California Water Views

On January 10, 2024, Governor Newsom announced his 2024-2025 State budget proposal for $291 billion with a $37.9 billion proposed deficit. For water projects, the proposal is remarkably similar to his proposal from last year. The main differences as compared to last year’s proposal are bigger cuts (to many of the same areas cut last year) and less funding for new projects.

Governor Newsom seeks to address the $37.9 billion budget shortfall (which is substantially lower than the Legislative Analyst Office’s $68 billion projection from last month) through a variety of mechanisms: $13.1 billion from reserves, $8.5 billion in reductions, $5.7 billion in revenue/internal borrowing, $5.1 billion in delays, $3.4 billion in fund shifts, and $2.1 billion in deferrals.

A meaningful portion of these actions impact environmental programs, with the governor reducing his climate commitment from 2021 and 2022 from $54 billion to $48.3 billion. That represents a $6.7 billion cut that includes $2.9 billion in reductions, $1.9 billion in delays, and $1.8 billion in shifts. The $2.9 billion in reductions from climate programs is the highest area of cuts, represents over 34% of the total reductions, and is more than double the second highest reduction, which is $1.2 billion from housing programs. In terms of specific delays, the budget delays $400 million for the Clean Energy Reliability Investment Plan (4th highest) and $175 million for Vulnerable Community Toxic Clean Up (6th highest). The fund shifting represents more than half of the overall shifting and is based on shifts to the Greenhouse Gas Reduction Fund.

In terms of agency funding, the Natural Resources Agency’s budget decreased by $6.795 billion, which was the largest decrease in nominal dollars and second in percentage (55.4%) while the Environmental Protection Agency’s budget decreased by $751 million, which represented the third highest percentage decrease (51.2%).

Turning to cuts specifically focused on water, the three areas we highlighted last year as receiving substantial cuts received even more substantial cuts this year:

• Watershed Resilience Programs:
  • $88.4 million reversion this year and $350 million reduction over the next two years
  • $56 million budget
• Per- and Polyfluoroalkyl Substance (PFAS) Clean Up:
  • $71.6 million reversion and $30 million reduction
  • $53 million budget
• Water Recycling:
  • $174.4 million reversion and $100 million shift
  • $348 million budget

Other notable reductions to water projects include a $50 million reversion in dam safety and a $175 million delay for the Department of Toxic Substances Control’s Cleanup in Vulnerable Communities Initiative Program.

However, as last year, the budget also includes some good news for water programs, as they were among as limited number to receive new funding, including:

• Flood Protection – $93.9 million
  • $33 million to continue working with the U.S. Army Corps of Engineers
  • $31.3 million for Central Valley projects
  • $29.6 million to address storm damage from 2023, including in the Delta
• Salton Sea Management Program – $65.2 million
• Protection for former Waters of the United States – $6.1 million Waste Discharge Permit Fund and $7 million ongoing
  • The Sackett v. EPA case last year substantially changed which wetlands qualified as “waters of the United States” and thus received protection under the Clean Water Act.
  • Governor Newsom’s budget aims to assist with “maintain[ing] protections for these wetlands under state law.”

This proposed budget from Governor Newsom is the first stage in the budgeting process and represents a starting point for negotiations with the Legislature, which will hold hearings and provide feedback. The Governor will next submit a revision in May. The Legislature is required to pass a balanced budget by June 15 to take effect starting on July 1, 2024, which is the start of the next fiscal year.