are Congressional Earmarks and How Do They Work?
Congress allows individual members to request funding for specific infrastructure projects in their districts. This funding is known as earmarks, also referred to as Congressionally Directed Spending (in the Senate) or Community Project Funding (in the House).
For water infrastructure, these earmarks are drawn from SRF appropriations and authorized as one-time grants to projects selected by members of Congress through congressional negotiations, rather than transparent, state-managed, needs-based processes.
That creates a fundamental shift. SRFs are designed to issue loans that are repaid and recycled into future projects. Earmarks are grants that are not repaid, so the money does not return to the revolving fund, shrinking the total pool of capital over time.
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