Congressionally Directed Spending and the Emerging Landscape of Federal Water Infrastructure Funding

By Amanda Peele, Project Director

Water and wastewater utilities often rely on external funding to finance expensive capital improvement projects. For decades, State Revolving Fund (SRF) programs have been one of the main sources of federal funding for drinking water, wastewater, and stormwater infrastructure in the United States. The Infrastructure Investment and Jobs Act (IIJA) significantly expanded these programs through a one-time infusion of over $43 billion in federal dollars over five years, increasing the availability of both low-interest loans and principal forgiveness (“grant-like”) funding. However, with the final IIJA allocations scheduled by the end of 2026, this temporary expansion is coming to an end and the amount of SRF funding available to utilities is expected to decline. In light of the evolving federal water infrastructure landscape, utilities may benefit from understanding the growing role of congressionally directed spending (CDS), which presents new funding opportunities while also raising important questions about the future of traditional SRF financing programs. 

What is congressionally directed spending (CDS)? 

Congressionally directed spending (CDS), often referred to as earmarks, is federal funding set aside at the request of a member of Congress for specific projects in their state or district. Congress imposed a temporary moratorium on CDS in 2011, but the practice resumed in Fiscal Year (FY) 2022. Since then, annual appropriations have usually included EPA Community Grants that support the planning, design, and construction of drinking water, wastewater, and stormwater infrastructure projects.

What should water and wastewater utilities know about how CDS is changing the landscape of federal infrastructure funding? 

Since the first round of EPA Community Grants awards in FY 2022, funding for these projects has generally increased, except in FY 2025, when no projects were identified in final appropriations legislation. The shift towards EPA Community Grants is occurring at the same time the temporary expansion of SRF funding under the IIJA is coming to an end. Moreover, EPA Community Grants divert funds from annual SRF appropriations towards these specific projects, reducing the share of federal water infrastructure funding available through traditional SRF programs. If this trend continues in future fiscal years, particularly in combination with the end of IIJA appropriations in FY 2026, there will likely be more federal funding flowing through EPA Community Grants than through SRF loans. 

For utilities planning future capital improvements, understanding these two funding pathways is becoming increasingly important. SRF assistance is awarded through state-administered priority ranking systems approved by the EPA, whereas EPA Community Grants are selected through the congressional appropriations process. Therefore, success depends on navigating two fundamentally different project selection processes. 

How can water and wastewater utilities request EPA Community Grants? 

Utilities seeking EPA Community Grants must start by submitting a project request to one of their members of Congress. If the Congressional representative selects the project, they may recommend it to the relevant Appropriations Committee for consideration during the annual federal budgeting process. Over the next several months, appropriations subcommittees hold staff meetings and committee hearings to draft spending bills that determine which (if any) CDS projects will receive funding in final appropriations legislation, which must then pass through both chambers of Congress. For utilities with selected projects, the process doesn’t end there. 

What does it mean to “apply” for an EPA Community Grant as a water or wastewater utility with a selected project? 

Having an EPA Community Grants project selected for funding in a federal Appropriations Act doesn’t mean the utility is automatically guaranteed funding. Instead, the utility is invited to formally apply for funding to ensure compliance with EPA procedures and federal law. The application process includes participating in trainings to learn about grant management, preparing to comply with various program requirements, and developing a workplan, budget, and application package. Utilities with selected projects can expect to receive funds after their applications have been submitted, reviewed, and accepted. Utilities with selected EPA Community Grants projects may find additional information and resources for navigating the application process on the EPA’s website.

The table below lists all North Carolina utilities with EPA Community Grants projects identified in federal appropriations acts, along with the fiscal year in which they were selected for funding. Note that all EPA Community Grants recipients identified in FY 2026 and prior Appropriations Acts must apply or submit an intent to apply no later than May 2028 to receive funding. North Carolina utilities may request technical assistance from the UNC School of Government Environmental Finance Center for help accessing these funds.  

EPA Community Grant Recipients in North Carolina