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Thursday, January 6, 2011

Allocation of Wastewater Treatment Assistance: Formula and Other Changes

Claudia Copeland
Specialist in Resources and Environmental Policy

Congress established the statutory formula governing distribution of financial aid for municipal wastewater treatment in the Clean Water Act (CWA) in 1972. Since then, Congress has modified the formula and incorporated other eligibility changes five times. Federal funds are provided to states through annual appropriations according to the statutory formula to assist local governments in constructing wastewater treatment projects in compliance with federal standards. The most recent formula change, enacted in 1987, continues to apply to distribution of federal grants to capitalize state revolving loan funds (SRFs) for similar activities.

The current state-by-state allotment is a complex formulation consisting basically of two elements, state population and “need.” The latter refers to states’ estimates of capital costs for wastewater projects necessary for compliance with the act. Surveys of funding needs have been done since the 1960s and became an element of distributing CWA funds in 1972. The Environmental Protection Agency (EPA) in consultation with states has prepared 15 clean water needs surveys since then (the most recent was released in June 2010) to provide information to policymakers on the nation’s total funding needs, as well as needs for certain types of projects.

This report describes the formula and eligibility changes adopted by Congress since 1972, revealing the interplay and decisionmaking by Congress on factors to include in the formula. Two types of trends and institutional preferences can be discerned in these actions. First, there are differences over the use of “need” and population factors in the allocation formula itself. Over time, the weighting and preference given to certain factors in the allocation formula have become increasingly complex and difficult to discern. Second, there is a gradual increase in restrictions on types of wastewater treatment projects eligible for federal assistance.

Crafting an allotment formula has been one of the most controversial issues debated during past reauthorizations of the Clean Water Act. The dollars involved are significant, and considerations of “winner” and “loser” states bear heavily on discussions of policy choices reflected in alternative formulations. This is likely to be the case again, when Congress considers legislation to reauthorize the act. Because the current allocation formula is now more than 20 years old, and because needs and population have changed, the issue of how to allocate state-by-state distribution of federal funds is likely to be an important topic in debate over water infrastructure legislation.

Date of Report: December 28, 2010
Number of Pages: 16
Order Number: RL31073
Price: $29.95

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