Proposed budget slashes state water funds by $2.4B as EPA reduced

The U.S. Clean Water and Drinking Water State Revolving Fund programs could face the largest cuts under the White House’s proposed 55% budget reduction for the Environmental Protection Agency (EPA) in the next fiscal year, according to a new letter from the Office of Management and Budget.

The May 2 letter to Appropriations Committee Chair Susan Collins proposes an overall discretionary budget of $305 million for those state revolving funds (SRFs), which is $2.4 billion less than the 2025 budget. The SRFs provide low-interest loans for water and wastewater infrastructure projects. The letter claims that these budget cuts will place the onus on state governments to find “alternative funding sources” for their own water infrastructure.

The letter, sent two days before the start of Drinking Water Week (May 4-10), adds that the 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. The budget letter also notes that states “received a massive investment in the Infrastructure Investment and Jobs Act (IIJA).”

According to the American Society of Civil Engineers’ 2025 Infrastructure Report Card, only about 30% of the funding needed for wastewater and stormwater infrastructure is currently being met. 

In a statement, the Water Environment Federation (WEF) announced that it is “deeply concerned” by the proposed cuts. 

“While federal dollars account for a relatively small portion of total water infrastructure spending, they play a pivotal role in helping communities comply with federal regulatory requirements,” the WEF statement noted.

The American Water Works Association hosted a roundtable last week in New York City to discuss the current landscape for SRFs as well as the EPA’s WIFIA program.

In a May 3 statement, EPA Administrator Lee Zeldin said that the new “phase” of the EPA’s reorganization efforts is anticipated to result in more than $300 million in additional annual savings for taxpayers by fiscal year 2026. 

“When the agency’s larger, comprehensive effort to restructure its organization is finalized, EPA’s employment levels will resemble those during President Ronald Reagan’s administration,” announced Zeldin.

The White House’s budget proposal letter does, however, allocate $124 million for drinking water programs, which is $9 million more than the 2025 budget. Increased funding is intended to “respond to drinking water disasters, directly helping people on the ground recover from such emergencies,” the letter states.

An additional $27 million funding is also earmarked for the Indian Reservation Drinking Water for tribes to “retain access to critical funding for drinking water and wastewater infrastructure on their lands,” with a total level of $31 million for the grant program.   

The letter also proposes massive cuts to the Hazardous Substance Superfund and Environmental Justice programs.