AUSTIN — Texas water officials delivered a stark warning to state lawmakers on Tuesday: the cost of keeping the state's water systems running has skyrocketed, and existing funding mechanisms are no longer sufficient to meet the demand.
Testifying before the Texas House Natural Resources Committee, officials from the Texas Water Development Board (TWDB) said the latest five-year State Water Plan carries a projected price tag of $174 billion — a figure that dwarfs the resources currently available through state programs.
Funding Gaps Widen
In 2013, the legislature created the State Water Implementation Fund for Texas (SWIFT) with a $2 billion initial investment, designed to function as an endowment that would generate $27 billion over 50 years for water projects. But TWDB Executive Director Bryan McMath told lawmakers that the 2027 plan reveals a severe mismatch between needs and resources.
“It’s an ongoing challenge,” McMath said. “We do our absolute best to essentially squeeze as much capacity as we can out of our financial assistance programs, but there is growing demand as evidenced very clearly by the kind of new $174 billion price tag for the State Water Plan.”
McMath attributed the cost surge to inflation, rising labor expenses, and higher materials prices.
Short-Term Fixes Not Enough
Last year, voters approved a constitutional amendment dedicating $1 billion annually to water infrastructure from 2027 through 2047. But the first disbursements won’t likely arrive until 2028 at the earliest. Meanwhile, House Bill 500 allocated over $1 billion in one-time grants for local water projects, but industry groups say that’s insufficient.
Sarah Kirkall of the Texas Water Association noted that while HB 500 funding helps specific projects, it does not replenish the core loan programs like SWIFT. “These grant-only dollars … provided no additional funding to the actual financial assistance programs,” she said.
For the first time in its history, SWIFT could not meet demand: it provided $2 billion in financing, but that covered less than half of the $4.2 billion in approved project costs.
Flood Infrastructure Also Strained
The TWDB’s flood infrastructure fund faced a similar crunch. The agency made $312 million available in grants and zero-interest loans, but received $2 billion in requests — six times what was on offer, according to TWDB’s Marvin Cole-Chaney.
Representative Trent Ashby, a Republican from Lufkin, acknowledged the need for more money but pressed officials for a specific figure. “We’re facing a reality that we need to take another examination of SWIFT and potentially recapitalize it,” Ashby said. “What is the number? I want you to dip your toe in this water.”
Kirkall estimated that an additional $1 billion per year could be required.
Data Centers Drive Demand and National Security Concerns
The explosion of data centers in Texas is adding new pressure on water supplies. TWDB reported that the number of surveyed data centers jumped from 22 in 2023 to 341 in 2025. Researchers at the University of Texas at Austin project these facilities could account for 9% of the state’s water use by 2040.
Michael Lucci, founder of State Armor, framed the issue as a national security matter. “This is an important debate for safety, environmental concerns of our community. It is also a very important debate for national security and the competition between the United States of America and the Chinese Communist Party to see who will dominate the technologies of the 21st century,” he told lawmakers.
Lucci argued that data centers are essential for powering artificial intelligence and emerging technologies that underpin U.S. military advantages. “We want to be able to do it in the right way, and you need data to do that,” he said.
As Texas faces mounting water infrastructure costs, the debate over funding — and the competing demands of growth, technology, and security — shows no signs of easing. For context, the state is also grappling with other fiscal pressures, including GOP fiscal conservatives resisting major defense spending pushes, and the Senate Banking Panel probing the affordability crisis ahead of midterms.
