The 2024-25 Budget: Flood Management Proposals

2024-25 BUDGET The 2024-25 Budget: Flood Management Proposals GABRIEL PETEK | LEGISLATIVE ANALYST | FEBRUARY 2024 SUMMARY The Governor’s budget proposes $95.1 million in 2024-25, primarily from the General Fund, for a variety of flood-related projects and activities. This includes (1) $29.6 million General Fund proposed for early action to repair damage from the 2023 storms, (2) $33 million General Fund to provide the state cost share for urban flood risk reduction projects conducted in collaboration with the federal government, (3) $31.3 million General Fund for three Central Valley multi-benefit flood projects, and (4) $1.2 million ongoing from the Water Rights Fund for the State Water Resources Control Board (SWRCB) to expedite permitting of flood diversions for groundwater recharge. Because the state is experiencing a serious—and worsening—budget problem, the Legislature will need to apply a high bar to its review of new General Fund spending proposals and be very selective in approving any of them. Based on our review, we find that the Governor’s flood-related proposals for early action meet this high bar. These repairs are a state responsibility and providing funding before the regular June budget time line will allow them to be completed ahead of the next rainy season. We also find that the urban flood risk reduction projects conducted with the federal government meet the high threshold for possible approval. These projects help protect public health and safety and are part of the state’s core responsibility for flood management in the Central Valley. In addition, the state would risk losing significant federal support for these projects if it neglected to provide its cost share. While there are compelling reasons to proceed with the Central Valley multi-benefit projects, we find that the General Fund condition complicates this decision. The Legislature will need to weigh the trade-offs associated with adding new spending for these projects against its other budget commitments. Because the proposal to increase SWRCB staffing to expedite permitting of flood diversions for groundwater recharge should improve efficiencies without affecting the General Fund, we recommend its approval. Lastly, given the state’s responsibility for flood management in the Central Valley and the rising flood risks due to climate change, the state will continue to face notable recurring costs in the years to come. As such, we suggest the Legislature develop a longer-term approach for funding flood management. This could include making room in the annual baseline budget and/or considering asking voters to approve a general obligation bond that might support several years of flood projects. BACKGROUND Managing Flood Risk in California magnified by the impacts of climate change, which are leading to the state experiencing California Faces Significant and Increasing more intense storms with significant rainfall. Flood Risk. Estimates from a 2013 comprehensive According to a 2022 study by scientists at the statewide report, California’s Flood Future, University of California, Los Angeles, climate suggested that 7.3 million people (one-in-five change already has doubled the likelihood of an Californians), structures valued at $575 billion, extreme storm bringing catastrophic flooding in and crops valued at $7.5 billion were located in California, and this risk will continue to increase. areas that had at least a 1-in-500 probability of Moreover, recent data reported in the state’s flooding in any given year. Flood risks are being 2022 Central Valley Flood Protection Plan (CVFPP) www.lao.ca.gov 1 2024-25 BUDGET estimate that more than 1.3 million people and Flood Protection Board (an independent body structures valued at more than $223 billion in housed administratively within DWR) has the state’s Central Valley region are at risk from responsibility for overseeing the SPFC on behalf of flooding and that without adequate investments the state. For most segments of SPFC levees, the in flood systems, both annual deaths and state has developed formal agreements with local economic damages could more than double in government entities (primarily local flood, levee, and the Sacramento River Basin and quadruple in the reclamation districts) to handle regular operations San Joaquin River Basin over the next 50 years. and maintenance responsibilities. A court decision Recent storms in 2023 and early 2024 highlighted in 2003 found that the state ultimately is financially the challenges that communities across the state responsible for the failure of SPFC facilities, even face from extreme flooding. when they have been maintained by local entities. Many Levees Are at Risk of Failing. In addition, although only 380 miles of the 1,100 Communities across the Central Valley and miles of levees in the Delta are part of the SPFC, Sacramento-San Joaquin Delta regions rely on the state provides some funding to local agencies more than 2,000 miles of levees for flood protection. to support both SPFC and non-SPFC Delta levees In addition to flood protection, levees located in large part because of their important role in the in the Delta region are essential components of state’s water conveyance system. the state and federal water systems that convey DWR’s Various Flood Management Programs water from the northern part of the state to Fall Into Two Main Categories. DWR manages Central and Southern California. As such, levee numerous different programs supporting a wide failures could put both public health and safety as variety of flood projects, depending on the project’s well as water supplies at risk. In the Delta, local geographic location, its main purpose, and what reclamation districts have identified 500 miles entity bears primary financial responsibility and on 75 Delta islands as needing improvement. liability. (Most flood projects are collaborative Moreover, nearly 90 percent of Central Valley efforts with local governments, property owners, levee systems currently fall short of federal and/or the federal government.) In general, performance standards, increasing the risk that however, these various programs and projects can they might fail. The Delta Stewardship Council, a be categorized as follows: state department charged with helping to manage • Protecting Public Health and Safety, the state’s multiple goals in the Delta, recently Property, and Assets. These flood projects published a risk-based prioritization of Delta have the protection of people, property, and levees in order to guide the state’s investments. other infrastructure as their primary purpose. This Delta Levees Investment Strategy assessed For example, the Urban Flood Risk Reduction each island and tract located within the Delta based Program supports projects that protect urban on flood risk (to people, property, and other state areas within the SPFC. Often these projects interests) and identified 34 out of 142 as having a use traditional physical infrastructure such as “very high-priority” rating. levees, floodwalls, channels, and weirs. Flood Management in the Central Valley • Reducing Flood Risk and Improving Habitat Is a Core State Responsibility. California gave and Water Supply Through Multi-Benefit assurances to the federal government that it would Projects. Other flood projects provide oversee and maintain the State Plan of Flood benefits in addition to flood protection, Control (SPFC) along the main stems and certain such as restoration of natural floodplains, tributaries of the Sacramento and San Joaquin ecosystems, and habitats, as well as Rivers, including parts of the Delta. The SPFC increasing water supply through groundwater includes 1,600 miles of levees, four dams, and recharge. For example, a flood bypass project seven flood bypasses. The Department of Water might use traditional infrastructure, such as Resources (DWR) is the state’s lead agency in a levee or weir, to redirect water out of a river flood-related activities, while the Central Valley channel into a large floodplain, thereby both 2 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET reducing flood risk near the river channel As shown in Figure 1, since 2021-22, the state has and improving habitat in the floodplain. primarily used the General Fund to pay for flood DWR’s Central Valley Systemwide Flood Risk management on more of a pay-as-you-go basis Reduction Program supports multi-benefit rather than through longer-term bond financing. projects within the SPFC. In combination, the 2021-22, 2022-23, and 2023-24 budgets included about $1 billion from the General Funding for Flood Management Fund for flood-related activities (some of it provided Local Funding Comprises Majority of Flood through local assistance grants), including for Management Spending. Statewide, most traditional capital projects, multi-benefit projects, activities to protect communities from floods are levee maintenance, and flood-related planning. undertaken and paid for by local agencies. In a In addition, over the past year, the state has 2021 piece, Paying for California’s Water System, incurred additional expenditures for emergency the Public Policy Institute of California (PPIC) flood response and recovery activities as a result of estimated that average annual spending on flood storms. For example, the 2023-24 budget provided protection statewide between 2016 and 2018 $20 million each for the communities of Planada totaled $2.7 billion, with about three-quarters of and Pajaro (which were hit particularly hard by 2023 that generated and spent by local governments. storms) and $25 million for flood relief for small While most local spending is for maintaining and farmers and agricultural businesses. Some of this operating flood facilities, the majority of state emergency relief funding will be reimbursed by the and federal spending (described below) is for Federal Emergency Management Agency (FEMA) capital projects. (discussed below). State Historically Has Relied on Bond Funds Federal Government Also Undertakes Priority to Support Flood Projects… The PPIC review Projects and Supports Flood Emergency found that state funding made up about 17 percent Response and Recovery. PPIC estimated that of overall flood-related spending in California during federal funds made up about 9 percent of total the years studied. The state has often supported flood funding in the years studied. The federal its flood management programs with general government supports flood projects in California obligation bonds. For example, since 2000, voters in two main ways. have approved five different bonds that included • U.S. Army Corps of Engineers (USACE). a total of $5.7 billion for flood-related activities. USACE authorizes and undertakes capital These bonds are repaid over time, with interest, flood protection projects when authorized by from the General Fund. Congress, generally in partnership with state …And Turns to the General Fund, Particularly and local agencies, which are responsible When Bond Funds Are Not Available. Most of for providing the non-federal share of costs the funding available through currently authorized for these projects. When the state has bonds has already been committed or spent. entered a Project Partnership Agreement Figure 1 Recent State Funding for Flood Management at Department of Water Resources (In Millions) 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Bond funds $111 $99 $150 $285 $118 $15 $42 General Fund 2 295 — 50 434 289 300 Totals $113 $394 $150 $334 $552 $304 $342 www.lao.ca.gov 3 2024-25 BUDGET with USACE, it commits to providing the Capturing Flood Waters for amount of funding requested by USACE for Groundwater Recharge each phase of the specific project. In addition State Increasingly Using Flood Flows to constructing projects, USACE inspects in Beneficial Ways. As described earlier, in federally constructed levees for compliance addition to supporting the historical approach with federal standards, offers planning and to flood management (physical infrastructure to assistance during flood events, provides protect people and property), the state has been funding to repair flood-damaged levees, increasing its emphasis on multi-benefit projects. and establishes flood storage and release Besides providing flood protection and restoring standards for certain reservoirs. ecosystems and habitats, these projects also have • FEMA. FEMA operates the National the potential to recharge groundwater supplies. Flood Insurance Program, which includes Not only does groundwater recharge increase developing flood hazard maps that water storage (and thus supply), it also can aid in define flood risk, establishing floodplain addressing and reducing land subsidence. management standards, and offering federally SWRCB Issues Permits to Capture Flood backed insurance policies. It also provides Waters. When surface waters are intentionally coordination, assistance, and funding for diverted for the purpose of underground storage responding to and recovering from federally (and not solely for the purpose of preventing declared flood disasters. flooding), the diverter needs to apply to SWRCB for Federal Funds Will Help Pay For Damage a new water right permit or to change an existing From 2023 Storms. The administration expects water right permit. SWRCB issues both standard that FEMA will provide reimbursement for some diversion permits (which are longer term and less of the costs the state incurred responding to urgent) and temporary permits (which last for 2023 storms. For example, DWR indicates it has 180 days). During the 2023 storms, the Governor, applied for $9 million in reimbursement from FEMA under an emergency authority, issued an executive for flood emergency response work. In addition, order that temporarily streamlined authorization USACE allocated $52 million to DWR for repairs for diverting flood flows for groundwater recharge. to SPFC facilities that are part of USACE’s levee Specifically, the order suspended normal permit rehabilitation program. requirements for diverting flood flows under certain State Plan Estimates That Up to $30 Billion Is circumstances, such as when a local or regional Needed Over Next 30 Years for Flood Protection agency has given public notice that flows would in the Central Valley. The most recent update to otherwise create the risk of flooding downstream. the CVFPP, adopted in 2022, estimates that over In addition, the diverter could not claim a water right the next 30 years, a total of roughly $25 billion based on the diversion and recharge. As part of the to $30 billion will be needed for both ongoing 2023-24 budget package, the Legislature codified operations and maintenance as well as capital these provisions into statute to allow unpermitted construction and improvements on the SPFC diversion during emergency flood events. system. (For ongoing operations and maintenance, this amounts to about $315 million to $390 million annually.) The plan estimates these costs would be shared across the state ($16 billion), federal ($11 billion), and local ($3 billion) governments. 4 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET GOVERNOR’S PROPOSALS As shown in Figure 2, the Governor’s budget in 2023, it is required to pay an additional proposes $95.1 million in 2024-25 for flood-related $3 million to draw down full federal support. projects and activities. Of the total, $93.9 million • Repair Infrastructure at Mendota Wildlife is on a one-time basis from the General Fund, Area—CDFW ($13.1 Million). CDFW while $1.2 million is ongoing and supported by manages the state-owned Mendota Wildlife the Water Rights Fund. Area in Fresno County. The 2023 storms Flood Recovery Activities From 2023 Storms caused damage to infrastructure, including to ($29.6 Million Proposed as Early Action). the only bridge spanning the Fresno Slough. Although the state made several disaster-response The administration indicates that expenses emergency allocations across numerous related to the repair and replacement of departments throughout 2023 in response to infrastructure may ultimately be eligible for the storms—including a combined $115 million FEMA reimbursement. to DWR, SWRCB, and the California Department Urban Flood Risk Reduction Projects of Fish and Wildlife (CDFW)—entities across the ($33 Million). The Governor’s budget proposes state have incurred additional recovery costs. $33 million from the General Fund in 2024-25 for The Governor’s budget proposes $29.6 million to urban flood risk reduction projects carried out in cover some of these additional costs and requests collaboration with USACE. Of the total, $23 million that the Legislature take early action to provide is the required state share of cost and $10 million is these funds in the current year. Specifically, the for associated state operations costs. The specific request includes: projects, all of which are part of the SPFC, are • Repair Delta Levees to Protect displayed in the top of Figure 3 on the next page. State-Owned Land—DWR ($13.5 Million). Central Valley Systemwide Flood Funding would support levee repairs on four Risk Reduction Multi-Benefit Projects Delta islands owned by DWR: Meins Landing ($31.3 Million). The Governor’s budget proposes ($1.4 million), Sherman Island ($715,000), $31.3 million from the General Fund in 2024-25 Twitchell Island ($310,000), and Dutch through the Central Valley Systemwide Flood Slough ($1.2 million). It also would fund levee Risk Reduction Program for multi-benefit rehabilitation on McCormack Williamson projects that also are part of the SPFC. Tract ($7.6 million) and Grizzly Slough ($1.6 million). Another Figure 2 $677,000 would support Governor’s 2024-25 Flood Management Proposals associated state operations costs. DWR bears financial General Fund Unless Otherwise Noted (In Millions) responsibility for these levees Activity/Program Department Funding as the property owner. • Provide State Share of Cost Urban Flood Risk Reduction projects DWR $33.0a Central Valley Systemwide Flood Risk Reduction projects DWR 31.3 for Federally Supported Repairing Delta levees DWR 13.5b Levee Repairs—DWR Repairing infrastructure in Mendota Wildlife Area CDFW 13.1b ($3 Million). Through its levee State cost share for federally supported levee repairs DWR 3.0b Staffing to expedite groundwater recharge permits SWRCB 1.2c rehabilitation program, USACE Total $95.1 is helping fund repairs in the a Includes $10 million for state operations costs. Sacramento and San Joaquin b Proposed for early action. River Basins. While the state c Ongoing amount from the Water Rights Fund. provided an initial $10 million DWR = Department of Water Resources; CDFW = California Department of Fish and Wildlife; and SWRCB = State Water Resources Control Board. towards its share of cost www.lao.ca.gov 5 2024-25 BUDGET Figure 3 Flood Projects Supported by Proposed 2024-25 Funding General Fund Unless Otherwise Noted (In Millions) Estimated Proposed Total Project Future State Completion Project One-Time Funding Costa Funding Needb Date Urban Flood Risk Reductionc $23 $4,893 $378 Folsom Dam Raise $1 $476 — 2028 American River Common Features 1 1,230 $60 2027 West Sacramento Project 6 1,140 64 2034 Lower Cache Creek Project 1 323 77 2036 Lower San Joaquin Project 12 1,400 163 2038 Marysville Ring Levee Project 1 214 13 2029 Yolo Bypass Comprehensive Study 1 8 1 2040 Lathrop Manteca Feasibility Study 1 8 — 2038 Smith Canal Gate Projectd 1 94 2 2024 Central Valley Systemwide Flood Risk Reduction $31 $82 — Yolo Bypass Fix-in-Place $11 $51 — 2027 Upper Sacramento River Basin Projects (Kopta Slough)e 12 22 — 2026 Crows Landing Floodplain Restoration 9 9 — 2027 Totals $54 $4,974 $378 a Includes state, federal, and local shares of cost. b Source for any future state funding has not yet been determined. c U.S. Army Corps of Engineers (USACE) projects. Funding reflects state’s share of cost required by federal government to proceed with projects. d Project led by the state, but spending could be eligible for a credit toward the state share of cost on a future USACE project. e The Kopta Slough project likely will receive $10 million in federal funds from the Bureau of Reclamation. Note: Totals may not add due to rounding. These particular projects—also displayed in budget proposes $1.2 million in ongoing funding Figure 3—are state-funded, although one project from the Water Rights Fund and five new positions likely can also draw down $10 million in federal at SWRCB to expedite groundwater recharge funds from the Bureau of Reclamation. permits. Four positions would handle permitting, Staffing to Expedite Groundwater Recharge while one position would support administrative Permits ($1.2 Million Ongoing). The Governor’s hearings related to unresolved protests of water rights permit applications. ASSESSMENT Higher Bar for Considering Approval of New previously identified priority and requires finding Proposals Given General Fund Condition. The a commensurate level of solution somewhere Governor’s new flood-related proposals would within the budget. The Governor “makes room” commit the state to General Fund expenditures for proposed new spending on flood projects by of $94 million in 2024-25. Importantly, the state making reductions to funds committed for other currently is experiencing a significant budget programs, including many in the climate and natural problem, where General Fund revenues already resources areas. However, our office estimates that are insufficient to fund existing commitments. the administration’s revenue projections are overly In this context, every dollar of new spending optimistic and the budget deficit likely will exceed in the budget year comes at the expense of a the level of solutions included in the Governor’s 6 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET proposal, requiring the Legislature and Governor to located in these regions, the fiscal and identify additional actions to balance the budget. safety risks of failing to adequately protect Given the serious budget challenges this year, against flood damage and levee failures we suggest the Legislature apply a high bar to its are considerable. review of new spending proposals and be very • Leverage Significant Federal Funding. selective in approving any of them. Because these projects are conducted in Early Action Repairs Meet That Higher Bar. collaboration with USACE, they help to draw In our view, the Governor’s early action requests down significant federal funding—USACE meets this high threshold for justifying new covers up to 65 percent of a project’s cost. spending for three key reasons. First, the state is If the state fails to provide its cost share this financially responsible for repairing damage on year, USACE would halt the projects due state-owned land—in the Delta and in the Mendota to nonperformance and redirect funding to Wildlife Area—and is liable for levee failure. projects in other states. The administration In addition, the repair to Delta levees provides flood indicates that, were this to occur, reinstating protection to state-owned land and infrastructure. the projects with USACE would be difficult The costs associated with repairs at Mendota to impossible. Wildlife Area may eventually be reimbursable by • Not Acting Now Would Lead to Higher FEMA. Second, the state must provide its share Costs and Complications Later. USACE of costs to draw down federal levee rehabilitation supports high-priority projects for which program support. An additional $3 million is needed flood protection benefits outweigh associated for this purpose. Neglecting to provide this funding costs. (Under federal law, confirming a positive likely ultimately would result in even higher costs for cost-benefit evaluation is a prerequisite for the state—either to undertake the repairs on its own USACE to undertake any flood protection without federal support or to pay for the damage project.) That is, USACE has estimated that and recovery costs that might occur if the repairs the economic toll to recover from flooding are not made. Third, approving funding early will in these areas would be more costly than allow the repairs to be finished in the spring and paying for these flood protection projects now. summer, ahead of the next rainy season. Waiting Because of its special responsibility for SPFC to consider these proposals in the regular budget facilities in the Central Valley, the state could process could delay construction until spring of be liable for resulting repair and recovery 2025, increasing risks during the fall and winter. costs should the levees fail. Urban Flood Risk Reduction Projects Also • Pausing Projects Already Underway Meet That Higher Bar. In our view, the urban Would Be Highly Disruptive. Nearly all of flood risk reduction projects (including the state the proposed funding supports projects that operations activities required to support them) also already are underway. Stopping midstream meet this high threshold for justifying new spending would be disruptive; almost certainly for the reasons described below. would increase overall project costs; and, • Part of State’s Core Responsibilities in given USACE requirements, likely would Central Valley. The funding would support compromise the ability to finish the projects. projects that are part of the SPFC, which the Several Compelling Reasons for Proceeding state has the responsibility—and associated With Central Valley Systemwide Projects… liability—to maintain. Although the three projects in the Central Valley • Provide Critical Public Health and systemwide request are located in more rural areas Safety Benefits. These projects provide and the direct flood risk to people and property flood protection to people, properties, and therefore is lower as compared to the urban infrastructure in urban areas, defined as projects, we also find some compelling reasons for areas with more than 10,000 residents. proceeding with these projects. Given the significant population and assets www.lao.ca.gov 7 2024-25 BUDGET • Support Disadvantaged Areas That May for these Central Valley systemwide projects against Not Otherwise Be Protected. The three its other budget commitments. If the Legislature projects are located in economically believes these projects are a top priority and disadvantaged areas that likely do not have chooses to fund them, it likely will need to make sufficient local revenues (such as from additional reductions to other planned expenditures property assessments) to be able to pursue given the worsening budget picture. this work without state assistance. Funding State’s Responsibility for Flood • All Three Projects Are in Their Final Management Activities Will Be a Recurring Stages; Pausing Would Cause Disruption Issue. Given the state’s responsibility for and Increase Costs. The state already has maintaining levees in the Central Valley and the provided funding for the initial stages of these rising flood risks resulting from climate change, projects and completing them expeditiously the state will continue to face notable recurring therefore would maximize previous state costs associated with flood management—and, investments. Additionally, one of the likely, recovery—in the years to come. As such, the projects—Kopta Slough—likely will leverage Legislature will need to grapple with how to make $10 million in federal funding that the state room for these types of regular expenditures within could have to forgo if it fails to proceed with its annual budgets. In years when the General Fund the project. is not in a position to support these costs on a • Reduce Flooding Risk in the Delta. The Yolo pay-as-you-go basis, the Legislature could consider Bypass Fix-in-Place project includes two levee returning to the historical practice of relying on improvement projects located in the Delta. general obligation bond financing. Although One of the locations has been assigned a such bonds must be repaid (with interest) from risk-based assessment of “very high priority” the General Fund—increasing the overall cost of (the highest level) by the Delta Stewardship completing the project—in the near term, the annual Council, with the other rated as “high priority” cost of debt service is lower than paying up front (the council’s middle ranking). for the projects. Another consideration is the timing of when the funds would be available to support • Provide Notable Ecosystem and Habitat projects. Even if the Legislature were to pursue a Benefits. Each project is designed to provide bond containing flood funding, it would have to both flood protection as well as ecosystem wait for a statewide election, the proposal would and habitat benefits. For example, the Kopta have to be approved by voters, and the resulting Slough project would restore a river channel funds would not be available until after the election. and remove rock revetment, ultimately leading (As such, bond funds could not be available at the to restoration of 170 acres of salmon rearing beginning of the 2024-25 fiscal year to implement habitat on the Sacramento River. Similarly, the Governor’s proposals.) the Crow’s Landing project would restore a floodplain and provide 270 acres of salmon SWRCB Groundwater Permitting Unit Would habitat in the San Joaquin River basin. Expedite Floodwater Recharge Projects. We find These types of projects are key components that the proposal to increase staffing at SWRCB of the state’s strategy to meet its public has merit. Adding these positions would speed up trust responsibilities of protecting fish and the permitting process for groundwater recharge wildlife—which is particularly important given projects, which could both improve flood protection the serious risk of extinction that California’s and increase water supplies. Because the cost of native salmon populations currently face. these staff would be covered by permit application fees through the Water Rights Fund, approving …However, the General Fund Condition this proposal would not worsen the General Complicates This Decision. Despite these Fund condition. potential benefits, the Legislature will need to weigh the trade-offs associated with adding new spending 8 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET RECOMMENDATIONS Approve $29.6 Million for Early Action Approve Funding and Staffing for Repairs. We recommend the Legislature Groundwater Recharge Permitting. approve via early action the three proposals for We recommend the Legislature approve the request storm recovery and repairs. This funding would to provide $1.2 million from the Water Rights Fund support repairs to levees and other infrastructure and five new positions at SWRCB. Approval of on state-owned land, for which the state is this request would have no impact on the General responsible. The funding also would enable the Fund and should result in improved permitting state to draw down additional support from USACE. efficiencies at SWRCB, which in turn could lead to Some of the costs might be recoverable through increased flood protection as well as groundwater FEMA reimbursements. Approving the funding early recharge and water supply benefits. would allow the repairs to be made this spring and Develop Longer-Term Approach for Funding summer ahead of next fall’s rainy season. Recurring Flood Management Activities. Approve $33 Million for Urban Flood Risk Given the state’s role in flood management, the Reduction Projects and Associated State significant public safety and economic risks Operations. We recommend the Legislature associated with floods, and the state’s liability approve the proposed funding for these nine for Central Valley flood facilities that are part projects. This funding would support important of the SPFC, we recommend the Legislature activities that help protect public health and safety develop a longer-term approach for how to fund by lowering risks to flood-prone urban areas. recurring flood-related state costs. For example, These projects are part of the SPFC, making them the Legislature could build some General Fund a core state responsibility. In addition, funding the for these activities into its multiyear plans and projects would allow the state to leverage significant baseline budgets. Alternatively—or additionally— federal funding and avoid incurring additional costs the Legislature could consider asking voters to and complications. approve a general obligation bond that might Weigh Central Valley Systemwide Projects support several years of flood projects. While the Against Other General Fund Priorities. While we former approach would have lower costs over time find that these three projects also have merit and (as there would be no added interest charges), provide both flood protection and habitat benefits, the availability of General Fund resources likely given the General Fund condition, we recommend will be subject to revenue fluctuations and such the Legislature weigh these benefits against its expenditure plans could create budget pressures other budget priorities. If the Legislature chooses in certain years. In contrast, the latter approach to provide $31.3 million for these projects in would cost more overall, would not provide 2024-25, it likely will need to identify commensurate ongoing funding on a long-term basis, would be reductions in other areas to accommodate subject to voter approval, and would not make the spending. funding available immediately—however it would provide a source of funding over a shorter-term period that is less affected by downturns in state revenues and has less impact on the near-term General Fund condition. www.lao.ca.gov 9 2024-25 BUDGET 10 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET www.lao.ca.gov 11 2024-25 BUDGET LAO PUBLICATIONS This report was prepared by Sonja Petek and reviewed by Rachel Ehlers. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, California 95814. 12 LEGISLATIVE ANALYST’S OFFICE