No, it's not tax payer money. The regulator controls how they spend their own money.
They aren't discharging raw sewage, it's less clean than it could or should be. The chemicals they cannot source are flocculants, they bind microscopic solids together so they can be filtered out. Without the chemicals the process cannot work so it kind of is an excuse. There is currently a lot of work going in to finding another chemical to do the job which doesn't kill biological processes.
The only time untreated sewage is discharged is during extreme storm events when the plant cannot keep up with incoming flows and storm storage tanks (millions of litres) are full. Those events are rare but becoming more common.