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State Water Board adopts Clean Water SRF plan as staff warn of shrinking grant dollars
Summary
The board adopted the Clean Water State Revolving Fund intended use plan after a workshop discussion of funding projections, proposed caps for small-community grants, and requests from stakeholders to prioritize disadvantaged communities and stormwater projects; the vote was unanimous and staff were directed to return with options to increase the small-community grant authority.
The State Water Resources Control Board unanimously adopted its 2026–27 Clean Water State Revolving Fund intended use plan on July 7 after a multifaceted presentation from the Division of Financial Assistance and an extended public comment period.
Mike Downey, DFA, outlined five years of program activity — nearly $3.5 billion in loans, almost $1 billion in grants and principal forgiveness for small communities, and targeted funding such as water recycling grants. DFA staff described workload pressures: long project timelines, frequent contract amendments driven by construction cost escalation, and administrative work to manage hundreds of active projects and loan agreements.
Key proposals and debate: DFA proposed adding 10 projects to the fundable loan list (about $780 million) and set program limits for small-community grants: planning grants capped at $2.5 million (priority) and $500k (secondary), construction/principal-forgiveness project caps proposed at $30 million (reduced from $50 million last year), and per‑connection caps ($60,000 per residential connection for compliance projects; $175,000 per connection for septic‑to‑sewer/regionalization projects). Staff said these caps respond to declining grant availability and a desire to spread limited funds across more communities.
Stakeholder views: Representatives from Water Reuse California, CASA, CASCOA and Clean Water Action praised the program’s improvements and urged the board to maximize principal forgiveness and to increase caps for stormwater and large water‑recycling projects. CASA and ACWA urged continued flexibility so large, shovel‑ready projects can access loan capital and keep the revolving fund healthy. Several commenters urged a public dashboard and clearer transparency on how federal reductions (the end of IIJA supplemental funding) will affect grant availability.
Board action and direction: Board member Nicole Morgan moved to adopt Item 5 and asked staff to return with steps to increase the small‑community grant authority; the motion carried on a roll-call vote with all present voting aye. The board recorded support for further stakeholder outreach and asked staff to analyze legislative or administrative levers to expand grant/expenditure authority where feasible.
Why it matters: DFA staff warned of an approaching “fiscal cliff” as federal IIJA funds taper, which will reduce principal‑forgiveness capacity and shrink the pool of grant money available to disadvantaged small systems. The IUP and the board’s direction will influence which communities get grant support and how the SRF program balances loans and grants to maintain long-term revolving capacity.
