WLI 2025 Final Project: Navigating Funding Challenges in a Changing Economic Landscape

Each year the final project is a major part of the Water Leadership Institute. The WLI 2025 cohorts wrote articles on turning challenges into strengths through resilient leadership.  

In 2021, the Bipartisan Infrastructure Law (BIL), also known as the Infrastructure Investment and Jobs Act (IIJA) was enacted to provide $1.2 trillion to support a wide range of infrastructure projects including wastewater. Now, with current budget cuts and rescission, the funding landscape in the United States (U.S.) has changed considerably. Yet, the nations’ water resource recovery facilities (WRRFs) challenges for funding such as aging infrastructure, industry and population growth, regulatory compliance, resource recovery, and technological upgrades remain the same. Water industry leaders are working to address these existing challenges and assuring services remain reliable, but struggle with the conundrum of increasing rates while keeping services affordable. Therefore, accessibility to external funding sources is critical to maintaining and improving WRRFs.

The following figures are based on a survey conducted to identify trends in funding challenges for wastewater utilities, distributed among utility professionals across the U.S. with first hand experience in funding and resource allocation. Survey respondents included directors, engineers, superintendents, and operators from municipal facilities ranging in size from less than 1 to over 100 million gallons per day.

Figure 1. Survey respondents selected the top three sources from which they receive the most funding (n=13). SRFs = State Revolving Funds (SRFs); USDA WEP = US Department of Agriculture (USDA) Rural Development Water and Environmental Program (WEP); HUD CDBG = Department of Housing and Urban Development (HUD) Community Development Block Grants (CDBG); DOE SWIFt = Dept of Energy (DOE) Sustainable Wastewater Infrastructure of the Future (SWIFt); EPA WIFIA = Environmental Protection Agency (EPA) Water Infrastructure Finance and Innovations Act (WIFIA); EDA = Department of Commerce Economic Development Administration (EDA); USDA WDLGP = USDA Water & Wastewater Disposal Loan & Grant Program.

Figure 2. Survey respondents selected the biggest challenges in acquiring funding for their projects in the next five years (n=13).

Due to operational costs, capital investments, and inflation the average combined sewer and water bill for Americans has increased by 24% over the last five years (U.S. Municipal Utility Water Rates Index 2024: Drinking Water & Sewer, 2025). Responses to the survey indicate that when rate revenues became insufficient to cover costs and improvements for WRRFs, utility leaders primarily turned to state revolving funds (SRFs) for low-interest rate loans and principal forgiveness.

However, a recent White House letter stated “SRFs are largely duplicative of the EPA’s Water Infrastructure Finance and Innovation Act (WIFIA) program and the Department of Agriculture’s (USDA) Water and Wastewater Loan and Grant program, and they received a massive investment in the Infrastructure Investment and Jobs Act (IIJA).” (WaterWorld, 2025). Shortly after this letter was published, the EPA proposed a drastic 54.5% decrease between the Fiscal Year (FY) 2026 and the FY 2025 Enacted Budget. This included a reduction of $1.5 billion, or 90.5% of the Clean Water State Revolving Fund (CWSRF) compared with annual appropriations from recent years. This change was implemented with the goal of ”returning the responsibility of infrastructure funding to the states”, “encouraging states to take responsibility for funding their own water infrastructure projects.” (FY 2026 EPA Budget in Brief, 2025). The Senate Committee on Appropriations later approved a bill that would result in a 5% decrease to the EPA budget, including $2.8 billion in funding for SRFs (Senate Appropriations Press Release, 2025). Now, these cuts make SRFs a less reliable source of funding for many utilities nationwide.

This economic change creates a new challenge for utility leaders. Given the recent cuts, finding alternatives to traditional funding sources will be crucial for many utilities looking for current and future project funding. Additional alternative funding sources include municipal bonds, EPA federal grants, state grants, and FEMA grants. Potential funding resources that do not rely on federal funds include special assessment districts, public-private partnerships, and tribal partnerships. With aging infrastructure, growing costs, and limited funding, utility leaders will have to become more resilient to effectively allocate resources.

Once funding is acquired, resource allocation becomes the next critical component for successful project management. This requires assigning available resources, such as people, money, and equipment, to different tasks to optimize efficiency and achieve organizational goals (What Is Resource Allocation? Importance, Benefits, & Optimization, 2021). For WRRFs, this may include a shift in focus from capital improvement projects to maximizing the ability of existing systems to extend performance (Infrastructure Report Card, 2025). Effective resource allocation relies on informed decision-making. Leaders with the ability to leverage digital tools and think beyond traditional capital improvement projects strategies can help guide their organization to achieve greater financial stability and reliability in their systems.

A reminder that when the funding landscape changes, the greatest resource utilities have are their leaders. Utility leaders can ensure their systems are resilient during transition periods by: 1) advocating to continue funding federal programs, 2) educating themselves and their organization on new and alternative funding sources, 3) being strategic and proactive with rates and planning for the future, and 4) investing wisely by utilizing effective resource allocation practices.

Authors:

Andrew Hummel, Jissell Muir, Melissa Pierce, Aaron Rice, RJ Tyson, Chad Whiting, Afiya Wilkins