Will Funds for Water Infrastructure Flow Fairly

Most federal water infrastructure funds flow through the State Revolving Fund (SRF) program. The SRF is a federal-state partnership in which Congress appropriates money each year that's divided among the states. Each state then distributes those funds to communities-typically in the form of low-interest loans-according to its own set of policies and priorities. A portion of these funds are reserved for grants (often called "forgivable loans") to disadvantaged communities.

These policies vary widely from state to state-in fact, they often differ between the Clean Water SRF and Drinking Water SRF funding streams within the same state. State policies can prioritize different types of projects and applicants, offer different interest rates and other loan terms, and provide different amounts of "additional subsidization" (grants and forgivable loans that don't need to be repaid). All of these policies affect how hard or easy it is for different kinds of communities to access funding. As a result, they have a significant influence on equity in the program.

Recent analyses have revealed problematic trends in states' ability to direct funds to disadvantaged communities. NRDC's 2022 report A Fairer Funding Stream: How Reforming the Clean Water State Revolving Fund Can Equitably Improve Water Infrastructure Across the Country, developed in collaboration with the Environmental Policy Innovation Center (EPIC), found that smaller municipalities and those with larger populations of color were statistically less likely to receive assistance through the Clean Water SRF between 2011 and 2020. These results were consistent with EPIC's 2021 analysis of Drinking Water SRF awards.

Because of those findings-and the fact that a surge of supplemental funding through the Bipartisan Infrastructure Law of 2021 has increased scrutiny of the SRF-we decided to take a closer look at the state policies that guide the distribution of these funds. Our goal was to identify the degree to which states are incorporating equity into their programs and to identify opportunities where they can improve.

To accomplish this goal, we developed a list of 16 policies that affect disadvantaged communities' ability to access SRF funds. We chose policies that we could evaluate on a standardized yes/no basis. We considered policies that govern Clean Water SRF and Drinking Water SRF award decisions, as well as the separate policies that states use when deciding how to allocate SRF resources for lead service line replacement projects.

While these certainly aren't the only state policies that can affect equity in funding distribution, considered together, they indicate whether a state is taking steps to ensure that all kinds of communities are able to access the resources they need.