Funding Poised to Dry Up for Water Projects in Ohio and Other States if Proposed Budget Cuts Become Law

Proposed federal funding cutbacks for water programs would severely impact communities in Ohio and other states as they strive to provide safe drinking water, replace aging infrastructure, respond to climate change and more.

Among other things, the bill terms reported out by the House Appropriations Committee on July 19 would dramatically slash money going from the U.S. Environmental Protection Agency to state revolving funds for clean water and drinking water projects. The House would also eliminate funding for environmental justice programs, block the Biden Administration’s orders on diversity, equity and inclusion and block certain rulemaking and enforcement actions.

“The proposed budget is a disaster for clean water,” said Laura Rubin, director of the Healing Our Waters—Great Lakes Coalition. Although the House would hold the line on the Great Lakes Restoration Initiative, “it really guts the other clean water programs.”

The House Appropriations Committee’s statement says its bill “reins in wasteful Washington spending and bureaucracy” by “rightsizing agency funding levels,” seemingly putting the U.S. Environmental Protection Agency in the cross-hairs, despite ongoing climate change. The bill doubles down with policy riders favoring fossil fuel interests.

With Democrats in control of the Senate, the proposed cuts have little chance of becoming law as they stand now. Yet the bill signals the Republican-controlled House will likely insist on some significant cuts and policy riders. 

So, even with the likelihood of pushback from the Senate, advocates are worried.

When it comes to water programs to respond to climate change, “this is only going to make things worse,” Rubin said. The Great Lakes region has already been experiencing impacts linked to climate change, such as flooding from stormwater runoff, stress on drinking water systems from harmful algal blooms and pollution and combined sewer overflow problems.

“It’s alarming that House Republicans’ response to climate change, record heat and extreme weather has been to slash funding and focus on the culture wars,” said Rep. Shontel Brown, D-Cleveland, noting planned cuts to state revolving loan funds, or SRFs, that pay for infrastructure. “Only an extremist could look at faulty pipes and rusted storage tanks and not see a problem.”

Money for the state revolving loan funds flows from the U.S. Environmental Protection Agency to state agencies in amounts determined by formulas. The state agencies in turn distribute money to local communities for priority projects. Some loans are forgiven, which makes them effectively grants. Communities pay back the other loans over time at low interest rates. Those funds can then be loaned out for other projects.

Ohio’s two revolving funds for clean water and drinking water funded more than $1 billion in projects in calendar year 2022, said Katie Boyer, director of communications and outreach for the Ohio Environmental Protection Agency. Among other things, the funds let communities fix and replace sewers and drinking water lines, remove lead service lines, construct and upgrade water and wastewater treatment plants and deal with stormwater runoff.

“Many projects, particularly those receiving principal forgiveness, occur in small and disadvantaged communities,” Boyer said. 

The House proposal would now slash total funding for the clean water state revolving fund by about two-thirds, from $1.6 billion in fiscal year (FY) 2022 and 2023 to $535 million. And total funding for the drinking water state revolving fund would go from about $1.1 billion as of FY 2022 and 2023 to about $460 million. Average total appropriations for those funds were $2.79 billion per year from FY 2018 through FY 2021, according to data from CIFA, the Council of Infrastructure Financing Authorities.

Since 2022, however, chunks of the federal funding have been earmarked. And increases in the share of earmarks for 2024 mean states will actually face “a double whammy,” said Deirdre Finn, executive director at CIFA.

The top-line funding would be cut, and roughly 88 percent of the revolving fund money would be earmarked for particular projects, rather than letting state agencies set priorities. So, Ohio’s share of the amount without earmarks could come to only about $3.5 million, said Jon Freedman, global government affairs leader for Veolia, which manages water services for a variety of communities in Ohio and elsewhere throughout the country.

Earmarked projects don’t make up the difference, either. Ohio is among three dozen states that got less in total, including earmarks, in FY 2022 and FY 2023, data from CIFA show.

The combination of overall cuts and diversion to particular projects “really has just widespread cascading effects,” Finn said. And the impacts won’t be felt evenly. “There are a lot of small rural and disadvantaged communities that can’t qualify for financing in the public market. So the SRF is really the only place they can go for financing water projects,” Finn said.

The House proposal also calls for more of the funding to go out for grants, rather than revolving funds, Finn noted. Grant funds are only used once, instead of being repaid so the funds can be loaned out again for other projects. The result is less money in each state’s revolving fund. 

The cuts’ cumulative effects “will obviously impact our ability to invest in water infrastructure, and we have a really big backlog in Ohio,” said Melanie Houston, managing director of water policy and chief of organizational planning for the Ohio Environmental Council. The American Society of Civil Engineers’ 2021 Infrastructure Report Card gave a C+ grade to the state’s wastewater infrastructure and D+ grades for stormwater and drinking water infrastructure. 

Cutting back on normal levels of funding also will reduce the impacts of the Bipartisan Infrastructure Law, Houston said. “It’s a hit to keeping our water clean in Ohio and keeping our drinking water safe and affordable.”  

The Bipartisan Infrastructure Law’s funding was supposed to be in addition to normal levels of federal funding, Houston explained. Taking money away from those other funding programs would mean less is available in total for water infrastructure.

“There is significant bipartisan support in our Buckeye state for clean water investments and partnerships,” said Rep. Marcy Kaptur, D-Toledo. “So if water infrastructure isn’t a partisan issue in America’s hinterlands, why do Washington Republicans have to make it so?”

Inside Climate News also sought comment from the offices of Rep. Bill Johnson, R-Marietta, who serves on the House Budget Committee, and from Greater Cleveland-area Reps. Max Miller, R-Rocky River, and Dave Joyce, R-Bainbridge Township. None responded.

EPA’s ‘Hands Will be Tied’

The House budget proposal also would block the Biden administration’s recent rule defining “waters of the United States” to include small streams and wetlands. Combined with the Supreme Court’s May ruling in Sackett v. United States, “the agency’s hands will be tied behind their backs in a lot of ways,” Houston said.

Policy riders also would limit EPA’s authority to update rules on pollution from coal-fired power plants. The agency had estimated that a proposed Clean Water Act rule would provide roughly $1.4 billion in net benefits per year. Additional provisions would require government lease sales for oil and gas. 

More generally, the House bill would ban agencies from considering the social cost of carbon in cost-benefit analyses for proposed rules. EPA defines the term as a comprehensive estimate of the costs of climate change damages, expressed as the dollar amount for avoided harm from a reduction in greenhouse gas emissions. 

Put another way, the social cost of carbon is the amount of harm polluters cause to society at large when they emit greenhouse gas emissions. Failing to account for that harm would skew any regulatory cost-benefit analysis in favor of polluters.

Other budget cuts would eliminate money for environmental justice programs, which got about $100 million this fiscal year. The Biden administration had asked for nearly $370 million for FY 2024. The House proposal also would prohibit the use of funds to implement various diversity, equity and inclusion programs.

“As a Black woman representing a majority-Black district, it is appalling that efforts to address diversity, equity, and inclusion are being singled out for cuts,” said Rep. Brown. “This is putting politics over people, ignoring the history of environmental injustice in this country.”

A lot can still change in the coming weeks. A bill summary released by the Senate Appropriations Committee on July 20 indicates an intent to maintain substantial levels of funding for water infrastructure programs. Full details have yet to be released.

“If you think about a Cleveland Guardians analogy, if this is a nine-inning game, we’re kind of in the first inning right now,” Freedman said.