How a Reformed WIFIA Could Use $1 Billion in Funding

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The fundamental purpose of WIFIA reform is to enable the Program to do more things in the real world. What the Program can accomplish in the real world in terms of some additional national benefit is the basis for requesting federal funding that comes from real-world taxpayer resources. The additional benefit is the ‘policy return’ that taxpayers get for providing their resources.

Go Big or Go Home

If the potential policy return is big, the request can — and should be — be large.

  • As with many sectors of US basic infrastructure, there are huge potential policy returns from federal support for US water infrastructure, across all its sub-sectors. That’s the consistent theme of water lobbyists’ recent legislative fly-in in Washington, and unlike their WIFIA ‘narrative’, this one appears to be solidly based on facts.
  • Large-scale infrastructure investment relies on long-term finance, and the federal government has a lot of unique strengths as a lender in this area. No surprise that a recent AWWA report highlights the central role of federal water finance programs.
  • Urgency? Yes — sooner the better in the context of inflation and declining affordability, stagnant economic growth (or worse), climate challenges, fiscal constraints and all the rest.

Can status quo WIFIA deliver a big policy return? No. Its capabilities and usefulness are too limited. In effect, WIFIA loans are similar to tax-exempt bonds with ‘free’ interest rate options thrown in, an ‘occasionally useful’ alternative for highly rated water systems. I’ve frequently written about the Program’s issues, most recently about the zero return on taxpayers’ real resources used to cover WIFIA’s gigantic funding losses.

But it’s important to remember WIFIA demonstrated that the federal government can effectively originate and efficiently process large-scale infrastructure project loans. That core capability is worth preserving — it’s the basis on which reform could be very effective towards real-world goals and relatively fast-acting — what the sector needs, right?

Still, further funding for status quo WIFIA is pointless — the trivial $65m that water lobbyists will soon be baying about (“or children will die of thirst“) would just add to a pile of unutilized budgetary authority from prior years, unlikely to be even occasionally useful under current market conditions and certain to deliver zero real-world policy returns. Don’t bother.

However, a reformed WIFIA is a different matter. The above chart is a rough sketch of how $1b of federal funding could be allocated among various water subsector projects that are eligible under current WIFIA law. Assuming that the lobbyists’ ‘narrative’ prevails to keep $65m as WIFIA funding again this year, but doesn’t stop reform by 9/30/2026, WIFIA’s budgetary authority for FY27 will total about $400m — definitely enough to get started on implementing the reformed Program’s much bigger objectives.

Crazy Huge? Not Really.

If the start goes well, that can be the basis for the real request — $600m for FY28 budget. Crazy huge? Well, let’s put that amount in perspective

  • There is no free lunch — ever. WIFIA only looked amazingly cheap, able to deliver $100 in loan volume for $1 of discretionary funding. But that was because WIFIA and OMB ignored predictable funding losses due to highly rated borrowers predictably exercising their interest rate options. The actual cost of WIFIA FY2018-FYTD2026 (including mandatory spending) was $3.4b, about $370m per year, or about 12% of the $26b loan portfolio executed in that period. The real loan volume-to-funding ratio was only 8.3:1. That’s what WIFIA was already doing, so is $500m per year with a loan volume-to-funding ratio of 12.5:1, and with a much better real-world policy return, really problematic? Or an improvement on the status quo?
  • The biggest federally subsidized financing source for the water sector is water & sewer tax-exempt bonds. Annual volume there is about $40b per year, and very roughly, the present value of the tax expenditure is about 10% of volume, or $4b per year. That’s ok, and the tax-exempt bond market should remain the predominant source of federally subsidized finance for the water sector. But a more coordinated approach to federally subsidized finance, including SRFs and WIFIA, would have a better policy return — Slicing Up the Federally Subsidized Infrastructure Finance Pie. In that context, $500m per year for WIFIA looks like a minimum level.
  • Perhaps most importantly, we’ve got to start thinking about a world where the policy returns of federal infrastructure finance might rapidly become far more critical than even the AWWA report cited above is saying. Look at the current geopolitical situation — think a global depression is impossible? Combined with a catastrophic financial crash? Mass unemployment in the US? Grim thoughts, and hopefully not likely outcomes. But I think it’s realistic to say that harder or at least more uncertain times are on the way, and federal infrastructure finance programs should begin to ramp up to a much bigger scale.

EPA WIFIA Loan Program Reform in FY26 Reauthorization

EPA-WIFIA-Reform-in-FY26-Reauthorization-One_pager-041126-InRecap-v1.0

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The WIFIA Loan Program will require reauthorization prior to September 30, 2026.  Reauthorization legislation is an opportunity to begin reforming the Program.

In ‘Narrative’ World, WIFIA Doesn’t Need Reform

Of course, according to the standard WIFIA ‘narrative’, everything’s fine – no reform is necessary.  Yes, the WH FY27 Budget is proposing ‘shocking’ cuts to Program funding, but that’ll be fixed in due course, as it was last year.

In the Real World, WIFIA Has Serious Issues

Back in the real world, the Program’s issues are becoming obvious.

A Guiding Principle for Reform

A recent report from a major water lobbyist actually spells it out for you:

From page 4 of Beyond the Replacement Era, AWWA April 2026

As a lender, the federal government has some significant ‘comparative advantages’ relative to private sector, especially the tax-exempt bond market. In the coming hard times, maximizing the utilization of these advantages is the key to loan program policies that are effective for both borrowers and federal taxpayers — that is, not just zero-sum transfer payments but a real win-win based on the low intrinsic cost of some federal lending strengths (e.g., very long loan terms).

This isn’t just some abstract economic theory — per the above, even lobbyists appear to get it, at least a bit, and you know they’d be looking for more IIJA-type transfer payments if they thought any were on offer. Hard times must be coming, and I think they’re coming at us pretty fast. So, let’s get on with it at WIFIA, shall we?

Congressional Directives to Ensure Compliance with Existing Policies

A lot of WIFIA ‘reform’ is in fact already on the books — the Program and OMB just need a couple of stern Congressional reminders to comply with established policy:

  • OMB Circular A-129 is very clear that federal credit programs must be fulfilling some need that private-sector lenders or other federal programs aren’t. If the A-129 rules and procedures are followed, they’ll lead to the Guiding Principle — the ‘need’ is obviously affordability in local funding, and unique WIFIA loan terms can help fulfill it.

No more excuses, right?

Statutory Amendments Already Proposed by Diverse Water Stakeholders

To fulfill a real-world mission, the WIFIA Program needs some more real-world capabilities. Previously proposed amendments showed what real-world stakeholders think those additional capabilities should be, and hence the short list is a good start for WIFIA reform:

  • Expanded Scope for Small Project Combinations: Most recent post here — Expanding the Scope for WIFIA’s Eligible Combinations of Small Projects. The specific language hasn’t been proposed before, but I think it’s consistent with what the proposed small project amendments were trying to accomplish and (perhaps more importantly) opens new avenue for innovation.
  • FCRA Amendment: More detail than any sane person would want here — FCRA Non-Federal. The ridiculous FCRA Criteria have to go.

Going Full Narrative: “Without WIFIA’s Free Interest Rate Options, Children in Silicon Valley Would Be Dying of Thirst!”

Desperately reaching for a new WIFIA ‘narrative’….

There’s a lot, lot going on in the US and in the world, not much of it good. Even within the narrow and relatively calm confines of upcoming debates on the WH FY27 Budget proposal and WIFIA reauthorization, the stressed-out zeitgeist means there’s likely to be contentious points raised and awkward questions asked. Standard-strength ‘narrative’ camouflage and obfuscation might not cut it this time. What to do?

You go ‘full narrative’.

Just disconnect from reality altogether and defend the status quo WIFIA Program and more (pointless) funding for it with outright lies. And not ordinary, everyday political lies, but extreme, almost ridiculous, statements that are hard to counter in rational discussion because opponents are left speechless. Here’s a simple example:

“Proposed WIFIA Cuts Will Cause Massive Unemployment and the Failure of Critical Water Infrastructure.”

But there are more subtle variations to address specific criticisms. If asked about the Program’s failure to comply with OMB Circular A-129’s additionality requirements, you can confidently state:

“To Protect the American Taxpayer, WIFIA Only Lends Money to Highly Rated Water Systems That Don’t Need It.”

WIFIA’s gigantic mandatory spending is a bit tricker — $3.1b in losses is hard to hide, even these days. There are two tactics. The first is to claim that the losses are meaningless numbers cooked up by malign Deep State nerds:

“WIFIA’s Mandatory Spending is an Arcane Accounting Adjustment, Not Relevant to Hardworking American Taxpayers.”

Second, and much better for your purposes of ending the debate and continuing the grift, is to put a positive and strangely plausible spin on the whole thing:

“Every $1 in WIFIA Funding Unlocks More Than $90 in Federal Spending.”

How does anyone even begin to answer that? You know, after they stop laughing?

In case other water sector stakeholders, with actually justified claims for scarce federal support, try to sneak in some WIFIA amendments to reform the Program, expand its capabilities and restore its originally intended statutory eligibility, a haughty dismissal might be effective:

“WIFIA Amendments Aren’t Necessary and Will Result in Higher Risk and Cost for American Taxpayers.”

Still, it’s possible that more persistent questioners might go so far as to bring up what WIFIA specifically ‘accomplishes’ and note that it appears to primarily involve ‘free’ interest rate options to highly rated water systems. This is dangerous — dishing out financial options does not sound like something an infrastructure loan program should be doing. To hard-working American taxpayers, it sounds like ‘crooked Wall Street shit’. For your critics, the soundbites write themselves — e.g., “EPA Program Delivers Billions in Financial Options to Insiders”. It’s hard to derail interest in a topic that might resonate with widespread political and economic discontent because it has its own narrative power.

You’ll need to bring in the children:

“Without WIFIA’s Free Interest Rate Options, Children in Silicon Valley Would Be Dying of Thirst!”

Perhaps this seems a bit extreme? It is often said that ‘you never go full narrative’. But to be honest, WIFIA’s current narratives are already so disconnected from reality that few people would notice the difference.

NACWA Tells Us They Are Shocked, Shocked!

NACWA LinkedIn Post 4/3/2026

NACWA is shocked — shocked! — that anyone would propose cutting FY27 funding to a program that can’t even utilize a fraction of its prior years’ funding and has more than $300m in carryover budgetary authority, enough to replicate its entire loan portfolio?

Is this…sarcasm? As in “Of course we know WIFIA doesn’t need and can’t even use the money in FY27, but we’ll show the federal taxpayer chumps that lobbyists can always deliver the goods to their special interests no matter how stupid or wasteful the spending is. Just like we did for WIFIA’s equally pointless FY26 funding. There’s nothing that simplistic ‘narratives’ about “keeping America strong, healthy, resilient, and secure” can’t camouflage. Abandon all hope, taxpayers — we’re laughing at you.”

You want shocking? Look at the reality that this narrative bullshit supports:

  • Free interest rate options for AAA water systems like Silicon Valley Water District and other highly rated and well-resourced WIFIA borrowers.
  • Blocking any WIFIA amendments that might make the Program useful for water projects that really need subsidized financing for communities where affordability is a real issue.
  • Being silent — or maybe even quietly supportive of — the egregious distortion of FCRA budgeting rules to effectively shut down the primary purpose of the CWIFP section of WIFIA.

Source: OMB apportionments website; InRecap analysis

If something can’t go on forever, it will stop. Narratives that are ridiculously disconnected from reality can be surprisingly persistent during prosperous times because the cost of the looting and misallocation they enable isn’t immediately felt. But when tougher times come, reality asserts itself remorselessly. We’re not there yet, but very close, I think.

WIFIA reform will happen — because it must. It’s not difficult and doesn’t need to take much time or effort — amendments in WIFIA reauthorization legislation based on prior bills could accomplish much of what’s required. And then, and only then, will requests for new WIFIA taxpayer funding be justified.

WH FY27 Budget: EPA WIFIA Funding Losses of $3.1b FY18-FY26 Est.

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In mid-February I posed the question: Will WH FY27 Budget Show EPA WIFIA Estimated FY26 Mandatory Spending Over $1 Billion?

Well, the answer is ‘yes’. The WH FY27 Budget, including technical appendices, was released this morning. The estimate for WIFIA FY26 mandatory spending is $1.03b, making the Program’s total since operations began about $3.1b.

It seems from other sections in the WIFIA budget that expected disbursements in FY26 are about $5b, so I think the total amount of drawn loans from the $26b loan commitment portfolio will be about $15b by FYE26. The $3.1b of funding losses is therefore about 20% of disbursements, the same rate as FY23-FY25. As a percentage of total loan commitments, however, funding losses are now 12% of commitments, up from 9% before.

Not pretty, but all much as expected. Other items for WIFIA:

  • As with the WH FY26 Budget, the proposed level of discretionary funding for the next fiscal year is only $8m for administration, doubtless based on the same argument that the Program has plenty of carryover funding.
  • The White House is even more right about that this year — of the $65m or so appropriated in FY25, only about $20m was utilized, and OMB expects the same usage rate for the FY26 pointless appropriations, so the carryover for FYE27 is estimated at a whopping $421m. The implied new loan commitment volume is only about $2b per year, or maybe even somewhat less if recent apportionment trends to higher risk WIFIA loans that are surfacing continue (that’ll be a topic for a future post).
  • Still, that big carryover could be the basis for continuing operations, without the need for further appropriations, for a reformed WIFIA — that is, correct FCRA budgeting for predictable funding losses and a move into the type of loans that actually accomplish real-world policy objectives. The money is already there — use it to prove that WIFIA really is a critical program for US water infrastructure renewal, without ‘narrative’ bullshit or off-budget games, and that’ll be the basis for a much higher level of funding in the future.

Meanwhile, for SRFs it looks like the same song as in the FY26 budget — I’ve yet to get to the numbers, but here’s the FY27 Budget statement:

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More on all this to come.