The Governor’s proposed budget and water

Governor Budget Press ConferenceEarlier today, Governor Brown proposed his balanced budget that increases funding for schools and health care coverage, holds college tuition flat and delivers on the propositions approved by voters last November by starting investments in water projects and saving money, while also working to reduce the state’s other long-term liabilities, according to the Governor’s press release.

The budget that I’m presenting today is carefully balanced,” Governor Brown said as he opened the press conference. “It builds for the future by saving money, paying down debt, and investing in the core needs of our state. Our long-term fiscal health depends on the wise and prudent actions that we take. Over the last several years, we’ve made some tough decisions, tough budget cuts, we asked the people for temporary tax increases, and the economy has recovered. All of that has put California in a very solid position in contrast to just a few years ago when there was a structural deficit of $20 billion looking long into the future. Now, we have a carefully balanced budget, more precarious then I’d like, but it is balanced, and we can keep it that way, but it will require self discipline and real prudence.”

The Governor’s budget specifically includes $532 million in expenditures from Proposition 1 to continue implementing the Water Action Plan, the administration’s plan for moving the state towards sustainable water management. The bond also includes $1.1 billion in spending from the 2006 flood bond to bolster flood protection, and proposes $1 billion in cap and trade funds for continuing investments in low-carbon transportation, energy efficiency, urban forests, and high-speed rail.

After the Governor’s press conference, Secretary of Natural Resources John Laird and Secretary of Cal-EPA Matthew Rodriquez held a press conference to discuss how the budget impacts their departments.  While other topics were discussed, here’s what they said in regards to water:

John Laird, Secretary of the California Natural Resources Agency

I’m confident all of you were watching the Governor’s virtuoso performance in releasing the budget where we all take away the quote that ‘more money is good, less money is bad,’ and we will use that going forward in how we explain things. He explained the overall trends in the budget with regard to revenues and that there’s a slight surplus that allowed them to meet an almost equal growth demand. Education, health care and debt reduction were really significant pieces of that.

When you move into the resources agency, and of course it’s $9.4 billion and 26 different entities, the two items that are the most significant in the budget that I wanted to highlight really have to do with water and parks.

With water, I think that the temptation would be to say, what are we going to do in implementing the water bond that was passed by the voters last November, but the water bond was based on the Water Action Plan, and the Water Action Plan lays out a framework for how we’re going to address a broad suite of actions to deal with water in California and the budget responds to the Water Action Plan. Yes, of the $7.5 billion bond, there’s the initial $532.5 million that are in the budget are in the budget for safe drinking water, watershed protection and restoration, regional water reliability, water storage, water recycling, and groundwater sustainability. There’s a small amount that is for the initial action on implementing the groundwater legislation of last year. And before people seize on $535.5 million of the water bond as being a certain amount, $2.7 billion of the water bond is in water storage and is in continuous appropriation, and so you really have to look at those together.

Additionally, $1.2 billion of existing bond funds that was not in the water bond are proposed to be allocated for local flood control and flood risk reduction projects throughout California. There is an amount in the budget for drought management projects; in the event that existing drought conditions continue through next year, the budget provides $115 million, and of that, $93.5 million is from the general fund on a one time basis to continue critical drought response efforts, so that is the global situation.

There is that amount of money in the budget for water. It’s really the $532 million for various pots in Prop 1, it’s $2.7 billion continuous monies appropriated for storage, it’s a $1.2 billion of existing bond funds for flood, it’s $115 million for drought, so that is a very significant investment in the Water Action Plan, and it is really around the goals of restoration, of resilience, and of reliability. So significant pieces, and that’s what the Governor was talking about in his brief overview of it.

Secretary Matthew Rodriquez, Cal EPA

As the Governor noted, California has the most far reaching environmental policies of any state. I believe he said the most far reaching policies of any government in the western hemisphere. And while at the same time, demonstrating that good policies are compatible with a vibrant economy. We’ve been moving ahead over the last several years under the Governor’s leadership.

The Governor is known for his commitment to the environment and I think that commitment is reflected in this budget. Overall, the budget for Cal EPA is $3.8 billion for the next year. That’s an increase of about $200 million from the current fiscal year, and as you know that includes budgets for the six boards, departments and offices that make up Cal EPA.

I will note that there’s some discussion of some of the budget matters referring to the State Water Resources Control Board in the natural resources section of the budget, but I did check. State Water Resources Control Board is still in Cal EPA, and so we’re looking forward to working with the state board over the next year.

I’ll really focus on just a couple of main highlights in the budget from our perspective. One point that I’d like to make is that it really reflects the administration’s approach to governance in that it combines some ambitious far reaching programs on one hand with a very pragmatic focus on making sure that government is working very efficiently and effectively on the other hand, so having said that, let me highlight a couple of things.

First, as the Governor noted, California has the most integrated policy of any state for combating climate change. One of those policies and programs is our successful cap and trade program, which puts a price on carbon and creates incentives for the development of clean energy technologies. This year we started investing the proceeds from cap and trade auctions back into state programs that will further reduce carbon pollution and promote clean energy. For the current fiscal year, these proceeds amounted to a little more than $870 million, and we’re already investing that money in low carbon transportation, sustainable communities, energy efficiency, high speed rail, and a host of other programs …

As Secretary Laird noted, the budget includes a significant allocation of proposition one bond money and of that, $135 million is going to meet California’s commitment to making sure that everyone has safe drinking water. The State Water Board through its drinking water division has been successful in sharing that at any given time, 98% of California’s drinking water consumers from public drinking water systems receive water that meets federal and state standards, but that still leaves too many Californians without reliable access to safe drinking water. It’s estimated that there are 500 public water systems in disadvantaged communities that rely on sources that fall short of the standards that we want to see met. Many of these systems are in low income communities, both urban and rural, and many of these communities lack the infrastructure, technical expertise and ability to pay the costs to treat water to safe levels, and so to address that, the budget includes $135 million of water bond money to provide loans and grants to these smaller systems, so that they can meet safe standards and ensure affordable, safe drinking water.

Director of Department of Water Resources Mark Cowin on the disbursement of funds for water storage projects

The question was asked about the timing of the disbursements of the $2.7 billion in water storage funds, and role of the California Water Commission.

Director Mark Cowin answers: Your focus is on the $2.7 billion component of Prop 1 that’s focused on system-wide operational improvements through storage programs, and potential reoperation of existing storage programs.

As you probably know from looking at the bond language itself, there are certain timelines incorporated into the bond, including a time period for the water commission to develop regulations that will allow the commission to quantify the public benefits associated with these storage proposals, and then compare them to one another to assure that we’re getting the best public investment to produce those defined public benefits. The Commission has until December of 2016 to complete those regulations, so that’s almost a couple of years off now. In the meantime, of course, project proponents are going to want to continue to sharpen their pencils and move their feasibility studies and assessments of different proposals along.

I want to make an important distinction here that this funding is to provide for investment in public benefits as defined by Proposition 1, including enhancements to the ecosystem, improvements in water quality, and so on, and so any project proposal that comes forward is also going to have to include a financing plan for at least 50% of the proposal if not more, and include very specific commitments for that other piece of the funding. Anybody that wants to propose a project to the Water Commission has a lot of work to do in the next couple of years to get all of that in shape, and not only show how their project can provide public benefits as to be defined in more detail by the water commission, but also to shore up the funding for the other part of the project. That’s going to take a lot of work, so I would say there’s a lot to be done in those two years and it would be very timely if the water commission is in a position to consider real proposals in 2017.

Just one other word, I wouldn’t say that this is the only funding to support storage; there’s also a significant amount of funding both in our existing budgets and proposed in this budget for IRWM and groundwater sustainability. Both of those pots of funding, including funding that we actually put out the door in the last calendar year through emergency drought funding to the tune of over $220 million, we have another $220 million or slightly more than that in drought funding to disperse from Prop 84 from this year for IRWM grants, so a big component I would expect of that funding would go towards local storage projects, including groundwater storage projects that will enhance the storage portfolio across the state of California.

For more information …

 

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