Clean Water: Revolving Fund Grant Formula Could Better Reflect Infrastructure Needs, and EPA Could Improve Needs Estimate
Fast Facts
The Environmental Protection Agency estimates that over $630 billion will be needed to overhaul clean water and wastewater infrastructure over the next 20 years. EPA's Clean Water State Revolving Fund gives states grants to build or replace such infrastructure.
However, we found that this money is allocated using a formula from 1987—which does not reflect states' current population and clean water needs. We convened experts who developed a new formula that is largely based on states' clean water needs.
We suggested that Congress consider revising the formula for this program. We also recommended that EPA better assess states' clean water needs.
Settling Tanks in a Wastewater Treatment Plant
Highlights
What GAO Found
Under the current Clean Water State Revolving Fund (SRF) program grant formula, the Environmental Protection Agency (EPA) allots a fixed percentage of annual appropriations to each state. From 2019 through 2023, states received annual grants averaging from $6 million to $208 million. States used most of their Clean Water SRF funding for wastewater infrastructure, such as treatment plants and sewer pipes.
A panel of experts convened by GAO agreed on a new formula that emphasizes clean water needs and includes population and economic burden. The experts used GAO's multi-step formula development process to consider how these and other variables align with program goals, including water quality and affordability.
Formula GAO's Expert Panel Developed to Allot Grants for the Clean Water State Revolving Fund Program
Experts also stated that EPA should periodically update the allotment percentages based on current data to reflect changing conditions. However, the law would need to be changed to allow this. Using the expert-developed formula with 2022 data, 31 states would receive the same or higher allotment, up to a 260 percent increase. The remaining 19 states would receive a lower allotment, as much as a 53 percent reduction. According to a 2003 National Research Council report, a formula should be transparent and achieve the goals of the program. Changing the law to require EPA to use a transparent formula that reflects program goals and uses current data could ensure the Clean Water SRF state allotments are and remain aligned with program goals.
While the expert-developed formula would allot a majority of funding based on need, EPA's Clean Watersheds Needs Survey does not fully estimate states' clean water needs. For example, the survey provides incomplete data for projects such as stormwater and nonpoint sources (e.g., those that manage runoff from agricultural lands and lawns). EPA officials told GAO that states do not always have the information to assess these categories of needs. For its 2022 survey, EPA provided tools to help states estimate such needs. For example, states could use the Agriculture Cropland Tool to estimate costs to address polluted water near cropland. However, EPA did not receive estimates for one or more of these categories of need from nine states and the District of Columbia. Targeting help to states that have not provided such estimates could result in more complete estimates.
Why GAO Did This Study
EPA estimates more than $630 billion is needed to repair and replace clean water and wastewater infrastructure nationwide over the next 20 years. To estimate clean water needs, EPA uses a survey of states' planned costs to build or replace infrastructure.
EPA awards grants through the Clean Water SRF program to states, which use them to establish their own SRFs to fund eligible activities. The amount of each state's clean water SRF grant—or allotment—is determined by a statutory formula enacted in 1987.
GAO was asked to review options for the program's allotment formula. This report (1) describes the current formula and how states distribute funds; (2) discusses an expert panel's views on a new formula it developed, and examines the effects on allotments; and (3) examines the extent to which EPA has estimated states' needs. GAO reviewed laws, regulations, and agency documents; analyzed EPA and U.S. Census data; and interviewed EPA officials, state organizations, and officials from eight states selected based on geographic and other factors. GAO also convened a panel of seven experts to develop a formula using a multi-step process.
Recommendations
Congress should consider revising the Clean Water SRF allotment formula to align with the goals of the program. GAO is making three recommendations to EPA, including that it work with certain states to assess their needs for the next Clean Watersheds Needs Survey. EPA agreed with the recommendations.
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| Congress should consider revising the allotment formula for the Clean Water SRF program to clearly align with the program's goals and requiring EPA to periodically calculate allotment percentages using the most recent data. For example, in developing a new formula, Congress should consider the types of variables, weights, and data sources used in the expert panel's formula in this report. (Matter for Consideration 1) | When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Environmental Protection Agency | The Administrator of EPA should ensure that the Director of the Office of Wastewater Management directly collects data on centralized clean water infrastructure needs from a sample of small communities, using an approach that is consistent with Office of Management and Budget survey guidance. (Recommendation 1) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
| Environmental Protection Agency | The Administrator of EPA should ensure that the Director of the Office of Wastewater Management provides guidance to states to submit estimates of large communities' centralized clean water infrastructure needs for a minimum time frame, such as 5 years. (Recommendation 2) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
| Environmental Protection Agency | The Administrator of EPA should ensure that the Director of the Office of Wastewater Management works with states that did not report any needs in one or more of the noncentralized clean water infrastructure need categories to use cost estimating tools and state-specific approaches to assess these needs for the next Clean Watersheds Needs Survey. (Recommendation 3) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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