California Water Views

On January 10, 2025, Governor Newsom announced his 2025-2026 budget proposal of $322.3 billion. Unlike in 2023 and 2024, the proposal is for a balanced budget with a surplus of $363 million, although it does include $7 billion in funds from the state’s rainy day fund. The budget site includes a full combined summary, summaries of individual sections and a full detailed budget.

The budget includes reductions in funding for nearly all government agencies. The Natural Resources Agency has the biggest cut in net dollars and the second biggest cut percentage wise, with a 55.4% and $6.795 billion decrease in the agency’s budget, which is proposed to have a $5.468 billion budget for 2025-2026. The Environmental Protection Agency has the third largest percentage decrease with 51.2%, leading to a proposed 2025-2026 budget of $715 million. The cuts for the two agencies together represent 34% of the cuts to all agencies. Another cut of note is the elimination of approximately 6,500 government positions that are currently vacant – decreasing the odds that key vacancies in these and other agencies will be filled and thus decreasing the odds of a higher level of service from those agencies.

Governor Newsom’s budget relies heavily on Proposition 4 funding for water and other environmental projects. Proposition 4 was a 2024 ballot initiative that provided for $10 billion in funding for various defined categories of water and other environmental infrastructure projects. The 2025-2026 budget proposes to use $2.655 billion of that $10 billion. It also includes shifting $273 million from prior General Fund obligations to Climate Bond funding for a variety of programs and a $32 million shift of Greenhouse Gas Reduction Fund for the Clean Energy Reliability Investment Plan.

The highlights of the Proposition 4 funding for 2025-2026 are:

• $231.5 million for dam safety and climate resilience through grants that will support areas such as repairs, rehabilitation and enhancements for existing dams
• $183.2 million for water quality, safe drinking water, tribal water infrastructure through grants and loans that will cover areas such as issues with perfluoroalkyl and polyfluoroalkyl substances (PFAS), contaminate groundwater and consolidation or extension of water or wastewater systems
• $176 million to protect and enhance fish and wildlife resources, including for land conservation acquisitions and easements
• $173.1 million for flood management projects
• $153.4 million for water reuse and recycling projects including multi-benefit programs
• $148.2 million to implement the Salton Sea Management Program
• $37.6 million for improving irrigation systems on farms and ranches.
• $30.8 million for coastal resilience projects
• $20.3 million for sea level rise mitigation and adaptation
• $8.5 million for dam removal and related infrastructure

Other water-related investments/investments that could be of interest to those in the industry include:

• $173.5 million to improve water storage, replenish groundwater, improve conditions in streams and rivers, and complete various water resilience projects and programs
• $40.6 million for various climate smart agriculture projects and programs
• $20.7 million for various biodiversity and nature‑based solutions projects and programs

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 2025. The Legislature is required to pass a balanced budget by June 15 to take effect starting on July 1, 2025, which is the start of the next fiscal year.