March 14, 2019

The few documents made available this week describing President Trump’s budget request for fiscal year 2020 (tens of thousands of additional pages will be released next week) show that the President is proposing to cut Corps of Engineers water infrastructure funding by 30 percent and cut the water infrastructure grant and loan programs of the Environmental Protection Agency by 33 percent.

Corps of Engineers. The only document released by the White House this week simply said that the total appropriation request for the civil works program of the U.S. Army Corps of Engineers was $4.8 billion, a 31 percent decrease from the 2019 enacted level. The Corps has since released its 54-page budget overview document which shows that the total is in fact $4.827 billion and breaks it down by account and project. Like last year’s request, the 2020 budget proposes to change the account structure and create separate budget accounts for the Harbor Maintenance Trust Fund appropriation ($965 million) and the Inland Waterways Trust Fund appropriation ($55.5 million).

Under the current practice, funding from the trust funds is mixed in with the appropriations across the Construction, O&M, and Mississippi System appropriations. The Appropriations Committees rejected the proposed account restructuring last year, and there is no reason to believe that they will reverse course and accept it this year, either. Accordingly, we went through the summary document and added the HMTF and IWTF appropriations back to those accounts so that the new budget request can be compared, apples-to-apples, to prior year appropriations.

Shifting the cost burden of cleaning up old nuclear weapons manufacturing facilities to the Department of Energy, which is the custodian of everything else relating to the nuclear weapons production complex, is an idea that has serious merit. And, since that account is already part of the defense budget category, moving funding responsibility from the Corps to DOE would not require amending the defense/non-defense spending cap balance.

Once the former nuclear site cleanup account is removed from the budget, the Trump FY 2020 request would be a reduction of $2.022 billion, or 30 percent, from the 2019 enacted level. More significantly, it would be a reduction of $1.1 billion, or 19 percent, from the fiscal 2017 enacted level – and FY17 was the last year of the “old normal” before the two year FY18-19 budget deal flooded the Appropriations Committees with more money than they could easily spend.

The budget again proposes to reduce the amount being spent from the Harbor Maintenance trust Fund to an amount well below that called for by the Water Resources Development Act, and since spending down HMTF balances is a top priority of House Transportation and Infrastructure chairman Peter DeFazio (D-OR) and (separately) of Senate Appropriations chairman Richard Shelby (R-AL), a cut that deep in new HMTF spending appears particularly unlikely.

The budget proposes to cut Inland Waterways Trust Fund spending for one year down to $55.5 million, which is half of the $111 million requested for Locks 2, 3 and 4 on the Monongahela River in Pennsylvania, which is listed in the budget document as a project that will be funded to completion by the FY 2020 request. (This frees up more IWTF money for whatever project starts in 2021.)

The budget proposes to cut Operations and Maintenance funding by $868 million, or 23 percent from the 2019 level. However, the Construction budget gets a 43 percent cut ($939 million).

In this respect, the Trump budget only differs from recent Obama Administration budgets in terms of degree. Corps funding for new projects comes from the Construction account but also, farther upstream, from the Investigations account (which is the studies that, if successful, grow up to be new projects). The following chart shows the combined Investigations + Construction appropriations and hows how the the eight budgets proposed by the Obama Administration (FY 2010-2017) and the first two budgets proposed by the Trump Administration (2018 and 2019) proposed combined funding levels for these accounts that were far lower than the levels that Congress, on a bipartisan basis, were willing to enact into law.

EPA water programs. The Environmental Protection Agency has also released its 2020 budget overview document. The budget proposes a 34 percent cut in the appropriation to capitalize Clean Water Act State Revolving Funds (SRFs), a 29 percent cut in the appropriation to capitalize Safe Drinking Water Act SRFs, and a cut in funding for the WIFIA loan program from 2019’s $63 million back down to $25 million.

Pagers 78-79 of the EPA document show the state-by-state allocation of the SRF appropriations and thus demonstrate how much the funding for each state would be reduced.

Of the cuts, the WIFIA cut is the most defensible – according to the EPA website, the WIFIA program has only made seven loans so far, totaling $2 billion. The EPA document says that a $25 million appropriation for 2020 would include enough loan subsidy budget authority to make $2 billion in new federal loans. This is on top of enough loan subsidy authority provided in 2018-2019 to make at least $10 billion in new loans (the subsidy rate for WIFIA loans calculated by OMB is incredibly low, leading to a very large bang-for-the-buck ratio for this program). The balance of loan subsidy authority would be enough to carry the program for a couple of years at the current rate of progress.

The budget request for the drinking water SRF account is only being reduced to the level of actual FY 2017 appropriations by Congress, but the budget is proposing to cut the Clean Water Act SRF appropriation to a level $274 million below the 2017 level.

The budget also makes reference to the new water resources law passed by Congress five months ago: