Water rate setting for full cost recovery is a best practice for long-term sustainability of municipal drinking water systems, yet doing so presents challenges for affordability and accessibility in communities with lower fiscal and/or operational capacity. Recently, the Government Finance Research Center (GFRC) at the University of Illinois Chicago researched water rate setting throughout Illinois by collecting the largest statewide dataset of water rates, payment policies and penalties, and system characteristics, combined with contextual information from in-depth interviews of municipal water system representatives. The results show wide variation in rate structures and billing, with many communities facing capacity and affordability challenges. This session will present findings from this research, particularly highlighting best practices and practical recommendations for municipalities. The session will also highlight a USEPA technical assistance case study with the City of Decatur, Illinois, which recently evaluated its water rates to address long-term financial sustainability and customer affordability, demonstrating how recommendations may be translated into local action. Overall, this session offers practical tools and policy pathways to improve equity and affordability, financial capacity and sustainability, and conservation outcomes in municipal drinking water systems.