- Trump’s FY2026 budget proposes major reductions in water funding.
- Bureau of Reclamation storage, reuse, and rural water projects face sharp cuts.
- EPA loan and grant programs for drinking water and wastewater would be reduced.
- USDA’s rural water assistance programs would see lower support
- Projects in Arizona, California, Colorado, Nevada, New Mexico, Utah, and Wyoming are directly affected.
Tuesday, September 16, 2025 — On September 10, 2025, the Congressional Research Service released a report detailing federal support for water supply and infrastructure projects
nationwide.
As a legislative branch agency within the Library of Congress, CRS has been a valued and respected resource on Capitol Hill for more than a century. CRS works exclusively for the United States Congress, providing policy and legal analysis to committees and Members of both the House and Senate, regardless of party affiliation. According to Congress.gov, CRS is well known for analysis that is authoritative, confidential, objective, and non-partisan. Its highest priority is to ensure that Congress has 24/7 access to the nation’s best thinking.
Its report notes that while Congress has historically maintained or increased funding for water initiatives, the Trump Administration’s discretionary budget request for Fiscal Year 2026 proposes to reduce or eliminate funding for many of these programs.
For the seven Colorado River Basin states—Arizona, California, Colorado, Nevada, New Mexico, Utah, and Wyoming—the proposed changes would directly impact projects that provide clean drinking water, wastewater treatment, rural water systems, and storage infrastructure essential to long-term water security.
Bureau of Reclamation Projects.
The Bureau of Reclamation manages most federal water projects in the West, operating dams, reservoirs, and canals that serve millions of residents. For Fiscal Year 2025, Reclamation received nearly $1.9 billion in discretionary appropriations. The Trump Administration’s FY2026 request reduces this to $1.27 billion.
-
Traditional multipurpose projects: Historically, Reclamation’s dams and reservoirs have supported irrigation, flood control, and municipal and industrial water supplies. Under the new proposal, fewer funds would be available for upkeep and expansion.
-
WIIN Act storage projects: These projects allow federal support for both federal and state-led storage facilities. No funding is requested for FY2026, halting momentum on several projects already underway in western states.
-
Rural water projects: Congress allocated $150.5 million for rural systems in FY2025, but only $31.8 million is requested for FY2026. This would delay or scale back projects serving small towns and tribal communities in New Mexico, Utah, and Wyoming.
-
Title XVI reuse projects: Water recycling initiatives, vital in California and other western states, received over $500 million through the Infrastructure Investment and Jobs Act between FY2022–2025. The FY2026 request includes no regular appropriations.
-
Desalination projects: Often championed as a solution in California and Arizona, desalination research and construction funds would be reduced to just $6.8 million in FY2026.
Army Corps of Engineers.
The U.S. Army Corps of Engineers manages reservoirs and infrastructure that also provide municipal and industrial water supplies. For FY2025, $6.5 million was provided for storage agreements; the FY2026 request lowers this to $5 million. Environmental infrastructure assistance, which supports drinking water and wastewater facilities, received $300 million in supplemental appropriations in FY2025 but is not included in the FY2026 request.
USDA Rural Water Programs.
The Department of Agriculture’s Rural Utilities Service provides critical loans and grants to small communities for water and wastewater facilities. In FY2025, Congress supported nearly $910 million in loan authority and $238 million in grants. For FY2026, the Trump Administration requests $84 million in grants and a lower loan subsidy, significantly cutting available assistance for rural systems in Colorado, New Mexico, Utah, and Arizona.
Emergency water assistance and decentralized system grants would also see reduced or no funding. This could leave smaller communities more vulnerable during drought emergencies.
EPA Drinking Water and Wastewater Funds.
The Environmental Protection Agency administers the Clean Water and Drinking Water State Revolving Funds (SRFs), which provide loans to states for local water projects. For FY2025, Congress appropriated $1.6 billion for the Clean Water SRF and $1.1 billion for the Drinking Water SRF, supplemented by billions from the Infrastructure Investment and Jobs Act.
The FY2026 request proposes:
-
$155 million for the Clean Water SRF, a steep reduction.
-
$150 million for the Drinking Water SRF, alongside the elimination of new lead service line funding.
-
$8 million for the Water Infrastructure Finance and Innovation Act (WIFIA) program, down from $72 million in FY2025.
These cuts would directly affect state-level financing in all seven basin states, slowing projects to modernize wastewater systems and replace lead pipes.
HUD and Economic Development Assistance.
The Department of Housing and Urban Development’s Community Development Block Grant program often funds water projects in urban and rural areas. In FY2025, the program received $3.3 billion. The Trump budget includes no request for FY2026.
Similarly, the Economic Development Administration’s public works and adjustment assistance programs—sometimes used for water and sewer systems—face uncertain funding, with no amounts specified in the budget request.
Implications for Colorado River Basin States.
The seven basin states rely heavily on federal funding for both large-scale infrastructure and small community systems. The proposed FY2026 budget would:
-
Slow progress on water recycling and reuse in California.
-
Reduce rural water support in Wyoming, New Mexico, and Utah.
-
Limit desalination expansion in Arizona and California.
-
Cut back on wastewater and drinking water upgrades across all basin states.
-
Eliminate supplemental funding streams that helped communities modernize systems in recent years.
Conclusion.
The CRS report underscores that water funding competes with other discretionary programs, but notes that supplemental appropriations in recent years have boosted support. The Trump Administration’s FY2026 request reverses that trend, proposing sharp cuts across nearly every federal water program.
For the Colorado River Basin, where drought, population growth, and infrastructure needs continue to mount, the proposed reductions would have immediate and long-term effects. Many projects authorized by Congress in recent years may be delayed, scaled back, or left unfunded altogether.
Citation; Report.
The full report, in PDF format, is available for free public download.
| CRS Product Type: | Reports |
|---|---|
| CRS Product Number: | R46471 |
| Referenced Legislation: | P.L.117-58 |
| Topics: | Energy & Natural Resources; Environmental Policy |
| Publication Date: | 09/10/2025 |
| Authors: | Benson, Lisa S.; Carter, Nicole T.; Humphreys, Elena H.; Jaroscak, Joseph V.; Lawhorn, Julie M.; Normand, Anna E.; Ramseur, Jonathan L.; Stern, Charles V.; Stubbs, Megan |
