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Interior-Environment Bill Increases Share of State Revolving Funds Directed to Earmarks
The “Minibus” of Appropriations bills released last week (and analyzed by NEMWI here) included the Interior-Environment Appropriations bill, which funds the Environmental Protection Agency and the Clean Water and Drinking Water State Revolving Funds. Those accounts would be funded at the same level as in Fiscal Year 2024: the Clean Water State Revolving Fund would receive $1.639 billion and the Drinking Water State Revolving Fund would receive $1.126 billion. However, the bill increases the amount of money within those accounts that must be used for Congressionally Directed Spending, or earmarks, which bypass the State Revolving Fund programs.
In both programs combined, earmarks rose by 13.3% from FY 24 to FY 26 and now constitute 58% of the SRF accounts. Because the funding for CDS comes out of the SRF accounts, an increase in CDS without a corresponding increase in total SRF funding necessarily means a decrease in funding going through the State Revolving Funds, and because earmarks go directly to projects as grants instead of loans, increased CDS also chips away at the long-term sustainability of the SRFs by lowering the amount of money coming back into the funds as interest. If the trend of increasing CDS continues, it would be especially impactful in FY 27, when supplemental funding for the State Revolving Fund programs under the Bipartisan Infrastructure Law expires. One of the benefits of that funding has been to offset the increase in CDS.
Because the continuing resolution passed last year to cover the entirety of FY 25 precluded the use of earmarks, each Great Lakes state would see a lower capitalization grant going to their State Revolving Funds under the FY 26 Interior-Environment appropriations bill. Depending on the reintroduction of earmarks, however, some states would receive more total funding in FY 26 than in FY 25, while others would receive less. Minnesota, for example, would see an increase of total funding under its Clean Water State Revolving Fund program of $23 million while New York would see a decrease of $48 million.
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