Last week, AWWA released a report on its State of the Water Industry (SOTWI) 2025 survey. A couple of sections provide some context on the recent cuts (and non-cuts) proposed by the Trump Administration

First, we can see what’s currently on the minds of water sector executives — they see infrastructure renewal and replacement as a top priority, but consider the necessary precursor to addressing that issue, capital financing, to be an even more important issue:

^{From page 4 of AWWA SOTWI 2025 Survey}

Next, we can see where those executives are thinking about regarding the sources of that financing. For us, the focus is on the federally subsidized sources of financing — the Grant category in the table likely includes direct federal grants, which is a source of funding. As you’d expect, three types of federally subsidized finance show up: Municipal bonds (presumably almost always tax-exempt, per IRS Code), SRF loans (which are subsidized via federal grants to the SRFs) and WIFIA loans (subsidized with credit subsidy federal appropriations):

^{From page 14 of AWWA SOTWI 2025 Survey}

I don’t think the table is intended to be indicative of the amount of financing sourced from each category. I’m sure that muni bonds are usually the biggest source of financing for water agencies in most years (maybe $40 billion or so), with SRFs coming in second depending on availability in a particular state (maybe $20 billion or so), and WIFIA providing a minor share, depending on the nature and eligibility of the project (maybe $5-6 billion per year).

Instead, what’s interesting is that the executives would appear to consider all three as established sources that most or many of them will regularly consider in their planning, and that to some extent the sources are interchangeable. In that context, imagine what would happen if the federal subsidy for some financing categories (say, SRFs and WIFIA) were reduced while others were left untouched (say, muni bonds). The executives will still check whether there’s availability at their local SRF or if WIFIA still has enough credit subsidy for their eligible project, but inevitably the final plan will reflect a higher proportion of the source that has maintained prior levels of federal subsidy.

In effect, the cuts proposed by the Trump Administration of SRF and WIFIA funding will almost certainly not reduce the water sector’s reliance on subsidized federal finance, given that tax-exempt muni bonds will remain available and that that market is functioning smoothly. Instead, the lost capacity in SRFs and WIFIA will be shifted to bond issuance. There might be some impact on the quality of the financing with respect to the project and the agencies’ financial situation (super-low SRF rates and very long and flexible WIFIA loan terms will be replaced by standard muni market terms), but I think probably not enough to change capital plans.

For the federal budget, I’m not sure that the cuts will result in any real cost savings, though the budget treatment for the three categories is so different that that might not matter — for now. The biggest unknown is how a $2.5 billion cut in SRF funding would impact available annual capacity and resulting increased muni issuance. That’s going to require some analysis — for the moment, here’s an overview of where things stand in June 2025:

^{From Page 14 of the WH 2026 Budget Summary}

“States should be responsible for funding their own water infrastructure.” sounds like a very principled statement, right out of old-timey Classic Liberalism, as if it might have been said by the Founding Fathers in a 1787 debate. But the exact words also have a slightly chiding tone, like “It’s time for you states to grow up and take care of yourselves, the federal government can’t do everything.” Either way, from principle or practical realism, the message is conveyed as a stern truth that the Trump Administration wants everyone to acknowledge.

But then there’s this:

Okay, this comes from a ChatGPT ‘discussion’ of a few weeks ago. But the $3.9 billion in annual subsidy for tax-exempt bonds issued to finance water projects sounds about right in my experience. More importantly, the data used for the calculation looks solidly sourced from two major water sector advocacy groups, AMWA and NACWA, who are consistent proponents of tax-exempt muni bonds.

As we know, the muni market was mighty concerned a few weeks ago that their slice of the federal pie (about $25 billion each year in total) would get reduced in the BB Bill as it went through the House. The tax-exemption did get partially whacked in Trump’s 2017 bill, so the fear was not unfounded, and the market’s lobbyists went Code Red, all-hands-on-deck, apocalypse now, etc. Their pushback succeeded in the House; I haven’t heard of any alarums raised yet in the Senate process. More importantly, the WH seems to accept the House bill, which implicitly endorses leaving the tax-exemption untouched. I’m guessing that the muni market will get through unscathed — but there’s still a long and rocky road ahead, so who knows?

What can be done at this point, however, is to ask some hard questions about where the Trump Administration is coming from on federal subsidies for water infrastructure finance. The two subsidies discussed above are obviously different in form, but substantively quite similar — about $2.5 billion per year has gone to the states for new SRF capitalization that can be used for low-interest loans many times over, and about $3.9 billion per year has gone to high-income taxpayers to subsidize about ten times that amount in lower-interest bonds. The same federal principle and/or realism ought logically to apply to both. But the FY 2026 Budget and the WH’s apparent acceptance of the House BB Bill aren’t consistent when it comes to funding (or not) for federal water infrastructure finance.

• Well, Trump Administration, what’s it going to be? Did the statement in the 2026 Budget Summary about states being responsible for their own water infrastructure funding mean anything? Or was it just rhetoric?

• If it’s all just rhetoric, okay, people get that. But what are the realpolitik factors at play here that would explain the Administration’s proposed radical SRF funding cut but apparent silence on the tax-exemption? Lobbyists for both sides can make the same arguments about the critical need for infrastructure funding — you know, the vivid vignettes of children going without drinking water and all that kind of thing. Is it just that the muni bond lobbyists are more badass — that they have better threats? Trump 1.0 took on this crew in 2017 and prevailed — what’s changed?

• Or is something a little more ideological going on in Trump 2.0? The standard distinction in real-world neoliberalism — strict small government principles and/or realism applied to public-sector spending, but a generous hand with ordained private-sector areas, especially major financial markets with high-income investors — is inherently inconsistent and illogical. That would go some way in explaining another logical inconsistency in the WH 2026 Budget: In the Summary, the SRFs are said to be ‘duplicative’ of WIFIA and, as such, undeserving of any more federal funding. Yet in the full, Technical Supplementary Appendix, WIFIA itself is cut for FY 2026 to just its operating budget, the explanation being that the program can use leftover funding for new loans. Okay, maybe — but isn’t there going to be a big increase in demand from the now lower-funded SRFs? That higher demand will be continuing — will WIFIA be funded again in FY 2027? Or FY 2028? Or…let’s be honest — if the Administration is adhering to the above neoliberal ‘principles’, they simply don’t care, right?

I don’t know when this FY 2026 EPA Budget in Brief was published — presumably right after the Technical Summary was released last Friday? Over the weekend? In any case, despite pretty much continuous searching, I just found it this morning. On page 48, the Brief clarifies something I thought might be the case (but erroneously discounted) in a prior post, specifically in Note 1.

It looks like the Trump Admin does not intend to shut down the WIFIA program for now, or is not giving an indication to that effect, anyway. Apparently, it was judged that the program could continue loan origination in FY 2026 with ‘substantial’ leftover funding. The rest of the descriptive language is not negative and would seem to acknowledge some success (‘large loan pipeline’), so it seems the cut is simply a way to shave $65m off this year’s budget.

Okay — that’s much better. However, there’s a bit of cautionary signal here — the federal budget is being examined critically, down to the smallest details. For FY 2026 budget, WIFIA’s leftover funding meant that the current goal (savings) could be achieved, apparently without much further thought, and the couch change could be thrown in the pot. But once the microscope is brought to bear, its use might become more standard — and harder questions asked. Like in FY 2027 or FY 2028, when the leftovers are gone and the federal budget is still in parlous shape? It might be better to see this, not as an affirmation of the role or necessity of federal infrastructure finance, but as a stay of execution during which a strong defense can be made — for the next time.

As expected from the earlier budget summary, CWIFP’s proposed FY 2026 budget is just flatlined — no new resources.

I’d like to see how the transportation loan program, TIFIA, is faring. It wasn’t mentioned in the budget summary. But to be honest, I can’t make head or tail of what’s in the Technical Supplement. Apparently, I’m not the only one who can’t tell what TIFIA gets — this from an Eno Center March 2025 article, The FY25 Year-Long CR: What’s in It, and What’s Not:

The $50 million for the formula bridge program at FHWA will once again be matched by $200 million transferred from the TIFIA contract authority program to the same bridge program, as happened in 2024. But between then and now, the 2024 WRDA bill transferred an additional $1.8 billion in TIFIA contract authority to the regular federal-aid highway formulas. That adds up to $2.2 billion transferred out of the TIFIA program in just over a year. No one outside DOT is quite sure exactly how much TIFIA funding is left. This new $200 million transfer will almost completely eliminate the new funding provided for TIFIA by the IIJA for 2025 ($250 million gross, lopped off by the annual obligation limitation to around $200 million. The list of projects expecting TIFIA loans in 2025 is now long and getting longer.

Perhaps to be clear about resources for federal infrastructure loan programs, you need to be clear about what the programs are meant to accomplish — you know, to put the request in context. As yet, that hasn’t been done, but in all the upheaval, I think it needs to get done soon. Such programs might come in mighty handy in certain economic conditions and even to achieve certain ideological objectives, as in ‘facilitate local funding for local infrastructure’ — that’s sufficiently Project 2025-ish, no? It’d be a shame if they all just got chain-sawed away or hijacked for high-risk P3 project finance. Just saying.

The conclusions of this post have been updated 6/3/2025 here: WH 2026 Budget WIFIA Cut — Update Re Carryover Funding

The Technical Supplement to the 2026 Budget was just released. Apart from being over 1,200 pages long, it is indeed technical — not easy to read or understand, even for someone who has interest in these matters. In particular, the mechanics of federal cash budgeting are completely sui generis — plain cash budgeting might have a certain logic, but here everything is mixed with terms and categories that reflect idiosyncratic federal practices. Federal insiders will understand the language; to be fair, they are the primary audience. Outsiders like me can only make educated guesses.

The WIFIA program shows up on pages 953-955. The screenshot above is what I think are the critical numbers. The yellow highlight is alarming. Although the WH Budget Summary of a few weeks ago did not show any cuts to WIFIA, the Technical Supplement appears to do so. WIFIA’s prior appropriation level was about $72m — $65m for loan subsidy and $8m for operations. The $8m number proposed for FYE 2026 indicates that the program can keep operating, but there won’t be any new appropriations for loan subsidy.

The brief accompanying text is consistent with this interpretation — it pretty much says in lawyer-like language that while the continued operation of WIFIA is a statutory requirement, that’s all the program will be resourced for. In effect, no new loans: [1]

This appropriation supports all activities necessary for the implementation of the Water Infrastructure Finance and Innovation program established by the Water Resources Reform and Development Act of 2014….The $8 million request to implement the Water Infrastructure Finance and Innovation Act (WIFIA) program is for the Environmental Protection Agency’s (EPA) management and operation of the program, including contract support and associated payroll. The WIFIA program will be administered by EPA’s Office of Water.

Since WIFIA’s borrowers have very high credit quality, $65m of loan subsidy would support about $6 billion of financing — so the impact for the water sector is material.

The importance of the purple highlight is less obvious, but may actually be more concerning. Of course, the startling $1bn of mandatory appropriations for is for interest rate re-estimates, as long predicted on this site — here’s my last estimate, The Economic Cost of WIFIA’s Portfolio at FYE 2023. You can see that the sum of mandatory appropriations for FYE 2024 and FYE 2025 in the Supplement is about $1.6bn, which is in the ballpark of my estimates, though fortunately at the lower end. [2]

The concern is this: The fact that Trump Administration people focused enough on WIFIA to propose cutting $70-odd million from a successful program that finances water infrastructure means that they might also notice the $1.6-odd billion in mandatory appropriations the program has required. Ok, those don’t show up in the budget, so maybe most of the practical folks won’t care — but what about the more ideological ones? Or a technically curious DOGE boy looking to make a mark? And what about muni bond lobbyists who have more reason than ever to put potential competition in a bad light and show how necessary (and relatively efficient) their market is for delivering federally subsidized finance? [3]

I know the budget numbers will change, so it’s not likely that WIFIA cuts, if there are any, will be so drastic. It’s hard to predict where the re-estimate issue will go — there may be ways to manage the ‘narrative’ if necessary. Still — a defensive mindset might be called for.

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Notes

[1] It is possible that WIFIA has sufficient unallocated leftover subsidy to meet loan demand for FYE 2026 without needing further funding. But I somewhat doubt it — WIFIA usually gets more than enough applications to utilize its annual appropriated funding. There are about 69 ‘pending’ loans on their website — amounts aren’t given, but I’d guess the total is somewhere around $8-10 billion, which would require $80-100 million in subsidy, i.e., all of last year’s funding plus some more. Maybe the ‘unobligated balances’ line above holds a clue? Above my pay grade.

[2] I doubt anyone will dig this deep, but if you include the mandatory appropriations for FYE 2021-2023, the total to date is actually closer to $2.4 billion. The portfolio is now about 50% drawn (i.e. prior loan commitments that were drawn down into funded loans, which triggers the re-estimate), so the final total could go yet higher when the remaining old commitments are drawn, but perhaps by not so much. The actual number is not so important — it’s the ‘billion’ handle showing up in the current budget environment that might be a concern.

[3] There’s this Congressional letter from 2020 re municipal bond market support (what eventually became the Municipal Liquidity Facility). FWIW, note the signatory on page 3, as one of forty-three House members.