California Continues to Prioritize Water and Climate Programs Despite Budget Cuts

Thanks to California's extraordinary budget surpluses in 2021 and 2022, the Newsom administration invested the historic sum of $16.3 billion in water and climate projects through various budget packages. In the last two years however, decreased tax revenues necessitated significant cuts to the state budget, and water and climate projects experienced a 21% reduction, resulting in a final FY25 budget of $12.9 billion. But even after these cutbacks, the General Fund budget allocated to climate and natural resources investments since 2021 remains significant-larger than any general obligation bond that's ever been on the ballot.

The use of the General Fund for these projects marks a departure from how California typically funds water and climate projects, which is usually through general obligation bonds passed by a simple majority vote in elections. The following provides more detail on the program areas currently supported through the General Fund.

Flood Planning: From 2020 to 2022, California experienced a severe drought, and the state budget in 2021 and 2022 included large sums of money allocated to drought support and resilience. However, the historically wet winter in 2022-23 turned the state's attention from droughts to floods. Usually a fiscal orphan, flood planning is currently allocated $858 million-a 9% boost to the original amount through alternative revenue sources-for various projects like flood planning efforts, dam safety, and floodplain restoration programs.

Extreme Heat: Extreme heat has become a major concern in California, particularly in the last few years, and the state budget acknowledges this. Despite a 54% cut to the original funding, extreme heat issues maintain $297 million to alleviate extreme heat stress across the state through projects like urban and schoolyard greening, low-income weatherization, community resilience, and public awareness campaigns.

Sustainable Agriculture: Following a 7% reduction to the original budget, $1.1 billion remains available to support agricultural sustainability with projects like diesel engine replacement, the Healthy Soils program, livestock methane reduction, and agricultural burning alternatives.

Coastal Resilience and Sea Level Rise: The state's current budget for this program area is $662 million-48% of the original funding. The funding targets coastal resilience projects such as sea level rise adaptation for infrastructure and state parks, coastal wetland restoration, coastal land acquisition, and protection against climate change.

Forest Health and Wildfires: Following the severe fire seasons between 2020 and 2022, forest health and wildfire intervention became another funding priority for the state. These projects include post-fire restoration, forest health, prescribed fire, and fire prevention grants. With $2.6 billion remaining (93% of the original budget) and wildfires re-emerging this summer, this area seems likely to remain as a priority for the state government.

Nature-Based Solutions: These programs still have $3 billion (82% of the original amount budgeted) available for a wide range of green infrastructure and ecosystem restoration projects across the state, including watershed resilience, climate-smart land management, and fish and wildlife protection against climate change.

Water Supply and Droughts: The state committed a significant portion of the climate and natural resources funding to water supply and drought support at height of the 2020-22 drought, including water recycling and storage projects, drought planning and relief, PFAs support, and implementation of the Sustainable Groundwater Management Act. Despite a 26% cut to the original budget, $4.3 billion remains available for these projects, signaling that the state continues to prioritize drought preparation and resilience in wet years.

These investments support a wide range of programs that address different impacts of climate change like sea level rise, floods, droughts, forest health, wildfires, and extreme heat. Although these funding amounts might change in the coming years based on the state's fiscal status, the 2024-25 state budget demonstrates that water and climate funding remains a priority for the state even in times of economic downturn.