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Testimony: Funding to Promote Drought Resilience

Ellen Hanak March 27, 2014

The Assembly Budget Subcommittee for Resources and Transportation–which oversees budget allocations for water-related state agencies–convened a group of experts on Wednesday to provide an update on the current drought. PPIC senior fellow Ellen Hanak gave the members an overview of state and federal emergency drought funding for California and suggested other fiscal measures that the legislature should consider to make California more drought resilient. Here are her prepared remarks.


Good morning and thank you for the invitation to address the committee. I’d like to focus my remarks on how the legislature can help California become more drought-resilient, both in the near term and over the longer term. And since your committee is tasked in particular with considering budget measures, I will highlight the question of funding.

As you all know, several weeks ago the legislature passed, and the governor signed, emergency drought legislation. These bills made $687 million available for a variety of programs. This state funding package came on the heels of an announcement of $222 million in federal drought funding for California—bringing the total to $909 million. In the state’s case, most of the funds (80%) come from previously authorized state general obligation (GO) bonds, with the remainder from the general fund (11%), new cap and trade auction revenues (6%), and a variety of other funds (3%). A large portion of the federal funds comes from the 2014 Farm Bill.

The table provides an overview of the allocation of these funds. About a quarter ($239 million) is for near-term emergency assistance to communities facing special hardship because of the drought. A small share (0.3%, or $2.3 million) is directed to emergency ecosystem support. And nearly three-quarters of the total ($668 million) is directed toward improving water use efficiency and reliability. Although some of the investments in this last category may help in the near term, most should be viewed as efforts to make the state more drought-resilient over the longer term.

This breakdown between near- and longer-term impacts of drought spending reflects the realities of drought response: In the very near term, cash can provide helpful support to affected communities, but it can’t fundamentally change the water supply situation. One of the very interesting lessons from the current drought is that two decades of investments by California’s major urban utilities—in areas such as water use efficiency, above- and below-ground storage, and non-traditional supplies like recycled wastewater and stormwater—has made these communities much more capable of getting through droughts. The new spending earmarked for improving efficiency and water supply reliability should help California continue to build its resilience to future droughts.

The drought has also renewed legislative attention on putting a new GO bond on the November 2014 ballot to fund water management in California. As we show in a new PPIC study on water finance, Paying for Water in California, state bonds approved since 2000 have helped fund a range of important water management activities. However, bonds can at best be just a part of the overall solution to meeting California’s critical water funding needs. The legislature can and should pursue other actions to give California a sustainable and reliable funding system for water. Some examples include:

  1. Adopting new state fees and special taxes to fill critical gaps. For instance, a small surcharge on water use could support integrated water management and protect our threatened aquatic ecosystems, and a small surcharge on chemicals could help fund pollution prevention and safe drinking water in affected communities.
  2. Passing enabling legislation to make it easier for local agencies—the front-line managers of water resources—to raise the funds they need. One example would be extending the authority to assess fees for groundwater pumping and basin replenishment—now available to just a handful of communities—to groundwater management agencies across the state.
  3. Providing guidance to the courts on how to interpret California’s Constitution so that local water agencies can improve water supply reliability. In particular, agencies should have the flexibility to adopt tiered, conservation-oriented rate structures and fund activities such as recycled wastewater and stormwater capture. In some cases, narrow judicial interpretations of Proposition 218—a voter-approved amendment passed in 1996—have created uncertainty about the ability of local agencies to use fee revenues to carry out such programs, which are essential for drought resilience.

In closing, it’s worth recognizing that droughts are a recurring feature of California’s climate. The current crisis presents an opportunity to continue improving our water system’s ability to cope with water scarcity in the face of population growth and a changing climate. By supporting the emergency funding package, the legislature has already taken some important steps to help alleviate the worst effects of this drought and to build future drought resilience. With additional steps, the legislature can help ensure that our water system can support a healthy economy, society, and environment over the longer term.

Table sources: California Senate Bills 103 and 104 (chaptered March 1, 2014); White House Fact Sheet on drought response (February 14, 2014).

Tags: drought, water

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