State Water Board holds workshop on 2025–26 Clean Water SRF intended use plan as funding picture shifts

The State Water Resources Control Board held a public workshop on June 17 in Sacramento to review its draft 2025–26 Clean Water State Revolving Fund intended use plan, outlining loan capacity, grant targets and program priorities as federal and state funding levels remain uncertain.

The IUP guides how the Division of Financial Assistance will allocate Clean Water SRF loans and principal forgiveness, the small-community wastewater grant program, water recycling grants and the modest stormwater principal-forgiveness pilot for the 2025–26 fiscal year. "The IUP will guide staff in implementing Clean Water SRF, small-community wastewater, and water recycling funding programs for the upcoming fiscal year," DFA deputy director Lisa Hong told the board.

Why it matters: the SRF is the state’s principal vehicle for financing municipal wastewater, stormwater and recycling projects. The workshop came as Congress had returned to a continuing resolution that restored the program’s baseline but left uncertainty about future federal appropriations; the administration’s 2026 proposal would reduce SRF baseline funds. That uncertainty affects both the loan program’s leveraging capacity and the availability of direct grants or principal forgiveness that depend on annual appropriations.

Board members and applicants focused on four program areas. On loans, staff recommended maintaining a near-term loan capacity target around $600 million and proposed a fundable list cutoff designed to meet federal “equivalency” requirements tied to the capitalization grant. Hong said the IUP’s recommended scenario adds new projects to meet those federal conditions and to satisfy Build America, Buy America requirements that are difficult to apply to projects already under construction.

On small-community wastewater grants — which provide principal forgiveness to disadvantaged and severely disadvantaged communities and are central to septic-to-sewer conversions — DFA proposed a larger pool than in recent years, reflecting Proposition 4 and other state funds. Hong said the draft IUP assumes about $456 million available for small-community wastewater programs in 2025–26, combining Prop 4, remaining Proposition 1 and other state and federal pots. "We're proposing a higher grant amount per project and expanding eligibility so projects beyond septic-to-sewer and violation-remediation can be eligible for up to 50% grant," Hong said.

On water recycling, staff proposed restoring a $15 million per-project maximum construction grant (consistent with historical caps) and establishing treatment for large-scale projects — defined in the draft IUP as projects delivering at least 10,000 acre-feet per year — with eligible planning, design and construction phases. Program proponents urged the board to lock commitments early so recipients can proceed with final design and contracting.

On stormwater, DFA proposed a new, modest principal-forgiveness allocation — $20 million in SRF principal forgiveness plus other federal small-grant funding — to seed projects and help overcome the longstanding funding shortfall for stormwater infrastructure. Board Chair Joaquin Esquivel and several commenters praised the move as an important step to address what advocates call a fiscal orphan: stormwater.

Public commenters included municipal utilities, regional wastewater systems, water-reuse advocates, small-community technical-assistance providers and stormwater coalitions. Key requests included restoring the water recycling grant cap to $15 million, directing additional technical assistance for disadvantaged communities, faster review of private certification bodies for cross-connection tester recognition, and adding a ready-to-build project (Town of Windsor) to the loan fundable list. Lisa Hong and DFA staff said they will incorporate written comment and the final state budget into the final IUP before returning to the board for adoption.

Board members emphasized the need to get funds out quickly while protecting long-term capacity. Board member Laurel Firestone urged staff to identify wastewater projects eligible for emerging-contaminant funds that could be spent quickly. Board member Nicole Morgan highlighted the continuing unmet need for small-community wastewater projects and thanked DFA staff for outreach that helps incomplete applications move forward.

The board treated the session as a workshop; no adoption vote was taken. Public comments on the draft IUP were due June 30; DFA expects to return with a final IUP for board adoption after the Legislature’s final budget actions and after incorporating written input.

Looking ahead: DFA will reconcile the IUP with the final state budget and federal appropriations when they are finalized, and the board will consider a final IUP for adoption.