Billions flow to water, sewer funds in Obama budget

WASHINGTON (Reuters) - U.S. states would get a significant bump in funds for clean drinking water and sewer systems under the budget President Barack Obama proposed on Thursday.

According to budget documents, $3.9 billion would go to the Clean Water State Revolving Fund and the Drinking Water State Revolving Fund in an "historic increase" that would fund more than 1,700 water projects in states, Native American tribes and territories.

That comes on top of $4 billion that will go to the funds through the recently-enacted economic recovery plan.

The Environmental Protection Agency estimates that for every federal dollar put into these funds, at least $2 in financing is provided to municipalities, according to the budget supplement.

The states' revolving funds use federal money for leverage and for offering low interest loans to communities.

As sewer systems and pipes age, water boards have worried they do not have enough money to keep water drinkable and safe. This has been especially troubling since the municipal bond market froze up at the end of 2008. Unable to borrow for maintenance and upgrades, local authorities faced the prospect of having to raise rates on consumers already strapped by the year-long recession.

(Reporting by Lisa Lambert)