Water Infrastructure Funding Takes Hit In Trump FY21 Budget

Water Infrastructure Funding Takes Hit In Trump FY21 Budget

February 14, 2020  | Jeff Davis

The Trump Administration is proposing $2.5 billion in cuts to federal water infrastructure programs in fiscal year 2021.

Corps of Engineers. The budget requests a total of $5.97 billion in appropriations for the civil works program of the Army Corps of Engineers. This is a $1.68 billion cut from the enacted 2020 level, or a 22 percent reduction.

However, this number needs to be put in perspective. $6 billion for the regular Corps budget (excluding emergencies, which sometimes are larger than the regular budget) is still higher than the Corps received in the first seven years of the Obama Administration and is a dead heat for the total in the final Obama year.

The public justification for the proposed cuts is mostly in a couple of pages of the budget overview document, which says “By proposing not to start any new construction projects, the Budget enables the Corps to focus on completing these ongoing priority projects faster and at a reduced cost, allowing the affected communities to see their benefits sooner…The Budget gives priority to operating and maintaining existing water resources infrastructure and improving its reliability.”

Harbor Maintenance Trust Fund. Once again, the budget proposes to end the practice of split-funding the big Corps accounts between the general fund and the HMTF and instead would provide all Corps funding from the Trust Fund out of one separate appropriations account. This idea has some merit, and if Congress does wind up enacting some kind of special budgetary treatment for HMTF spending (an exemption from Budget Control Act appropriations caps or something similar), segregating HMTF appropriations into their own account might be the only way to make it work. However, the budget proposes to reduce the total amount appropriated from the Trust Fund to the Corps in 2021 by about $615 million, down to $1.02 billion.

The Office of Management and Budget assumptions in the Budget Appendix say that this will cause the year-end unobligated balance in the Trust Fund to end 2021 close to $11 billion, up from $9.3 billion at the start of this year, but it may be even higher than that – for reasons unknown, OMB estimates that appropriations out of the Trust Fund in the ongoing FY 2020 will only be $1.03 billion, but the Congressional Budget Office (in its baseline in Table 4 of this document) says that those appropriations are $1.67 billion, which tracks with what the Appropriations Committees said when they enacted the final bill.

Harbor Maintenance Trust Fund
(Millions of dollars.  Appropriations levels from Budget Appendix but the FY20 number is vastly different from the CBO number.
FY 2019 FY 2020 FY 2021
Actual Estimate Request
BOY Balance 9,505 9,307 10,108
Tax Receipts 1,555 1,627 1,694
Interest on Balance 214 199 215
Appropriations -1,968 -1,025 -1,049
EOY Balance 9,307 10,108 10,968

Inland Waterways Trust Fund. The other water resources trust fund is only one-twentieth the size of the HMTF, and instead of the HMTF problem of having too much money, it has too little. The recent CBO baseline for the IWTF (Table 3 in this document) projects that, at current spending levels, the Trust Fund will run out of money in 2023. In this instance, the OMB baseline is consistent with the CBO baseline, and the Administration proposes to deal with that in two ways.

First, they reiterate the longstanding OMB proposal to levy a new system of tolls for the use of Corps-operated inland waterway locks, which would raise an additional $180 million per year for the IWTF in perpetuity. (This is basically the same proposal as under the Obama Administration and may date back earlier than that.)

Second, the budget proposes to give the IWTF a year off from having to spend anything – zero appropriations from the Trust Fund are proposed for 2021. That may also make sense – Congress did that for the HMTF in the late 1990s, giving it a year off in the immediate aftermath of the Supreme Court declaring that half of the Harbor Maintenance Tax (the half applied to exports) was unconstitutional. But if you look deep in the fine print of the budget (on page 332 of this table), you see that the budget also assumes that IWTF spending will never start back up again, which would be a problem. If spending from the Trust Fund is never to be restarted, why not just abolish the Trust Fund? In any case, we haven’t found anything in the budget explaining these decisions.

Inland Waterways Trust Fund
(Millions of dollars)
FY 2019 FY 2020 FY 2021
Actual Estimate Request
BOY Balance 132 70 55
Tax Receipts 117 114 112
Interest on Balance 4 2 2
New User Fees 180
Appropriations -183 -131 0
EOY Balance 70 55 349

EPA water programs. Federal grants to capitalize state revolving funds (SRFs) that make low-interest loans to municipalities for wastewater and drinking water infrastructure projects are run through the Environmental Protection Agency. The Administration’s budget proposes to cut these grants by 28 percent, taking the Clean Water Act SRF grants down to $1.12 billion and the Safe Drinking Water Act grants to $863 million (the latter is the annual total that program had for several years before the Appropriations Committees started getting a lot of extra money in FY 2018).

Funding for the new WIFIA loan program would be cut down to $20 million from last year’s $55 million, but we don’t yet have good estimates on what kind of loan volume for this program is even possible (the TIFIA loan program at USDOT has received far more funding over the years than it can use because there just aren’t enough qualified projects out there to get loans).

And the other tenth of a cent of federal gasoline and diesel fuel taxes goes to LUST – the Leaking Underground Storage Tank Trust Fund run by EPA. The budget proposes to cut spending out of this fund in half. This would increase the projected year-end balance in the Trust Fund to just north of $1 billion, which is notable because LUST is always the first place that Congress turns to when it wants to prop up the Highway Trust Fund, since it’s just a reallocation of highway user taxes. So at least $700 million in new transfers from LUST to the HTF should be possible next hear when the HTF runs out of money again.

Leaking Underground Storage Tank Trust Fund
Millions of dollars. Source FY21 Budget Appendix.
FY 2019 FY 2020 FY 2021
Actual Estimate Request
Beginning-of-FY Balance 545 694 832
Tax Receipts 226 214 214
Interest Earned on Balances 16 16 17
Appropriations Out -93 -92 -48
End-of-FY Balance 694 832 1,015
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