Origins of the State Revolving Fund

When Congress passed the Clean Water Act in 1972, it made an historic financial commitment to help local governments construct and rehabilitate sewage collection and treatment facilities. This commitment yielded huge benefits for waters across the nation.

However, by the mid 1980s, the federal government no longer had the money to pay for everything that local governments still needed to do. Many fiscal conservatives and environmentalists argued that the federal government should no longer have to pay. They pointed out that local governments had never been promised that federal grants for sewage treatment plants would last forever. In a new financial and political climate, the "State Revolving Fund" was born.

Instead of paying directly for sewage treatment works, the federal government would “capitalize” SRF programs. States would make low-interest loans, not grants, to local governments. States were expected to ensure the financial stability of these programs and to ensure that funded projects were environmentally sound and cost-effective — consistent with national policies for the responsible use of federal money. These ideas became law when the Clean Water Act was amended in 1987, and the SRF program was established.

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