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Today we live in an era of limited federal funds. The period of turmoil may be about to end. An emerging partnership between the federal government and the state and local sponsors of water projects provides the opportunity to forge a new consensus. 22 Due to limited financial capability of non-federal sponsors and the fact that water resource developments are typically long-term investments characterized by uncertainty in future conditions, demands and revenue potential, the federal government has traditionally assumed the financial risks of project planning and construction. Traditionally, local and state sponsors generally provided lands, easements and rights of way; reimbursed some vendible outputs like water supply and hydroelectric power; and assumed some project operation and maintenance responsibilities, Funding Cutbacks Today we live in an era of limited federal funds, especially for water resources construction, Although the Corps' Fiscal Year 1985 budget is about the same as last year and larger than several years ago, funding for new project construction is about $1.1 billion; this is only 37 percent of the 1980 level and 25 percent of the 1967 level after adjusting for inflation. There are several reasons for this decrease. Although the last authorization bill was in 1976, this Congress has not agreed upon and the President has not signed a comprehensive water resources authorization bill since 1970. The growing federal deficit makes it unlikely that major new federally funded water development can be undertaken today. There are competing demands for limited federal dollars, including those funds needed for the operation, maintenance, repair, rehabilitation and/or modification of existing projects. It is also unlikely that the trend toward smaller federal investments in water development will be reversed. If urgently needed projects are to be built, the country requires new financing arrangements. During the past decade, traditional water project cost-sharing and financing (sponsor-provided lands, easements, and rights-of-way; reimbursement for vendible outputs over the life of the project) have been subjects of intensive scrutiny and divisive debate. The milestone report of the National Water Commission in 1973 recommended cost-sharing policy changes. The Carter Administration reviewed cost-sharing in the Ford Administration's "Section 80" study authorized by the Water Resources DevelopmentAct of 1974 and proposed, depending on the nature of the project purposes, that non-federal project sponsors should provide an additional five to ten percent of project costs "up front." These proposals generated a great deal of controversy, and achieved no consensus on cost -sharing and financing. The era of turmoil characterized by a gradual loss of consensus between the executive and legislative branches on water priorities and federal responsibilities resulted in a virtual halt in the congressional authorization process for new water projects. Of the 106 ongoing construction projects in the FY85 Civil Works budget (down from 159 in FY 83), only six were begun after 1979, Meanwhile, there are about 200 projects involving about $13 billion of construction costs eligible for authorization; hundreds of projects, involving about $16 billion, already authorized, await funding for construction appropriations or de-authorization. Policies for Project Cost-Sharing and Financing The period of turmoil may be about to end. An emerging partnership between the federal government and the state and local sponsors of water projects provides the opportunity to forge a new consensus. President Reagan, in his January 1984 letter to Senator Laxalt concerning water development, said, "It is time to conclude the discussion and to establish a national water financing policy so that we can get on with the job of completing projects where commitments have already been made and undertaking new construction starts to meet the country's future needs."