Budget Time and Water Finance

About the Author

Jeff Hughes

Jeff Hughes was the Director of the Environmental Finance Center (EFC) at the UNC School of Government between 2003 and 2019. Hughes currently serves as a Commissioner in the North Carolina Utilities Commission.

Much of the year, the focus on water finance seems to be oriented to how much needs to be spent on water and wastewater systems. The numbers are daunting and the national and local media are rife with reports of what it is going to take to improve our water and wastewater systems.

One of my colleagues at the School of Government, Jake Wicker, who passed away some time ago, was fond of saying, “Governments don’t pay for anything, only people pay – Governments just do the Collecting.” That phrase always comes to mind during budget time as different levels of government decide how much they are willing to collect for specific services.

This week was particularly interesting related to local, state and federal budgets. July brings a new fiscal year for local governments and state government in North Carolina. Local government utility budgets were all passed last month and brought a host of key water finance decisions in the form of water and rate adjustments with locally elected officials tasked with balancing the public health needs of citizens in terms of water system integrity with concerns for the economic impact of water bills. At the time of this post, the North Carolina General Assembly was literally voting on the state budget for the new fiscal year – a few weeks late which is not unusual. The budget up for a vote includes a number of decisions about collecting funds for water and wastewater services. Several long standing state tax funded water and wastewater funding programs will see significant changes if the budget is passed — the most notable being the cessation of infrastructure funding for the NC Rural Center, a non-profit that has served as one of the primary distributers of state water and sewer funds in the past. The Center has distributed hundreds of million of dollars of state taxes over the last decade for rural water and sewer purposes. The state budget includes some new state funded water programs but nothing at the scale of what the Rural Center has done in the past. This follows a trend of reduced state funding that has seen other state water and sewer programs such as the Clean Water Management Trust Fund’s funding greatly reduced. (The budget also includes a provision consolidating several environmental funding  programs into a newly constituted Clean Water Management Trust Fund.) If the budget is passed, the most significant remaining state tax-funded water and wastewater programs will be drinking water and clean water state revolving funds (SRF). (The budget includes provisions to consolidate these programs under a new Water Infrastructure Authority). Approximately $10 million in state funds are allocated to the SRF programs next year. That brings us to the federal government budget which happens to be having serious water and wastewater developments going on today as well.  A draft budget from the US house Appropriations Committee proposes cutting over a billion dollars from the amount of money that the federal government collects and distributes to state governments for their SRF programs. The federal budget is the most in play – the draft house budget differs from the President’s Budget and the final SRF funding will be debated for months to come.

Normally budgets tend to be viewed primarily as spending documents, but in the case of water and wastewater infrastructure when overall spending is a necessity, the role budgets play in determining who collects may be more important than who spends…




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