Federal Funding Outlook

 Ari Neumann, RCAP Policy Director

Amid the electoral fury heading toward the November presidential election, Congress and President Obama still have a busy legislative agenda left to tackle this year, which has broad implications for rural water and sewer programs.

The most pressing issue facing Congress is reauthorization of the Farm Bill. Current law is set to expire on September 30, and unless there is some resolution before then, many of the programs at the U.S. Department of Agriculture’s Rural Utilities Service (USDA-RUS) will be eliminated or have their funding authorizations rolled back to levels not seen for decades. In June, the Senate passed a bipartisan reauthorization bill by a vote of 64-35. The House Agriculture Committee passed a bipartisan bill (voting 35-11 in favor) in July, and we are now waiting for the full House to begin debate on the bill.

Depending on the outcome of the election, Congress will likely hold a “lame duck” session this November and December to resolve the issues remaining on its schedule. The two big items left are the expiration of the 2001 and 2003 tax cuts (set to expire on Dec. 31) and the impending sequester set up by last year’s debt-ceiling deal. The sequester is an across-the-board cut of nearly 8% to non-defense, non-entitlement programs and a 10% cut to security programs (including both defense and homeland security). These cuts are in addition to the billions of dollars that have already been cut from domestic, non-defense programs. The cuts were originally set up as an incentive to get the parties to come to agreement on long-term deficit reduction, but if Congress fails to act before January 1, the cuts will take effect in 2013.

If the sequester hits, rural water and sewer funding at USDA-RUS will be cut by nearly $40 million, and capitalization grants for the State Clean Water and Drinking Water Revolving Funds will be cut by roughly $115 million and $71 million, respectively. Cuts of this magnitude would severely restrict the amount of funding available to rural water and sewer systems for improvements necessary to protect public health and the environment. In addition, the cuts would mean the loss of an estimated 9,500 jobs, primarily in construction, that would be created or saved by maintaining current funding levels.

For utilities, all of this means that there are likely to be fewer federal resources available for your systems in the coming years, regardless of what happens in the election. Whether deficit reduction comes through the sequester or a long-term agreement between the parties, the federal budget as a share of the national economy is almost certain to shrink over the next decade. That will mean less money from the federal government for water infrastructure and an emphasis on direct and guaranteed loans, rather than grants.

RCAP Solutions is the Northeast affiliate of the six-member national RCAP Network, (www.rcap.org) which focuses its interests on rural water-related and infrastructure issues. As such, we provide services in all six New England states, New York, New Jersey, Pennsylvania, Puerto Rico and the U.S. Virgin Islands.