The forecast, based on growth trends in EPA’s 2022 Clean Watersheds Needs Survey and its 2024 Clean Water State Revolving Fund (SRF) Annual Report, shows that even with record appropriations, federal financing will cover less than 2% of documented need each year. 

Gardner-Andrews said the federal government “is almost nowhere to be found in a meaningful way” as funds from the 2021 Infrastructure Investment and Jobs Act taper off.

EPA has begun approving larger Water Infrastructure Finance and Innovation Act (WIFIA) loans—141 agreements worth $22 billion in credit assistance financing $48 billion in projects through early 2025—but the system’s expansion is outpaced by inflation, aging networks and climate-driven demand.

Gardner-Andrews credited WIFIA with “running really well,” but noted recent administrative delays. “We’ve only seen one loan close since January,” he said. “We’ve been told those loans should start flowing again once contract reviews are finished.”

By contrast, he said the SRF program “has its pluses and minuses.” While it gives states “a better finger on the pulse of local needs,” he added, “the extra layer of bureaucracy can slow projects down.”

A recent American Water Works Association survey highlights the same local constraints. “Capital improvement funding rises to the top priority … only 41% of utilities feel very or fully able to cover costs through rates and fees,” the group reported in its 2025 State of the Water Industry summary.

Unless state and local agencies move faster to prepare eligible projects, most of the backlog will remain unfunded when EPA’s next survey cycle opens in 2026.

“The issue isn’t the willingness to lend,” said Steffanie Crossland, manager of EPA’s national CWSRF performance branch, in the agency’s 2024 Annual Report. “It’s helping utilities develop projects that meet eligibility requirements for innovative and resilient infrastructure.”

A Market That’s Growing Faster Than Its Financing

EPA’s 2022 Clean Watersheds Needs Survey—the most recent national dataset, released April 2024—documents $630.1 billion in required investment across wastewater, stormwater, decentralized and nonpoint-source systems.

ENR analyzed those data, along with SRF loan and disbursement records, applying the 2012–2022 growth rate to current lending trends to project capital needs through 2026. That forecast suggests total demand could rise to $760 billion to $785 billion within two years.

Over the same period, annual SRF lending is projected to climb from $9.4 billion in 2024 to only about $10.6 billion by 2026—covering roughly 1.4% of total need. Even if WIFIA continues adding about $4 billion a year in new assistance, the shortfall will widen faster than it can be financed.

“This is not a funding problem—the money is available—but a project-packaging problem,” said Ken Pantuck, who oversees EPA Region 3’s revolving-fund program. Speaking during a 2024 EPA regional webinar on water-infrastructure finance, he said communities that design for automated metering or water reuse from the outset “can access entirely different funding streams.”

A June 2025 U.S. Government Accountability Office audit reinforced that point, concluding that the 1987 formula used to apportion SRF funds no longer reflects the areas with the greatest need. Thirty-one states would receive increases of up to 260% under a revised model, the report said.

Smarter Projects, Uneven Uptake

EPA data show how project types are changing. Between 2013 and 2023, 179 Clean Water SRF-funded projects incorporated automation, real-time control or digital-twin systems—collectively financed at about $12.5 billion. About 63% added new supervisory control and data acquisition (SCADA) networks, while others deployed automated metering and analytics.

In Cincinnati, the Metropolitan Sewer District’s SRF-backed real-time control network—completed 2016—cut combined-sewer overflows 61%, preventing about 557 million gallons of untreated discharge each year.

“Those are not glamorous projects,” said Maureen Hodgins, research program manager at the Water Research Foundation, speaking at WEFTEC’s Intelligent Water Systems Research Update. “But they’re the connective tissue of a modern system—how you get data, how you operate pumps and how you avoid flooding events.”

More than half of innovation loans in the past decade went to systems serving fewer than 25,000 people, and nearly 30% benefited communities classified as disadvantaged under EPA’s climate-justice criteria.

Yet many smaller utilities still struggle to prepare complete engineering and environmental documentation before loan windows close.

Gardner-Andrews said that the problem extends beyond paperwork. “For a lot of utilities—especially smaller or mid-size ones—it’s not just about the money,” he said. “It’s about having the staff and technical expertise to navigate all the requirements.”

EPA’s Financing Decentralized Wastewater Treatment Systems guidance cites about $500 million in SRF loans for clustered or packaged systems—evidence that decentralized treatment is emerging as a viable alternative where municipal expansion is unfeasible.

The Race to 2026

As the 2026 survey cycle approaches, the urgency is no longer abstract. States must obligate fiscal 2025 SRF allotments—$8.9 billion across clean-water and drinking-water programs—within two years or risk federal recapture. Each missed cycle delays compliance upgrades and inflates future bids.

Technical-assistance funding from the infrastructure law helped smaller utilities compete, Gardner-Andrews said, but that support is set to expire. “The real uncertainty now is what happens after fiscal 2026,” he said. “By then not only will the infrastructure-law funds be gone, but the SRF’s entire authorization will expire unless Congress acts.”

NACWA’s top priority, he added, is securing reauthorization at current funding levels. “If we roll backward to pre-infrastructure-law levels of roughly $1 to $1.5 billion a year, we’re going in reverse,” Gardner-Andrews said. “Some state programs could hit a death spiral because there won’t be enough to go around.”

Six states—New York, California, Florida, Virginia, Louisiana and Georgia—account for 42% of total national need, while West Virginia and New Mexico rank highest per capita.

With most major consent decrees still active, failure to modernize means higher penalties and tighter regulatory scrutiny.

“The data trail—from CWNS to CWSRF to WIFIA—shows a financing system evolving faster than many utilities realize,” Crossland said in the same report. “If design teams can match innovation with eligibility, they can capture the opportunity before it shifts elsewhere.”

Rising construction costs further strain budgets, Gardner-Andrews said. “We’re hearing from members that project bids are coming in 20 to 50 percent higher than expected; tariffs and material shortages are driving costs up for everything from pumps to pipe fittings.”

ENR’s forecast suggests the “intelligent systems” share of SRF-funded work could double from 13% in 2023 to roughly 25% by 2026—representing a $5-to-$6-billion annual submarket for automation-ready design and modular construction.

But without faster permitting and project packaging, much of that work could miss the next two fiscal windows—pushing the nation’s documented clean-water gap toward $800 billion before the next survey closes.

“The window for congressional action is closing fast,” Gardner-Andrews said. “If reauthorization doesn’t happen before next September, we risk losing momentum just as the next survey cycle begins.”