Division of Financial Assistance warns of funding cliff as IIJA support wanes

Division of Financial Assistance leadership told the Water Quality Coordinating Committee the agency has committed roughly $9–10 billion in the past five years and manages extensive state revolving fund (SRF) assets that will continue to lend into the future. Joe Carowski, deputy director of the Division of Financial Assistance, said the SRF portfolio holds about $10 billion in outstanding loan assets and provides a durable lending source, while federal infrastructure funds (IIJA) provided a recent influx of grant dollars.

"The SRFs are massive and will continue to operate in perpetuity," Carowski said. "But the IIJA and other temporary funding sources have masked an underlying decrease in the base federal grant to the SRF program."

Josh Zeiss (assistant deputy director) told the committee that earmarks (congressionally directed spending) have shifted a portion of EPA grant funds away from the SRF base program and into specific, congressionally‑directed projects. He said the division expects a substantial reduction in base SRF funding after the IIJA pots are exhausted, estimating a more than 50% drop in base EPA capitalization compared with recent years, a change that could tighten loan and grant availability for communities.

The presenters described the division’s suite of funding tools — drinking water, clean water, water recycling programs, emerging contaminants pots, and the Safe and Affordable Drinking Water Fund — and highlighted technical assistance programs that target small and disadvantaged communities. Carowski and Zeiss also explained project prioritization rules, affordability scoring, principal‑forgiveness grants, and the leveraging program that issues revenue bonds backed by SRF assets.

What happens next: Division staff asked local applicants and regional boards to coordinate early on project finance, to use technical assistance programs to ready small disadvantaged communities for construction projects, and to track upcoming changes in federal grant flows that could influence prioritization and timing for projects in 2027–2029.