Water Sector Pushes for Increased Funding Amid Federal Budget Cuts

When a $250M flood prevention infrastructure project in Louisville, Kentucky is complete, Tony Parrott, Executive Director of Louisville Metropolitan Sewer District, says the city will be able to better withstand intense weather events, including devastating floods and crippling ice and snow storms. 

With funding allocated through the bi-partisan American Rescue Plan Act, Infrastructure Investment and Jobs Act (IIJA) and Kentucky Infrastructure Authority (KIA), the project aims to address critical stormwater and flood protection needs by modernizing and maintaining the city’s sewers and flood systems, including the construction of a new flood prevention pump station and levy. 

“Our current assets aren’t built to handle extremely intense storms,” said Parrott, who also serves as President of the Water Agency Leaders Alliance.

The project has been in the planning and construction phase for more than a year. But amid wide-ranging cuts to the federal budget, any potential delay to its funding lifeline is a worry that has now been top of mind. “If there is any change or restriction or pause to funding, it will be devastating to our momentum because we already have the project under construction,” Parrott said. 

Pumping the Breaks 

With a raft of executive actions by the Trump Administration that have created uncertainty for projects reliant on federal support, Parrott’s concern is understandable.

In January, the Administration issued Executive Order 14154, which paused the disbursement of funds under the Inflation Reduction Act (IRA) and the IIJA. 

Programs funded by the Acts have been noted to span the entirety of the federal government, including Low Emissions Vehicles and Energy Efficient Loan Programs through the Department of Energy, Carbon Reduction and Sustainable Aviation Fuels Programs through the Department of Transportation, and the Greenhouse Gas Reduction Fund, Methane Emissions Reduction Program, and Low Emissions Electricity Program overseen by the the Environmental Protection Agency (EPA).  

“It is not uncommon during a new Administration to pump the brakes on existing programs to see who recipients are and if they conform with priorities, but what was unusual was the extent and scope of cuts,” said Zack Perconti, Vice President of Government Affairs at National Utility Contractors Association (NUCA). 

Ultimately, the directive mostly impacted environmental justice and energy initiatives—and largely spared the water industry. But a key concern remains unresolved: while funds for the water sector are not likely to be cut, they may not be sufficient to keep pace with rising costs either. 

Aging Water Infrastructure 

Over decades, industry experts say maintenance and upkeep to water infrastructure has been a challenge. 

“Utilities have been historically underfunded to be able to properly keep up with the aging pipe infrastructure underground,” said Chelsea Boozer, Executive Director of the Rogue Water Lab, a nonprofit focused on issues related to water. “This goes unseen by customers, and so they don't realize the need to increase rates to a level that actually covers the cost of service.”

With federal financing programs and higher water utility rates, however, massive progress has been made by drinking water utilities to replace tens of thousands of miles of pipes across the country, according to the American Society of Civil Engineers.

But, water programs tend to represent significant line items within the EPA’s budget, often amounting to billions of dollars. According to the Agency’s Drinking Water Infrastructure Needs Survey and Assessment, for example, the US requires an estimated $625 billion over the next 20 years to maintain and improve its drinking water infrastructure. 

“It’s a very real concern that there may be cuts,” Perconti said. 

But more simply, money doesn’t go as far as it used to. 

“The federal government will for now, at the very least, continue funding at a steady level, but with increased costs, a steady level is still a cut,” Perconti said, noting that any investment to water infrastructure could add up to $4.5 trillion to national revenue. “Congress should look at the issue as an investment, rather than an expenditure.”

Tariffs and Inflation

Since the IIJA passed in 2021, Congress has not raised appropriated amounts, despite higher prices for labor and materials and general inflation. On March 4, 2025, the Administration also implemented tariffs on imports from Canada, Mexico and China which are estimated to drive up the cost of producing equipment in the United States by as much as 7%, compounding financial pressures on utilities and engineering firms. 

Currently, an estimated 25% of US construction steel and 50% of aluminum are sourced internationally, meaning tariffs could significantly impact supply chains as well. 

“It will take significant time for domestic supply to catch up to demand,” said NUCA chief executive officer Doug Carlson in a statement. “NUCA urges the Trump Administration to reconsider the pending tariffs on steel and aluminum, at least with regards to materials used in domestic infrastructure projects.”

New Leadership

On the upside, however, many have applauded the nomination of Jessica Kramer to help lead the EPA’s Office of Water.

As a Republican staffer on the Senate Environment and Public Works Committee, Kramer worked with US Senator Shelley Moore Capito (R-W.Va.) to help draft the Safe Drinking Water Act which evolved into the IIJA and allocated roughly $50 billion for water-related projects, including upgrades to water systems and improvements to water treatment plants to remove contaminants.

“We think the Administration made an excellent choice with its nomination,” Perconti said, noting that Kramer’s knowledge of the country’s water and wastewater issues could prove useful when it comes to overseeing critical Clean Water and Drinking Water State Revolving Funds (SRFs), which provide financial assistance to state and local governments for water infrastructure projects. 

For now, industry insiders are also looking forward, with many expecting further clarity regarding regulatory requirements related to per- and polyfluoroalkyl substances (PFAS) for drinking water and wastewater. 

Looking Ahead

During a March 2025 gathering in Washington, DC, 55 water infrastructure leaders shared their perspectives on policy shifts, noting the importance of designing projects that are shovel-ready; revising language related to environmental justice and climate change in funding proposals to align with shifting federal priorities; exploring alternative financing such as municipal bonds over Water Infrastructure Finance and Innovation Act (WIFIA) loans; and looking at projects that may be favored by the Administration, including those undertaken in partnership with the manufacturing industry.

With some federal funding in place through 2026, a subcommittee hearing on reauthorizing the Clean Water SRF and WIFIA was also held in mid-March to look at how both programs could be improved, with perspectives shared on the water infrastructure project application and construction pipeline. 

Likewise in April, the National Water Policy Fly-In in Washington, DC is expected to gather hundreds of experts. Among those present will be Tony Parrot of Louisville, Kentucky. 

In an address to the audience, he is likely to discuss the importance of keeping funding in place.  

“As infrastructure fails, we have to repair, replace or improve assets,” said Parrot. “If not, it will make the cost of utility services higher and higher.”