Clean Water Act

In 1987, Congress authorized the creation of state revolving funds to help local governments and others construct projects to improve water quality, thereby safeguarding public health and the environment. All 50 states and Puerto Rico have establish such revolving funds, and through fiscal year 1996, Congress provided them with more than $11 billion. The federal government provides annual grants to the states as "seed money" to help capitalize their revolving loan funds. In turn, the states use their revolving funds to make loans to local governments and others. As the loans are repaid, the funds are replenished, and additional loans can be made. This testimony is based on a December 1996 report (GAO/RCED-97-19) that discussed nine states' use of their revolving funds, including (1) the amount of the money lent and the percentage of available funds lent, as of the end of each state's fiscal year 1996 and (2) factors at the federal and state levels that constrained the amount and percentage of funds lent.

GAO noted that: (1) the nine states increased the total amount of funds they lent from $3.3 billion in 1995 to $4.0 billion in 1996; (2) all nine states increased the amount they lent by 15 percent or more, and three states achieved increases of 30 percent or more; (3) in addition, seven of the nine states increased the percentage of available funds they lent; (4) of these seven, three states increased this proportion by 17 percentage points or more; (5) nevertheless, the percentage of funds lent as of the end of 1996 varied substantially among the nine states; (6) specifically, five states had lent 80 percent or more of their available funds, three states had lent between 70 and 79 percent, and one state had lent 60 percent; (7) in eight of the nine states, officials identified the expiration of the authorizing legislation, as well as federal requirements, as affecting the amount and percentage of funds lent; (8) for example, officials in seven states said the legislation's expiration created uncertainty about the loan conditions that might apply in the future and caused some communities to postpone seeking or accepting loans; (9) also, officials in seven states said that other federal requirements, such as a prevailing-wage provision, discouraged some communities from seeking loans; and (10) finally, in two states, officials said that state program decisions constrained lending.