A trillion-dollar federal infrastructure package and a chance to reform the water sector
– Warning: mixed metaphors ahead –
Observers of America’s water, sewer, and stormwater systems have known for years that the nation faces a trillion-plus-dollar bill for repairs, replacements, and upgrades. I’ve long been skeptical about the prospect of federal funding alleviating that burden in any significant way. With Congress ideologically divided and its chambers split across parties, the idea of a major infrastructure program coming out of Washington would seem unlikely on its face.
But rumblings over the past eighteen months have made me reconsider. Last spring the White House released an infrastructure plan that called for significant investments in water.*
Just before the 2018 mid-term elections, Congress passed the bipartisan America’s Water Infrastructure Act, which signaled federal priorities for the water sector but stopped short of sending tens of billions into the nation’s pipes and canals. Then last week President Trump met with House Speaker Pelosi and Senate Minority Leader Schumer and apparently agreed in principle on a $1-2 trillion federal infrastructure program.†
Little is known about the dimensions of the program, beyond the eye-popping figures. What might a huge federal infrastructure package mean for the water sector?
Back to an afterthought?
Transportation is the politician’s perennial infrastructure darling, as “roads and bridges” (Rosenbrigez) offer excellent credit-claiming opportunities for politicians who like to associate themselves with gleaming, highly visible projects. President Trump has made a career of putting his name on buildings, so we shouldn’t be surprised that he’d like to put his name on some Rosenbrigez, too. Although Pelosi and Schumer’s letter on infrastructure to the White House last week mentions “broadband, water, energy, schools, [and] housing,” transportation continues to grab the headlines: Time’s glibly declared that all $2 trillion was for Rosenbridgez.
Although water, sewer, and flood control systems are arguably more vital, much of that infrastructure is literally buried. Politicians aren’t clamoring to put their names on sewage treatment plants. Creating credit-claiming opportunities for water infrastructure is an ongoing challenge. If Washington is really going to pour hundreds of billions of dollars into infrastructure, water sector leaders will need to work hard to make sure their systems aren’t forsaken in favor of sexier transportation projects.
The promise & perils of fiscal federalism
Let’s assume for blogging’s sake that the water sector gets some major love (say, >$300 billion) in a trillion-dollar infrastructure bill. When contemplating such a massive federal capital infusion, it’s worth considering the last time Uncle Sam poured hundreds of billions into the water sector. The 1972 Clean Water Act and 1974 Safe Drinking Water Act included grants that provided as much as 90% matches for local investments in water and sewer infrastructure. The political genius behind the CWA and SDWA was that sweeping new environmental mandates came with considerable sweeteners in the form of federally-funded jobs in construction and environmental engineering. The federal funding made the new regulations politically palatable. From a policy perspective, the idea was for the federal funding to help create systems that local governments would operate, maintain, and upgrade in perpetuity.
Unfortunately, it hasn’t worked that way. One of the main reasons so much of America’s water infrastructure is in trouble is that there are strong structural disincentives for local leaders to invest adequately in water systems, as I’ve observed before. Maintaining water infrastructure doesn’t offer much of a credit-claiming opportunity, and local officials worry a great deal about being blamed for rate increases. Many of the organizations that operate water systems are ill-suited to the task; the institutions that govern and regulate water infrastructure are badly fragmented and often ineffective.
Attaching some strings
A federal water infrastructure funding package that fails to address the systemic factors that got us into this mess would be a wasted opportunity. Hundreds of billions of dollars might help shore up failing systems today, but would simply kick the problem down a generation: our children and grandchildren would face a similar infrastructure crisis in 2070, and justifiably curse their forebearers.
Rather than simply firing a money cannon at local water systems, federal leaders should use a massive funding package as leverage to reform the institutions that govern, regulate, and finance water infrastructure in America. In future posts I’ll explore some of the strings that Congress might consider attaching to their water infrastructure dollars.
*President Trump has since disowned his own plan. 🙄
†Still unclear is the small matter of how to raise a couple trillion dollars. Donald, Nancy, and Chuck are supposed to meet about that soon.
Some observations about the new law & what it tells us about the politics of water infrastructure in America
The Senate recently passed the America’s Water Infrastructure Act (AWIA) by a 99-1 vote; today President Trump signed it into law. AWIA is pretty slender as federal infrastructure bills go, weighing in at 332 pages and 70,000 words.
What follows are some thoughts about AWIA’s main water infrastructure provisions and what they tell us about the state of water policy and politics in America. This isn’t really a coherent essay or an exhaustive commentary; it’s a series of cursory observations on the bits that strike me as interesting.
What’s new in Title II
Titles I, III, and IV include some important provisions, but much of it is garden-variety authorizations for sundry projects and studies, along with some light regulatory housekeeping. As a careful observer of water policy, the most interesting parts to me come in Title II—Drinking Water System Improvement.
Sections 2014-2015 have received the most public attention, as they include increases in federal grants along with changes to the State Drinking Water Revolving Fund program. Those funds will help with infrastructure investment, but is really a drop in the trillion-dollar bucket of America’s water infrastructure needs. That money will make a splash ahead of the midterm elections (more on that later), but isn’t all that interesting from a policy perspective.
Here’s what I find most intriguing in Title II:
- Sec. 2001: Indian Reservation Drinking Water. Literally the first section of Title II is a marked expansion of grant programs for tribal drinking water infrastructure—$20 million annually for the next four years.
That isn’t much in the grand scheme of American infrastructure, but it’s potentially huge for some tribal systems. My research with Mellie Haider & David Switzer has found that tribal facilities lag far behind non-tribal facilities in regulatory compliance, in part because tribes weren’t eligible for the vast federal grants available in the 1970s and 1980s. Sec. 2001 is a step toward correcting that. More generally, it’s fascinating that this program is the very first thing in Title II.* Hopefully this prominent spot in the AWIA presages greater efforts to build tribal drinking water capacity.
- Sec. 2002: Intractable Water Systems. In substance, Sec. 2002 isn’t terribly exciting—it just funds a study on water systems that consistently fail to meet regulatory requirements. But this section (along with Sec. 2010, discussed below) signals that Uncle Sam is interested in doing something about perennially poor water systems. Of particular interest are the tens of thousands of small utilities that serve fewer than a thousand customers, many of which lack the financial, physical, and human capacity to operate modern drinking water systems.*
- Sec. 2006-7: School lead testing & drinking fountain replacement. Section 2006 authorizes $75 million over three years to support lead testing in school drinking water lines. Sec. 2007 provides $15 million for school drinking fountain replacement. These programs remain voluntary, however, so its effectiveness will depend on local officials participating proactively. Federalism! As with most aspects of national drinking water policy, this only works insofar as local governments make it work.
- Sec. 2010: Ownership provisions. Innocuously named “Additional Considerations for Compliance,” this section empowers state regulators to “require the owner or operator of a public water system to assess consolidation or transfer of ownership… to achieve compliance with national primary drinking water regulations.” This section is aimed at repeat violators of the Safe Drinking Water Act, and although it’s weak in substance—it doesn’t actually require consolidation or change in ownership—it signals something about the potential direction of future water regulation. More frequent consolidation, privatization, and/or public condemnation of failing water systems may be on the horizon.*
What AWIA tells us about the politics of water infrastructure
AWIA provides more evidence that water infrastructure remains an very hot issue at the moment. A 115th Congress that has been historically contentious—it might struggle to pass a resolution that puppies are cute—just passed an infrastructure law with near consensus. The timing is noteworthy, as well: AWIA arrives just in time for midterm elections. Credit-claiming opportunities abound!
Crucially, none of the funding authorized in AWIA will turn into actual water infrastructure until Congress appropriates funds for it. Conveniently for the 115th Congress, the task of appropriating money for all of that water infrastructure will fall to the 116th.
This is the fourth in my series of posts on the recently released White House infrastructure plan.
Release of the White House infrastructure plan triggered a flurry of news about the nation’s ports, dams, water works, sewer systems, rails, and rosenbridges. Little noted in all that coverage was the fourth part of the president’s four-part plan: workforce development.
Human capital shortfall
The human capital—the educated, qualified, and experienced workers who build and maintain the nation’s infrastructure—is suffering from the same kind of shortages that plague physical infrastructure. Infrastructure work is skilled work, and skilled workers are aging out of the labor market faster than they’re being replaced. The return on infrastructure investment will be poor if workers aren’t available to operate and maintain what’s built. The availability of qualified workers has real consequences for utilities. A study I published with David Switzer linked labor market human capital to drinking water safety, for example. The challenge is particularly acute for small utility systems, which often struggle to attract and retain talent. Organizations like AWWA and Baywork have invested heavily in workforce development initiatives in an attempt to address the shortfall.
Astonishing Part 4
Just as Parts 1-3 of the White House plan are meant to incentivize communities and corporations to invest in physical capital, Part 4 would change federal rules to incentivize individual workers’ investments in human capital.
The White House plan would revise Pell Grant eligibility to cover operator training, reform the Perkins CTE program to facilitate infrastructure-focused training, and expand federal Work Study to include trade apprenticeships. Perhaps just as importantly, the White House plan would push states to harmonize their operator licensing requirements. This last move would liberalize the labor market, which would open up opportunities for infrastructure workers and employers.
Taken together, these changes help make infrastructure careers more attractive. As Joe Kane at Brookings has observed, infrastructure jobs are good for the economy, too—they offer good pay, foster transferable skills, and aren’t easily outsourced to foreign workers. Unlike the plan’s provisions for physical capital, Part 4 is aimed squarely at the American working class.
The prominence of workforce development in the White House plan is extraordinary.
Federal investment in infrastructure is nothing new, and federal investments in human capital have been around for decades. But the White House plan’s Part 4 makes workforce an integral part of its vision for infrastructure. That’s important, and hopefully it marks a deep change in the way we think about infrastructure policy in America.