Skip Navigation

Over the last 150 years, the federal government has gradually accepted responsibility for most of the costs of developing the nation's water resources. Federal investments have provided valuable services to a developing nation, including navigation on inland waterways and coastal ports, irrigation of western lands, flood control in all major river basins, and hydroelectric power primarily in the West and South.

Today, with a more mature national economy and with most nationally important water projects in place, the need for a strong federal role in new water development is less compelling. The most likely future water resources needs--maintenance of existing facilities and new construction of local projects--could be met more efficiently if states, local governments, and direct beneficiaries had a greater responsibility for project costs, financing, and selection.

This study analyzes three options that are under Congressional or Administrative consideration. Each recognizes the changing nature of water development responsibilities and aims to combine cost-sharing reform with financing mechanisms and changes in decisionmaking processes that, taken together, would promote a more efficient water resources investment program. The Congressional Budget Office (CBO) has prepared this report at the request of the Water Resources Subcommittee of the Senate Committee on Environment and Public Works. In keeping with the CBO's mandate to provide objective analysis, this paper offers no recommendations.

Kenneth Rubin of CBO's Natural Resources and Commerce Division prepared this study, under the supervision of David L. Bodde and Damian J. Kulash. The author wishes to thank Everett M. Ehrlich, also of the CBO, for his support and valuable commentary; and Dr. Peter Rogers of Harvard University, Dr. Kenneth Frederick of Resources for the Future, and Dr. Gerald E. Galloway, Jr. of the U.S. Military Academy for reviewing and commenting on the manuscript. Patricia H. Johnston edited the manuscript, assisted by Nancy H. Brooks. It was prepared for publication by the ever-cheerful Angela Z. McCollough.
 

Alice M. Rivlin
Director
August 1983
 
 

SUMMARY

CHAPTER I. NTRODUCTION

• Plan of the Paper

CHAPTER II. FEDERAL WATER RESOURCES DEVELOPMENT POLICIES

• History of Federal Water Programs
• Current Cost-Sharing Policy
• Federal Water Project Decisionmaking

CHAPTER III. SHIFTING WATER DEVELOPMENT PRIORITIES

• Shifts in Federal Spending
• Realization of Economic Development Goals
• Shifts Toward Local Projects
• Growth in State and Local Capabilities

CHAPTER IV. ECONOMIC EFFICIENCY AND WATER RESOURCES INVESTMENTS

• Economic Efficiency
• Economic Efficiency and Cost-Sharing Policy
• Economic Efficiency and Administrative Processes

CHAPTER V. POLICY OPTIONS

• Federal Loan Program
• Federal Block Grants
• Federal Project Grants Under A Limited Federal Role

Widespread support is beginning to develop for fundamental redirection of the federal government's water resources policies. Traditionally, the federal government has played a major role in choosing, financing, and paying a large share of the costs of water projects. In contrast, the responsibilities of state and local governments and private users have been relatively small. This extensive federal participation was appropriate for the early development of the nation's major river basins, waterway transport systems, and western regions. It appears less so today as water investment priorities continue to shift from construction of new projects toward the management, repair, and modernization of facilities now in place and to projects of increasingly local character. The Congress, therefore, faces the task of reorienting federal water policies to conform to these changes.

Two components are central to any such policy reorientation. The first is greater state and local responsibility for project costs, financial arrangements, and project selection. The second is increased user fees to recoup those portions of project cost that provide private rather than public benefits. Taken together, these policy changes could lend strong incentives to states, local governments, and private beneficiaries to work with the federal government to ensure that the most cost-effective projects are built and maintained.

Many legislative approaches to carry out such a reorientation are possible. This paper concentrates on three that appear closest in intent and structure to those that have recently been considered by the Administration or the Congress:

• Establishing a self-sustaining federal loan fund to replace annual appropriations for local water resources projects.
• Replacing federal grants for projects of local interest with block grants to states, allowing greater local choice of investments.
• Targeting the remaining federal project grants toward water projects that are national in character.

This document is available in its entirety in PDF.