The Clean and Drinking Water State Revolving Fund programs (CWSRF and DWSRF) are our nation’s primary mechanisms for providing financial assistance to communities for projects that support compliance with the Clean Water Act and Safe Drinking Water Act. The SRF’s operate on an annual basis, with states applying to receive their allotment each year before allocating those funds (along with matching state dollars) to eligible projects. Over the past few years, funds from the Infrastructure Investment and Jobs Act (IIJA) have boosted the base allotments for the Texas SRF programs by more than $1 billion. The state is also in the process of allocating special IIJA funding for lead service line replacement and treatment of emerging contaminants.
A Quick Refresher on the IUP Process
Texas’ SRF Intended Use Plans (IUP’s) are prepared annually by the Texas Water Development Board (TWDB). The IUP’s outline available financing terms and list projects that have begun the process of applying for SRF funds in the upcoming fiscal year. This is an important step because the amount of funds available varies from year to year and the TWDB may adjust programmatic details such as the terms of financing and the methodology used to rank projects. Draft IUP’s are released for public comment, presenting a valuable opportunity for input on the way these important programs are administered.
Many of the comments submitted by stakeholders are from applicants wishing to correct or double-check the score assigned to their project. Each of these comments receives a response after being examined by TWDB staff in an effort to ensure the final IUP is free of mistakes. In our comments, the Texas Living Waters partner organizations typically focus on the structure and administration of the SRF’s rather than the specific scores of individual projects. Submitting comments during the IUP comment period guarantees our recommendations will be considered as part of the TWDB’s review process. Each entity that submits comments can expect a response from TWDB.
SRF Demand is far in Excess of Available Funding
Demand for SRF funding in Texas has soared in recent years to roughly 10x the dollars available as utilities replace aging facilities, implement new or improved treatment technology for drinking water and wastewater, make upgrades to reach water conservation goals, and much more. The level of demand for SRF funding was a point often repeated at the Capitol during recent legislative sessions to underscore the need for additional state investment in water and wastewater infrastructure. That trend continues for 2026, with both programs heavily oversubscribed even with help from the IIJA:
The SRF’s provide low-cost financing to plan, build, and improve water and wastewater systems. Eligible projects may include traditional “grey” infrastructure, but the SRF’s can also be used for efficiency and conservation improvements, wastewater and stormwater reuse, and land conservation to protect source water quality or prevent nonpoint source pollution. SRF financial assistance is primarily offered as low-interest loans along with a limited amount of “principal forgiveness” offered to disadvantaged communities, small systems, “green” activities, and certain emergency projects.
Increased Federal Investment through IIJA Runs Out This Year
Fiscal year 2026 marks the end of additional federal investment in the SRF programs through IIJA, meaning we can expect to see a sharp drop in SRF funding capacity over the next couple of years as the TWDB disburses its final IIJA allocations. In addition, the annual base funding for the SRF program has diminished in recent years as this pot of money has also been made available to federal legislators for direct project funding allocations frequently referred to as “earmarks.”
Money in the Texas Water Fund (TWF) can be transferred to the SRF’s and may become a critical resource to fill the gap left by waning federal allocations, pending the approval of dedicated tax revenue by voters on November 4. We are fortunate to have this option in Texas, but healthy federal SRF allocations would preserve greater freedom for the state in its distribution of TWF dollars.
With these factors in mind, Texas Living Waters partner organizations will continue advocating at the state and federal level for additional state resources beyond the significant and much-needed revenue dedication passed during the 89th legislative session (subject to voter approval in November).
Our Recommendations for the FY 2026 IUPs
While there is much we appreciate about the Texas SRF’s and the work performed by the TWDB in administering them, we have also identified opportunities for improvement. Our written comments this year address several facets of the programs:
Disadvantaged Community Policies: we offer suggestions for modernizing the methodology used to identify disadvantaged areas and clarify policies to ensure funds can be obtained for any eligible project.
Program Accessibility: we recommend streamlining application requirements through thoughtful leveraging of state data resources and providing clarified up-front guidance for certain regional projects.
Green Projects and Water Efficiency: we recommend offering additional scoring and financial considerations for water loss and reuse projects and examine financial requirements to ensure they do not disadvantage projects sponsored by nonprofit organizations.
Engaging in the IUP public comment process is important for anyone who has specific recommendations to improve the SRF’s. Now more than ever as federal allocations trend downward, the limited funding available each year must be used equitably and prioritize responsible, resilient, efficient infrastructure. Written comments afford TLW partners an important opportunity to weigh in on these considerations and share great ideas with TWDB staff as they begin working on next year’s IUP
