This is the second of a three-part series on water infrastructure policy for the 89th Legislature.
Given the importance of reliable water infrastructure to the continuation of Texas’ economic miracle, water infrastructure funding has emerged as one of the key issues for the 2025 legislative session. Texas 2036 recently released a report assessing Texas’ water infrastructure needs.
This report describes the long-term costs for addressing the state’s infrastructure challenges, anticipated funding gaps, and explores potential financial strategies that could set the state on the path toward building a more resilient water future.
Here are some of the key data points from that report.
1. Addressing Texas’ water challenges will cost at least $154 billion.
Texas needs to invest at least $154 billion over the coming decades to address the state’s water infrastructure challenges. This price tag includes an inflation-adjusted $59 billion in state financial assistance for water supply projects and management strategies identified in the 2022 State Water Plan.
In addition to expanding a water supply portfolio for a growing state, Texas also needs to address the problems attributable to aging, deteriorating drinking water and wastewater systems. The U.S. Environmental Protection Agency projects that Texas’ drinking water systems need $74 billion in repair and rehabilitation over the next 20 years. Fixing aging, deteriorating wastewater systems will cost just over $21 billion in today’s dollars.
2. Texas’ water infrastructure funding gap exceeds $110 billion.
Texas’ $154 billion price tag for addressing its water infrastructure needs comes with good news and bad. The good news is that existing state and federal funding programs are projected to pay for a portion of that cost. The bad news is that the projected effort from these existing programs will fall well short of $154 billion.
Texas 2036’s report projects that Texas faces a long-term water infrastructure funding gap of $112 billion in the coming decades.
This funding gap exists despite the Legislature’s and voters’ approval of the $2 billion State Water Implementation Fund for Texas (aka SWIFT) in 2013 and the $1 billion Texas Water Fund in 2023. While both of these initiatives took critical steps toward expanding the state’s water infrastructure financial strategy, they are not capitalized to the extent needed to close the long-term funding gap.
Even recent congressional initiatives, such as the U.S. Infrastructure Investment and Jobs Act of 2021, which temporarily course corrected decades of declining federal spending on state water programs, are not anticipated to provide the funding levels necessary to meet Texas’ needs. Moreover, since 2022, the use of congressional earmarks has resulted in a net loss to Texas’ water funding programs.
3. Texas needs a long-term funding solution for water infrastructure.
Texas must close the water infrastructure funding gap to avoid the economic problems of water shortages and provide a firm foundation for continued growth and development. Texas 2036’s report recommends two key steps for the 89th Legislature to consider:
- Appropriate an additional $5 billion to the Texas Water Fund.
- Approve a $1 billion per year revenue dedication toward the Texas Water Fund.
Both steps, when leveraged with the state’s existing bond programs, will work toward closing Texas’ long-term water infrastructure funding gap.
Fortunately, Texas has a strong precedent of using funding dedications for other infrastructure needs. In 2014 and 2015, both the Legislature and voters approved dedicating a portion of state sales and severance tax revenues to the State Highway Fund.
This method of finance has delivered over $35 billion over the past decade, and the Texas Department of Transportation has leveraged this funding to underwrite nearly $150 billion in transportation projects.