To be honest, I didn’t expect there to be any mention of WIFIA, CWIFP or even SRFs in the 2026 budget request summary published today. Federal financing and funding for water infrastructure has solid bipartisan support and is obviously completely non-ideological. Funding for the loan programs is miniscule in the scale of the federal budget and even annual SRF grants don’t amount to much. Given the magnitude of their battles ahead, why were these even on the Administration’s radar screen?

The proposed numbers would do some serious damage. SRF funding is almost completely cut, leaving a relatively small amount for transitioning. CWIFP funding for 2026 is eliminated. WIFIA funding is left flat from 2025, which would be a positive sign were it not for the summary’s indication that the EPA program is expected to take up the capacity lost at the SRFs and CWIFP.

Of course, a lot will change by the time Congress is done with the budget, so I don’t think the numbers themselves need to be taken too seriously. But their explanatory text is another matter. That text includes strong statements that hint at longer-term policy directions for federal finance. But also, confusion about what federal finance is meant to do.

To provide some context, I’ll briefly outline something that I’ve been developing for a while and will be writing a lot about in future. I hadn’t expected that it would be relevant until the ongoing federal upheaval started to settle down. But here we are – if relevant policy directions and/or confusion are emerging from the apparent chaos, they need to be addressed in the context of clear policy objectives. So, what are they? What should they be?

Here is where TIFIA, WIFIA and CWIFP have a serious problem. After you strip away all the special interest narratives, what exactly is the national purpose of federal infrastructure loan programs lending to investment-grade borrowers financing low-risk projects while debt markets are functioning normally? It could be reasonably said that there is none. In pre-2025 times, such an observation wouldn’t have mattered. Now, it might invite the DOGE chainsaw. So, a real-world, narrative-free objective, suited to the emerging political context and actual federal fiscal constraints, must be made explicit. For now, I’ll simply state what I think it should be:

The primary goal of federal infrastructure loan programs is to facilitate local funding for local infrastructure solely by utilizing intrinsic and unique federal financing strengths (relative to debt market alternatives) through loan feature design and efficient transaction implementation.

Much more on that to come in future posts and articles. Now, back to budget summary. I’ll comment on each paragraph, roughly line-by-line.

Clean and Drinking Water State Revolving Loan Funds: $2,460m Reduction

EPA’s State Revolving Fund (SRF) was designed decades ago to give money to States via formula allocation for seed money to set up their own water infrastructure loan programs without continued annual appropriations. When it comes to water infrastructure, the States should be responsible for funding their own water infrastructure projects. Contrary to that design, in practice, the program has been heavily earmarked by the Congress for projects that are ultimately not repaid into the program and bypass States’ interest and planning. In addition, 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, and they received a massive investment in the Infrastructure Investment and Jobs Act (IIJA). The Budget proposes to return the SRFs to their intended structure of funds revolving at the State level and therefore provides the decreased funding level of $305 million total to allow States to adjust to alternative funding sources for their water infrastructure.

• I don’t know if the limited seed money intent was part of the original design or was later superseded by some sort of consensus. Not sure it matters because the administration is raising a valid question — is continued annual federal grant funding anything more than a transfer payment? Note this is relevant to the proposal to offer WIFIA sub-UST rates to SRFs to jump-start more optimal leveraging — that feature should be explicitly time-limited and contingent on measurable progress.

• States responsible for their own water infrastructure funding — that’s a major statement. ‘Should be’ without further explanation is the kind of normative language used for ‘self-evident’ objectives — as in a political philosophy. Also note consistency with the fundamental objective I briefly stated above — there is also a self-evident national interest in helping states raise their own funding, and federal financing can be part of that.

• Yes, the earmarking does suggest that annual grants are seen as ‘free money’ transfers which Congress can redirect away from the intended purpose, revolving fund capitalization. Why, because that purpose is not important and Congress is better at resource allocation? It’s a bad look. Perhaps the huge cut was proposed, not so much to really reduce SRF funding, but to clap back at Congress: “See, you didn’t think revolving fund capitalization was important and you could play earmarks with the money. Well, taxpayers aren’t going to fund your earmarks and the SRFs can do without. That okay with your constituents?”

• The next one is very important: SRF lending duplicative of WIFIA lending? Really? Of course, the answer is ‘absolutely not’, as I’ve written about frequently on this site. But the real concern is that the line suggests whoever wrote it doesn’t know much about SRFs, WIFIA or even basic project lending. How about thousands of $5m project loans being selected, executed and administered out of Washington? Does that sound efficient or like the optimal use of resources? Not exactly consistent with Project 2025 decentralization principles — or even common sense. To be fair, the policy objectives and outcomes of federal finance programs have been so shrouded with ridiculous narratives (as described above) that the new team’s simplistic misunderstanding is not surprising. Still, it’s a red flag. This kind of thing needs explicit clarification before it’s embedded in emerging policy mindsets.

• Who knows if $305m for ‘alternative funding sources’ is the right amount? But I agree with the implied principles: (1) states (and localities) need to fund their own infrastructure, but the federal government should help them find it — this was not a cold cut-off, and (2) alternatives that increase the capital efficiency of SRFs with prudent leverage would presumably be included. WIFIA sub-UST rate for underleveraged SRFs would be consistent with both principles. Btw, $300m of SWIFIA credit subsidy funding would support about $3bn of leveraged SRF loan volume, more than the cut. Just saying.

Corps WIFIA Program (CWIFP): $7m Reduction (Implied Elimination)

The Corps WIFIA program provides direct loans and loan guarantees for non-Federal dam safety projects. The Budget eliminates this program because there is no demonstrated need in the private market for Federal financial assistance for these types of projects. In addition, the program is duplicative of other programs, such as FEMA’s National Dam Safety Program and the EPA’s WIFIA Program. In addition, this program is arguably outside of the Corps’ mission, which is to provide engineering expertise for military construction and civil works projects—not serve as a creditor to private entities.

• Ugh, the FCRA Criteria again. CWIFP wasn’t intended to be limited to dam safety projects – it was meant to support non-federal cost shares in Corps & BOL projects, but the FCRA Criteria wrecked eligibility for that.

• There’s as much or more need for federal financing of this type of infrastructure as there is for WIFIA’s loans – like to AAA Silicon Valley Water agency. It’s the same case of utilizing federal finance to facilitate local funding. Which is exactly what cost sharing does, except that it also reduces federal outlays.

• Again, not ‘duplicative’ of WIFIA. CWIFP is a statutory extension of WIFIA for a type of specialized finance (cost shares). EPA WIFIA is effectively specialized in municipal water agencies. CWIFP just extends WIFIA’s proven success and efficiencies to another sector of water infrastructure, usually involving projects with an even greater degree of national-scale interest. Also, note the glaring inconsistency of saying that there’s no need for CWIFP loan capacity in the just-prior sentence, and then saying two other federal finance programs ‘duplicate’ that loan capacity? Well, which is it?

• CWIFP is no more outside USACE’s mission than WIFIA is outside EPA’s mission, or TIFIA is outside of DOT’s mission. In ideal world, I do think that federal infrastructure finance should be centralized, perhaps at Treasury. But as it is, location at sectoral agencies is relatively efficient.

• All this focus in a short budget summary for $7m?? The only two reductions that small are for a radical woke education program and an obsolete grant series. Both cuts were clearly intended to make a bigger point. What’s the bigger point of cutting CWIFP? None, except…well see below.

• Here’s an ugly thought. Axios reported that “many proposed cuts were identified by Elon Musk’s DOGE”. Quite possibly lower-level DOGE boys ended up talking to the same bureaucrats at OMB who are pursuing a private agenda against CWIFP and who were behind the FCRA Criteria. The boys likely asked them to name candidates for cuts. So, this dismal Criteria crew used the opportunity to go in for the kill by describing CWIFP only in terms of government waste, which they knew would resonate with the DOGE boys. It didn’t matter that their criticisms were misleading and inconsistent because they knew that their audience would be uninformed on the details. Exactly the same dishonest word salad strategy I saw in the Criteria. The story sounds plausible, no? But let me stress it’s just speculation at this point.