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The National Governors' Association conducted a survey of governors and their staffs regarding priority issues facing the states over the next four years. Water problems was selected as the number one issue. The states, like the Congress, are slowly but surely turning away from traditional means of doing business. 50 While the Congress continues to work its way through the complex morass of water and tax legislation, the states are moving to address the issue of water financing, Led politically by the governors and managerially by senior water officials, the states are key to inter- and intra-governmental cooperation on water issues. As the federal government recedes from major financial participation, the mantle falls - whether by choice or by default - on the states. State Initiatives Overall, the states can be expected to playa more active role in financing by providing both technical and financial assistance to non-federal sponsors, as well as by acting as sponsors themselves. States are already providing leadership in project financing through the creation of bond banks, financing authorities, loan and guarantee programs, dedicated revenue sources and the like. It must be recognized, however, that states have widely varying financial capacities to take up the slack. Some have their own version of a water trust fund in the form of severance taxes on mineral deposits. Others, however, are constitutionally limited in their borrowing power and fiscal capacities. Also, a number of states and localities have encountered increasing voter resistance to proposals for bond referenda, increased user charges, operation and maintenance charges and local property (ad valorem) taxes to finance governmental services. The State Perspective In 1982-1983 there were some important signals of the way states view water issues. For example, the National Governors' Association conducted a survey of governors and their staffs regarding priority issues facing the states over the next four years, water problems was selected as the number one issue, Another important signal was provided by the Interstate Conference on Water Problems (ICWP), a 25-year-old national association of state and regional water officials. In 1983, ICWP selected cost-sharing as the focus for special study by a task force of water officials. The battles over cost-sharing during the last seven years have primarily focused on the percentages now in the law and those being proposed for non-federal contribution. Of significance is that, while still certainly concerned about the actual percentages, the ICWP Task Force demonstrated a willingness to negotiate and an awareness that the key issue had shifted from percentages to capital. In its report, the Task Force stated: . . , state water experts agree that the fundamental issue in water project financing is not cost-sharing but is, instead, capital formation. In order to adequately resolve water infrastructure problems, the states believe that a comprehensive reform of the current system for selecting and developing water facilities is essential. The states, like the Congress, are slowly but surely turning away from traditional means of doing business. Working Together on New Approaches In 1984, in a classic example of a strong state-federal partnership, ICWP and the US. Army Corps of Engineers cosponsored a series of regional water project financing workshops. The ICWP-Corps workshops brought together several hundred members of the local, state and federal water communities, along with the investment banking and financing communities, to mutually explore financing problem areas and begin to identify pragmatic solutions. The bottom line was realization that, regardless of the outcome of pending water project legislation, the state and local levels of government must be prepared to pay more.