The 2025-26 Budget: Proposition 4 Spending Plan

2025-26 BUDGET The 2025-26 Budget: Proposition 4 Spending Plan GABRIEL PETEK | LEGISLATIVE ANALYST | FEBRUARY 2025 SUMMARY Governor Proposes Multiyear Spending Plan to Implement Proposition 4. In November 2024, voters approved Proposition 4, a $10 billion bond measure focused on increasing the state’s resilience to the impacts of climate change. The Governor has proposed a multiyear spending plan to implement the bond, including appropriations totaling $2.7 billion in 2025-26. The Governor also proposes shifting some prior appropriations from the General Fund and Greenhouse Gas Reduction Fund (GGRF) to instead be supported by Proposition 4. Proposed Plan Has Several Merits but Also Comes With Some Trade-Offs. We find that the proposed spending plan generally strikes a balance between quick distribution of funds and thoughtful implementation of programs. In many cases, it phases in funding to account for program readiness and builds on the significant prior funding provided in recent budgets for similar activities. Adopting a multiyear plan would offer a more coordinated, strategic approach and provide more funding certainty to departments and grantees. Despite these advantages, such an approach would make enacting subsequent changes more difficult for the Legislature if its priorities shift or circumstances—such as new fires or droughts—warrant a possible change in focus and timing. In addition, a multiyear approach may not be suitable for all programs because it would limit opportunities for future legislative deliberation over spending choices—which is particularly concerning for activities that are new or not yet well defined. Administration Made Some Choices the Legislature Will Want to Review. Within some of the bond categories that have multiple allowable activities, the administration has selected the programs on which to target funding. In addition, the Governor’s decision to shift the fund source for some programs to Proposition 4 would reduce the total amount of spending on climate-related activities, although this approach would free up funds for other priorities. The Legislature will want to ensure that the administration’s choices align with its priorities. Recommend Legislature Adjust Proposed Plan as Needed to Ensure It Aligns With Legislative Priorities. We offer several suggestions to ensure Proposition 4 spending reflects the Legislature’s intent. First, we recommend the Legislature consider approving multiyear spending plans for existing and well-defined programs, but also consider requiring the administration to submit new budget requests in future years for programs that are new and less well-defined. Second, we recommend the Legislature consider clarifying spending guidance in statute for programs where bond language grants discretion around specific spending decisions. Third, we recommend considering requiring enhanced reporting to track how Proposition 4 spending is helping the state make progress toward its most important climate goals. Finally, we recommend the Legislature weigh fund shifts in the context of the overall budget and its highest priorities—if the budget condition requires General Fund reductions, such shifts may become important tools. www.lao.ca.gov 1 2025-26 BUDGET INTRODUCTION In July 2024, the Legislature approved the Legislature could refine the proposal to reflect Chapter 83 (SB 867, Allen), authorizing a $10 billion its priorities and increase transparency. bond measure entitled the “Safe Drinking Water, In subsequent sections, we then walk through Wildfire Prevention, Drought Preparedness, and how the Governor proposes to allocate and Clean Air Bond Act of 2024.” Largely designed implement funding within the bond’s eight spending to increase the state’s resilience to the impacts categories and describe some key issues the of climate change, the measure was placed Legislature might wish to consider. The major on the statewide ballot as Proposition 4 and Proposition 4 categories include: subsequently approved by voters in November. • Safe Drinking Water, Drought, Flood, and This bond measure builds on significant funding Water Resilience. for climate-related programs—principally from the • Wildfire and Forest Resilience. General Fund—the state made in recent years. • Coastal Resilience. This report begins with a discussion of Proposition 4, including background contextual • Biodiversity and Nature-Based information on recent funding augmentations from Climate Solutions. the General Fund and GGRF. It then provides an • Clean Energy. overview of the Governor’s proposed multiyear • Park Creation and Outdoor Access. spending plan, an overarching assessment of the • Extreme Heat Mitigation. proposal, and several recommendations for how • Climate Smart Agriculture. BACKGROUND Proposition 4 Authorizes $10 Billion in least 10 percent of total funds must go to General Obligation Bonds for Climate-Related projects that benefit severely disadvantaged Activities. Proposition 4 authorizes the state to communities. (Bond language specifies sell a total of $10 billion in general obligation bonds the criteria for communities to meet primarily for climate-resilience purposes, including these definitions.) related to water, wildfire, and energy, among • Funds must be prioritized for projects that others. The bond measure includes a number of leverage private, federal, or local funding or requirements to guide how funds are administered provide the greatest public benefit. and overseen by about 30 different state agencies, • On an annual basis, the California Natural departments, boards, commissions, conservancies, Resources Agency (CNRA) must report and offices. Much of the funding is to be provided information about projects’ objectives; status; as grants for eligible applicants including local anticipated outcomes; expected public agencies, nonprofit organizations, tribes, and benefits; and other basic information such as utilities. Remaining funding will support state-led location, cost, and matching funds. activities, such as addressing deferred maintenance Proposition 4 Supplements Significant and wildfire resilience activities at state parks and Recent Augmentations for Climate Resilience. projects at the Salton Sea. In addition, some key As shown in Figure 1, recent budgets included provisions apply to all programs and projects: a total of $29 billion in appropriated and planned • At least 40 percent of total funds must go to funding from 2021-22 through 2028-29 for climate projects that benefit vulnerable populations and environmental-related activities, including or disadvantaged communities and at 2 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET $17 billion from the General Fund, $10 billion from GGRF, and Figure 1 $2 billion in other funds. Initial Recently Approved and Planned Funding for plans for these funding packages Climate Packages, 2021-22 Through 2028-29 totaled $36.6 billion, primarily from the General Fund. However, (In Millions) when the state experienced a 2026-27 worsening budget condition, Prior Through Multiyear agreements in 2023-24 and Thematic Package Years 2025-26 2028-29 Totals 2024-25 made several adjustments Zero-Emission Vehicles $5,924 $1,176a $2,065 $9,165 to address General Fund shortfalls. Drought and Water Resilience 6,582 82 41 6,705 These included reductions, fund Energy 4,588 441 474 5,503 shifts to GGRF, and delays, Wildfire and Forest Resilience 2,525 10 88 2,623 Community Resilience 1,226 — 5 1,231 resulting in a net reduction Nature-Based Solutions 1,278 10 — 1,288 of $7.6 billion while retaining Coastal Resilience 613 — 37 650 nearly 80 percent of the original Sustainable Agriculture 1,073 7 — 1,080 Extreme Heat 297 — — 297 amounts planned. Proposition 4 Circular Economy 437 — — 437 supplements these funding Totals $24,541 $1,726 $2,709 $28,977 commitments, which represented a Does not reflect Governor’s new proposed reduction of $500 million for zero-emission school buses an unprecedented level of General in 2025-26. Fund spending on climate and environmental programs. DISCUSSION OF THE GOVERNOR’S OVERALL APPROACH Proposal distributed from 2025-26 through 2039-40. As shown in Figure 2, $2.7 billion (about 27 percent Proposes Multiyear Spending Plan, With of the total authorized by Proposition 4) would About One-Quarter of Funds to Be Provided be appropriated in 2025-26, including $1.1 billion in 2025-26. The Governor proposes a multiyear for water-related programs and $325 million for spending plan for Proposition 4 with funding Figure 2 Governor’s Proposition 4 Proposal: Multiyear Spending Plan (In Millions) 2028-29 Through Purpose Bond Total 2025-26 2026-27 2027-28 2039-40 Pending Safe Drinking Water, Drought, Flood, and Water $3,800 $1,074 $972 $819 $925 $10 Wildfire and Forest Resilience 1,500 325 376 214 496 89 Coastal Resilience 1,200 173 129 190 708 — Biodiversity and Nature-Based Climate Solutions 1,200 286 136 165 512 101 Clean Energy 850 275 229 3 21 323 Park Creation and Outdoor Access 700 286 117 42 23 231 Extreme Heat Mitigation 450 102 172 152 24 — Climate Smart Agriculture 300 134 84 15 7 60 Totals $10,000 $2,655 $2,215 $1,600 $2,716 $814 www.lao.ca.gov 3 2025-26 BUDGET wildfire and forest resilience. The share of the to enhance the natural resource values of the total amounts proposed for appropriation in state parks system and expand trail access. 2025-26 vary across each of the individual bond The administration has noted a few reasons for categories. For example, the budget proposes waiting to provide implementation plans for these to appropriate 45 percent of the total for climate programs. For example, regarding clean energy smart agriculture and a comparatively much transmission, the administration is awaiting the lower 14 percent for coastal resilience in 2025-26. results of a study being published this summer The Governor’s overall multiyear approach would pursuant to Chapter 762 of 2024 (AB 3264, build the proposed out-year funding amounts into Petrie-Norris) that will inform program development. departments’ baseline budget plans, subject to For several programs, the administration stated appropriation by the Legislature each year. That is, it is seeking further direction from the Legislature for most of the programs, the administration does about what it intended when drafting Proposition 4. not plan to submit discrete requests or specific Additionally, the administration indicates that it is budget change proposals in future years. still assessing staffing needs at departments for Proposals Within Several Bond Categories administering all Proposition 4-funded programs and for Staffing Are Still Pending. As shown and plans to provide more information about in Figure 3, spending decisions within several planned administrative expenditures from the bond programs remain pending. This includes and associated personnel this spring. $323 million for public financing of clean energy Shifts Some Prior General Fund and GGRF transmission projects, $139 million to reduce Appropriations to Proposition 4 Funds. The climate impacts on disadvantaged communities Governor’s budget proposes to shift $305 million and expand outdoor recreation, and $92 million in previously appropriated funding to Proposition 4 Figure 3 Governor’s Proposition 4 Proposal: Pending Allocations (In Millions) Implementing Purpose Department Bond Category Amount Salton Sea Conservancy or Salton Sea Authority TBD Water $10 Watershed improvement, forest health, biomass utilization, Wildfire Conservancy Wildfire 15 chaparral and forest restoration, and workforce development California Fire Foundation Wildfire 15 Fire ignition detection technology CalFire Wildfire 25 Reducing risk from electricity transmission TBD Wildfire 35 San Andreas Corridor Program WCB Biodiversity and NBS 79 Southern Ballona Creek Watershed WCB Biodiversity and NBS 22 Public financing of transmission projects TBD Clean Energy 323 Reducing climate impacts on disadvantaged communities and CNRA/CDFW Parks and Access 139 expanding outdoor recreation Enhancing natural resource values, expanding trail access CNRA/Others TBD Parks and Access 92 Increasing land access and tenure DOC Agriculture 30 Deployment of vanpool vehicles and related facilities CalVANS Agriculture 15 Research farms at postsecondary education institutions CDE Agriculture 15 Total $814 TBD = to be determined; CalFire = California Department of Forestry and FIre Protection; WCB = Wildlife Conservation Board; NBS = Nature-Based Solutions; CNRA = California Natural Resources Agency; CDFW = California Department of Fish and Wildlife; DOC = Department of Conservation; CalVANS = California Vanpool Authorty; and CDE = California Department of Education. 4 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET funds—$273 million from the Figure 4 General Fund and $32 million from GGRF. The affected Governor Proposes Shifting Some Prior Spending programs are shown in Figure 4. Commitments to Proposition 4 The administration indicates that Shifts from General Fund Unless Otherwise Noted (In Millions) this particular mix of programs was not based on policy priorities, Implementing Purpose Department Amount but rather on which programs had Safe Drinking Water, Drought, Flood, and Water Resilience available unspent General Fund Water recycling SWRCB $51 balances that could be reverted Dam safety DWR 47 and backfilled with Proposition 4. Systemwide flood risk reduction DWR 15 This proposal would free up Wildfire and Forest Resilience General Fund and GGRF, which the Stewardship of state-owned land Parks $68 Governor then proposes to redirect Home hardening CalOES 13 for other spending priorities within Extreme Heat Mitigation Community Resilience and Heat Program LCI $15 the overall budget. For example, Biodiversity and Nature-Based Climate Solutions the Governor’s budget proposal Watershed climate resilience WCB $32 includes new General Fund Park Creation and Outdoor Access spending such as $60 million Deferred maintenance Parks $14 for California Competes grants Clean Energy administered by the Governor’s Demand-Side Grid Support Program CEC $50a Office of Business and Economic Total $305 Development, $25 million for a Shifts support from the General Fund and Greenhouse Gas Reduction Fund to Proposition 4. These an augmentation to the Farm fund shifts would provide $50 million of previously unallocated Clean Energy Reliability Investment Plan funds to Demand Side Grid Support Program. to School program through the SWRCB = State Water Resources Control Board; DWR = Department of Water Resources; California Department of Food and Parks = Department of Parks and Recreation; CalOES = California Governor’s Office of Emergency Services; LCI = Governor’s Office of Land Use and Climate Innovation; WCB = Wildlife Conservation Agriculture (CDFA), and $25 million Board; and CEC = California Energy Commission. for a new local litter abatement program to be administered by of the APA and notes that previous resources the California Department of Transportation. bonds also have been implemented with a similar (We have posted a list of the Governor’s 2025-26 statutory exemption. discretionary General Fund proposals on our website.) The Governor proposes using the LAO Comments freed-up GGRF to help address a funding shortfall Legislature Crafted Proposition 4 Bond in the Motor Vehicle Account that supports the Measure to Reflect Its Funding Priorities. California Air Resources Board, California Highway The Legislature drafted Proposition 4 with some Patrol, and Department of Motor Vehicles. preferences in mind. These intentions are reflected Proposes Budget Trailer Bill Language to in choices about how much funding to dedicate to Exempt Spending From the Administrative particular purposes, which activities to support, Procedure Act (APA). The APA governs how state and which departments should undertake those agencies adopt regulations to implement state activities. They also are highlighted in the bond’s law. It requires that agencies provide the public requirements about targeting certain shares of with a meaningful opportunity to participate in funding to benefit vulnerable populations and the process and that the proposed regulations disadvantaged and severely disadvantaged undergo review by the Office of Administrative Law communities. In addition, the Legislature to ensure that they are clear, necessary, and legally made bond expenditures subject to annual valid. The Governor’s budget proposes to exempt legislative appropriation (rather than continuously Proposition 4 spending from the requirements appropriating the funds), which gives it the chance www.lao.ca.gov 5 2025-26 BUDGET to stay actively involved in directing funds to meet because it is confident sufficient demand its priorities. While the Governor’s administration exists for grantees already. (Its last round of presented a proposal for how to implement grant funding for a similar program had nearly Proposition 4—consistent with the traditional $2 billion in unfunded requests.) budget process—the Legislature should view • Phases in Funding Based on Program this as a starting place for determining the timing Readiness. Administering departments and details of funding allocations. Importantly, will use Proposition 4 funds for (1) planning, the Legislature has the opportunity to modify or administration, and oversight and (2) project recraft the Proposition 4 spending plan to align implementation. In some cases, the Governor with its priorities if aspects of the Governor’s proposes to wait to provide significant proposal do not reflect what it intended for project funding until after 2025-26 because bond implementation. departments may need to substantively Proposed Plan Has Several Merits. Given that update program guidelines or develop a new voters only approved Proposition 4 in November, program. For some of these programs, the the administration acted quickly to prepare a administration proposes to provide planning proposed spending plan. Having the proposal in funds in 2025-26 and the bulk of project January rather than later in the budget process implementation funding in subsequent years provides the Legislature and other interested once program details have been finalized. parties with more time to review the proposed For example, the State Water Resources course of action and consider all of the potential Control Board (SWRCB) would use $1.1 million options. Based on our initial review, the proposed in 2025-26 to update program guidelines and spending plan generally strikes a balance prepare a new solicitation for multi-benefit between quick distribution of funds and thoughtful urban stormwater projects. The Governor then implementation of programs. Positive aspects proposes to allocate project funding over the of the proposal that apply to most—though not following three years. necessarily every—bond category include: • Builds on Recent Funding and • Appears Consistent With Bond Program Development Efforts. Recent Requirements for Uses of Funds. Proposed budgets provided substantial funding for funding reflects the bond categories outlined climate-related activities similar to those in Proposition 4. In our review, we did not to be supported by Proposition 4. The identify any proposed actions that conflict with administration indicates that it will use bond requirements. activities undertaken with that funding to inform many proposed Proposition 4-funded • Phases in Funding to Account for activities. For example, the State Coastal Administrative Capacity. Based on our Conservancy (SCC) indicates that the recent initial review, in many cases the Governor influx of state funding led to more project proposes to distribute funding across years proposals from potential grantees than it had in a manner that accounts for differing funding to support. It therefore proposes to levels of departmental or grantee capacity. use $31 million from Proposition 4 for several For example, for its Regional Forest and of these shovel-ready projects in 2025-26 Fire Capacity Program, the Department of while also beginning to plan for future projects. Conservation would reserve most of the bond Similarly, the Governor’s Office of Land Use funding to be appropriated in 2027-28 and and Climate Innovation (LCI) would combine thereafter, in large part to give grantees more Proposition 4 with some remaining funds from time to develop effective project proposals. earlier appropriations to create a larger grant In contrast, the Department of Parks and cycle for its Extreme Heat and Community Recreation (Parks) is requesting essentially all Resilience Program in 2025-26. of the bond’s project implementation funding for the Statewide Park Program in 2025-26 6 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET • Waits to Make Funding Decisions in Cases or health. Nevertheless, the multiyear approach Where More Information Is Needed. In does have some important trade-offs that warrant certain cases, the administration appropriately careful consideration. defers funding decisions until essential Potential advantages of adopting a multiyear information becomes available. For example, spending plan include: for some programs the administration • Supports implementation of a more indicates that it will seek clarification on the coordinated, longer-term strategy. Achieving Legislature’s intent and wait to propose a climate goals requires thinking beyond a single spending plan until these discussions have budget cycle. taken place. For example, Proposition 4 • Provides more certainty to grantees and authorizes $79 million for the Wildlife state agencies, potentially allowing them to Conservation Board (WCB) to establish the plan projects, assess staffing needs, and San Andreas Corridor Program. WCB believes develop capacity to implement programs this allocation would benefit from additional more effectively. discussions with the Legislature before it designs an implementation plan. • Reduces certain inefficiencies and potential for extra workload tied to uncertain Proposed Multiyear Approach Has Important year-over-year appropriations, such as having Trade-Offs… As described above, rather than to delay projects midstream or prepare budget planning to request new funding allocations each requests annually for every single program. year, for all but a few programs the Governor’s budget presents a multiyear spending proposal Potential drawbacks of pre-approving funding that includes both 2025-26 appropriations plans for future years include: and planned amounts for future years (through • Increases the procedural burden to make 2039-40). (The Legislature still would need to modifications. Adopting a multiyear spending approve a given year’s spending amounts through plan does not preclude the Legislature the annual budget process.) Such a multiyear from making changes in a future year, as all spending approach has precedent for resources appropriations would be dependent upon bonds. For example, the administration proposed subsequent approval through the annual a similar multiyear plan to the Legislature in budget process. However, building spending 2019-20 for Proposition 68, the most recent prior plans into departments’ future baseline resources bond that was approved by voters in budgets means the Legislature would have to June 2018. The administration and Legislature take specific action to change the proposed also adopted a multiyear approach for the recent budget and deviate from the plan. climate packages originally proposed to be funded • Requires being proactive if the Legislature primarily by the General Fund. However, in that wanted to pivot and use Proposition 4 funds to case, spending plans ultimately required notable respond to evolving priorities or emergencies, revisions. Specifically, as the budget condition such as significant reductions in federal worsened, some of these funds were reduced funding or a wildfire, flood, or drought. Future or shifted to other funding sources (primarily Legislatures or governors could have different GGRF) to help resolve the budget deficit and priorities, but the previously approved plan make room for other state budget priorities. Future might limit the extent to which they can easily Proposition 4 spending is more stable and generally pursue alternative approaches. Changing does not face that risk since its language limits course from an established plan also could how funds can be used (only for the specified be challenging and potentially disruptive for climate-related and environmental purposes). administering departments and grantees with For example, the Legislature would not be able set expectations. to redirect Proposition 4 funds to backfill General Fund spending in other budget areas like education www.lao.ca.gov 7 2025-26 BUDGET • Reduces transparency. The administration resilience.” CalFire proposes to target all of the would not provide the Legislature with the funding towards just two of these activities— same level of information and detail each year defensible space (creating a new program) as it would if it had to request funding on a and reforestation. Similarly, within the coastal year-by-year basis. The Legislature would resilience section of the bond, Proposition 4 have to specifically ask for annual updates includes $75 million for CNRA and the California to understand whether the administration Department of Fish and Wildlife (CDFW) to is implementing programs with fidelity (1) protect and restore island ecosystems, to expressed intentions as it would not (2) advance climate-ready fisheries management, receive these on the natural through budget and (3) support the restoration and management change proposals. of kelp ecosystems. The Governor proposes that this funding be administered by CDFW for just …And Might Not Be Suitable for All one of these categories—fisheries management. Categories of Spending. For well-defined and The Legislature may or may not agree with these established programs, a multiyear spending plan choices, but for categories in which the bond leaves could make sense—Proposition 4 would essentially room for discretion over specific spending options, augment funding within the existing framework. the Legislature will want to ensure its priorities are In contrast, for bond categories and programs reflected in the final budget agreement. around which details are less certain—either Even for Established Programs, Oversight because the bond requirements are broad or the Will Be Important. The more well-established program is new—adopting a multiyear approach programs supported by Proposition 4 have could limit deliberation over important choices. less uncertainty about program design and In some such cases, the Legislature would be goals and are more likely to have existing approving out-year baseline funding without much mechanisms for assessing which projects should information about future program implementation. be funded. In addition, Proposition 4 requires For example, as we discuss in the “Biodiversity the administration to report a number of details and Nature-Based Climate Solutions” section annually about all of the projects supported by the later, the Legislature is being asked to pre-approve bond. Some departments also have other forms $688 million for WCB for 2025-26 and future years of reporting already built into their programs. For for broad purposes—to “protect and enhance fish example, CalFire maintains an incident reporting and wildlife resources and habitats and achieve dashboard, and the Salton Sea Management biodiversity, public access, and conservation Program presents updates annually to SWRCB, goals” within (but not limited to) any of ten specified prepares a yearly report, and maintains an online existing WCB programs—without knowing much project tracker. However, some programs—even about how it will be allocated or used. For cases those that are established—may have fewer such as these, the Legislature may want to avenues in place for reporting on specific activities. wait until the administration has more detailed In cases where the Legislature has particular implementation plans to share—and ensure interests, it could consider requesting more that it is comfortable with those plans—before user-friendly annual updates to help it monitor pre-approving a multiyear spending schedule. program implementation. These could include Proposal Reflects the Administration’s progress reports at annual budget subcommittee Preferences for How to Target Spending. hearings or additional reporting requirements for Within some of the overarching bond categories, specific programs and information added to budget Proposition 4 allows several options for how to or trailer bill language. For example, although spend funds. For example, Proposition 4 authorizes the Department of Water Resources (DWR) has $50 million to the California Department of well-defined flood management programs, the Forestry and Fire Protection (CalFire) “for grants Legislature could consider requiring a summary to conduct fuel reduction, structure hardening, each year about which specific projects supported create defensible space, reforestation, or targeted by Proposition 4 are underway. acquisitions to improve forest health and fire 8 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET Proposed Proposition 4 Spending Plan’s make their use more convenient, widespread, and Alignment With Specific Climate Goals Not effective? Evaluation of climate-related spending Fully Clear. Proposition 4 contains language that could help the state understand how to target future identifies specific climate-related problems that funds in a cost-effective manner. Proposition 4 bond funding should help address and articulates provides the chance for evaluation and learning, but goals—including some quantitative targets—that requires adequate data collection along the way. bond funding should help the state achieve. For Fund Shifts to Proposition 4 Reflect example, it mentions the Governor’s previously Administration’s Priorities, but Legislature’s released “California’s Water Supply Strategy,” May Differ. As highlighted earlier in Figure 4, the which outlines actions the administration estimates Governor’s proposal shifts support for previous would be needed to recycle and reuse at least commitments totaling $273 million from the 800,000 acre-feet of water per year by 2030. General Fund and $32 million from GGRF to The administration indicates that its proposed Proposition 4 funds. The result of the Governor’s Proposition 4 spending plan is designed to proposed fund shifts is threefold: it (1) maintains advance the various goals identified in its numerous previously planned amounts for existing activities, climate-related plans and strategies. However, the (2) frees up General Fund and GGRF resources to proposal does not fully describe the links between support other budget activities proposed by the those goals and individual spending decisions. administration, and (3) precludes this amount of For example, the proposal does not set a goal Proposition 4 funds from being used to expand for how many additional acre-feet of water will be or enhance upon previously planned activities. recycled because of Proposition 4 investments. For example, the Governor proposes to replace In addition, the administration has not explained $68 million of previously authorized General how its planned reporting will specifically evaluate Fund with Proposition 4 funds for stewardship progress toward such goals. Without these of state-owned land by Parks. This means that connections, the Legislature may have difficulty $68 million of Proposition 4 funding is not being assessing whether the funding effectively advances provided on top of previous funding for land the state’s climate objectives as expressed in the stewardship, but instead replaces those previous bond language. allocations. As noted earlier, the Governor uses the Given the challenges of adapting to climate freed-up funds for a number of other expenditures change, understanding which activities might be throughout the budget. Shifting fund sources in this more effective—and cost-effective—than others manner is both legal and allowable. However, the at achieving intended outcomes will be important proposed budget framework reflects the Governor’s for informing future spending. Slight modifications priorities, while those of the Legislature could differ. to reporting requirements or incorporation of For example, the Legislature might prefer to retain independent evaluations might help to address prior appropriations (thus making Proposition 4 these gaps. For instance, adapting to extreme additive) and choose to spend less General Fund heat is a relatively new and very significant climate and GGRF on other new activities as proposed by challenge the state is facing. Proposition 4 includes the Governor. Alternatively, the Legislature might funding for community resilience centers to address have spending priorities for the freed-up General the impacts of extreme heat. Because this is a Fund and GGRF that differ from the Governor’s. somewhat new activity, however, the state still lacks These considerations may become even more information regarding how effective this strategy is important if the budget condition deteriorates. at mitigating the threats that higher temperatures Given the risks and uncertainties surrounding state pose to public health, particularly compared to costs from recent fires, the availability of federal other approaches the state could take with the funding, and the state’s overall revenue condition, same objectives. For example, to what degree the Legislature may need to rely on Proposition 4 will people use these centers during extreme heat to free up General Fund or GGRF to help maintain events, and what features or components might existing high-priority baseline programs. www.lao.ca.gov 9 2025-26 BUDGET APA Exemption Seems Reasonable, Though Recommendations Legislature Could Add Measures to Increase While we have identified some positive Transparency. In our assessment, exempting attributes associated with the Governor’s overall Proposition 4 spending from APA requirements approach, we also raise some issues for the is reasonable for several reasons. First, this Legislature to consider to ensure the spending approach has past precedent. With previous bonds, plan it ultimately adopts is consistent with what it administering agencies still were able to maintain intended for Proposition 4. Below, we discuss our public processes for developing program guidelines recommendations to the Legislature, which we also despite this exemption. Second, the administration summarize in Figure 5. has committed to conducting a transparent process Ensure Spending Plan Reflects Legislative and providing opportunities for public participation Priorities. The administration’s proposal represents as it develops program guidelines. Third, an APA a reasonable starting point for implementing exemption could create some efficiencies. For Proposition 4. If the Legislature’s intentions example, certain existing programs only need minor and priorities differ in certain ways from what updates to current guidelines in order to align with the administration has proposed, however, we Proposition 4 language. Requiring them to undergo recommend that it modify the plan to reflect the full regulatory process would be protracted and its preferences. administratively burdensome. Fourth, exempting Tailor Approach to Differentiate Between bond spending from the APA would expedite Already Established and Less Well-Defined spending on climate programs. Despite these Programs. Although taking a more comprehensive advantages, the APA provides certain guarantees and multiyear approach to implementing about the rulemaking process and ensures that Proposition 4 has merit, the Legislature could uniform standards and procedures are followed, so consider tailoring the plan based on the degree exempting the bond from these requirements is not to which programs already are well established without trade-offs. For some of the newer programs or are well defined within the bond language. We supported by Proposition 4, some additional recommend the Legislature consider the following transparency measures may be warranted to overarching approach: ensure that the development of guidelines adheres to certain standards. For example, this could • For existing programs and programs that include adopting statutory language requiring that have well-defined implementation plans and the administering agencies take certain steps (such clearly defined activities that are consistent as fixed time lines for soliciting public comments) in with legislative intent and/or existing practices, their guideline development process. approve a multiyear plan. Request that the Figure 5 Summary of Recommendations for Proposition 4 Implementation 9 Ensure Spending Plan Reflects Legislative Priorities. 9 Tailor Approach to Differentiate Between Already Established and Less Well-Defined Programs. • For existing programs and programs with well-defined plans, approve a multiyear plan. • For new or less well-defined programs, require new budget requests in future years once plans are more refined. 9 Consider Clarifying Spending Guidance in Statute, Particularly When Multiple Options Are Allowed. 9 Consider Enhanced Reporting to Track Progress Toward Most Important Proposition 4 Climate Goals. 9 Weigh Fund Shifts in Light of Overall Budget and Legislative Priorities. 9 Approve Administrative Procedure Act Exemption, but Consider Adding Transparency Requirements for Program Development Processes. 10 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET administration provide user-friendly updates could specify how many more acres of land are about specific projects and activities for which being conserved each year as a result of projects the Legislature has a particular interest and supported by Proposition 4. To avoid adding feels existing reporting is not sufficient. undue reporting burdens for the administration, • For other programs—new programs, programs we recommend the Legislature be selective for which Proposition 4 provides more and focus any such requirements on the areas discretion around specific spending choices, for which additional information would be most programs for which additional information is helpful in informing future efforts. For a more still forthcoming, and programs with pending robust assessment of progress, particularly for allocations under the Governor’s proposal— new programs, the Legislature also could require require the administration to submit new independent evaluations of outcomes to identify budget requests in future years once plans are which activities are more effective in advancing more refined. This will allow the Legislature climate objectives. (While potentially very valuable, to deliberate on how these programs will be requiring evaluations likely would entail some implemented before appropriating funding. associated costs, so the Legislature will want to We highlight examples of such programs in be similarly selective and targeted in considering subsequent sections of this report. where such information would be most helpful.) Weigh Fund Shifts in Light of Overall Budget Consider Clarifying Spending Guidance in and Legislative Priorities. We recommend that Statute, Particularly When Multiple Options Are before making any decisions about proposed Allowed. When the bond language allows multiple fund shifts, the Legislature wait and see how the potential activities within a given category, we larger budget context evolves over the spring. recommend the Legislature ensure it understands For example, if the budget condition worsens, specifically what the administration is planning the Legislature may need this fiscal tool to help and request additional information if needed, such balance the budget and maintain existing base as during budget subcommittee hearings. The programs. A key consideration will be the degree to Legislature could then modify the proposal as which using Proposition 4 funds to add, enhance, needed based on its preferences. Regardless of or increase climate-related activities is a higher whether it generally approves of the administration’s priority than freeing up General Fund and GGRF to plans or wants to make its own modifications, we spend on other areas of the state budget, and the recommend the Legislature consider specifying comparative importance to the Legislative of those spending guidance in budget bill and/or trailer bill potential alternative expenditures. language to ensure the agreed-upon approach Approve the APA Exemption, but Consider is followed. Such language could be especially Adding Transparency Requirements for important in future years for programs where the Program Development Processes. We Legislature approves a multiyear spending plan recommend the Legislature approve the proposed in order to help it ensure that its expectations APA exemption, as such an action has precedence, are upheld. and likely would make bond implementation both Consider Enhanced Reporting to Track more efficient and expeditious. However, we Progress Toward Most Important Proposition 4 recommend the Legislature consider specifying Climate Goals. Proposition 4 requires that certain process-related requirements—such as CNRA provide annual information about each requiring proposed guidelines to be published funded project. We recommend the Legislature online and requiring public notifications, public consider requiring additional reporting about the meetings, and opportunities to provide public degree to which funded projects help the state comment—in budget bill or trailer bill language to reach the climate goals and targets articulated in ensure that the development of guidelines is public Proposition 4. For example, in light of the state’s and transparent. goal to conserve 30 percent of California’s lands and coastal waters by 2030, the administration www.lao.ca.gov 11 2025-26 BUDGET OVERVIEW OF SPECIFIC SPENDING CATEGORIES SAFE DRINKING WATER, These programs have well-established systems for assessing need, which in turn inform decisions DROUGHT, FLOOD, AND WATER about which projects to support. For example, DWR RESILIENCE conducts assessments of flood risk (particularly in the Central Valley where the state has liability for Proposal the State Plan of Flood Control), partners with—and Governor Proposes $1.1 Billion for leverages funding from—the federal government Water-Related Spending in 2025-26. As on certain critical flood management projects, shown in Figure 6, the Governor proposes to and relies on needs assessments from local appropriate $1.1 billion (28 percent) in 2025-26 reclamation districts and the Delta Stewardship from the $3.8 billion authorized by Proposition 4 Council to inform spending on levee improvements for safe drinking water, drought, flood, and water in the Sacramento-San Joaquin Delta. These resilience activities. The largest component of the established processes can give the Legislature 2025-26 proposal is $406 million for flood risk and some assurance that implementing departments stormwater management programs. The Governor will spend Proposition 4 funds strategically and on also would provide $194 million in 2025-26 for water vetted projects. Nevertheless, the Legislature could quality and clean, safe, and reliable drinking water consider requesting progress updates each year programs, including $11 million for tribal water ahead of budget subcommittee hearings on which infrastructure projects. Within the rivers, lakes, specific projects are being supported and are streams, and watershed resilience bond category proposed to be supported with Proposition 4 funds ($605 million total authorized by Proposition 4), to ensure spending is progressing as envisioned. the Governor proposes to allocate $191 million in No Clear Rationale for Different Spending 2025-26. Most of that funding is for projects led by Periods for Tribal Projects as Compared the Salton Sea Management Program. No funding to Other Drinking Water Projects. SWRCB is yet proposed for the creation of the Salton Sea administers all drinking water projects, including Conservancy as required by Chapter 771 of 2024 tribal water infrastructure projects, through the (SB 583, Padilla), however, the administration same programs. However, the Governor’s proposed indicates that it plans to submit a related proposal budget bill language imposes shorter spending later this spring. The Governor’s budget includes periods (for encumbrance and liquidation) for funding in 2025-26 for about a dozen programs tribal water projects than for other drinking water to support planning efforts and development projects. Specifically, while tribal projects would be of program guidelines—including for urban given three years for encumbrance and six years stormwater management and brackish desalination for liquidation, other drinking water projects would programs—with plans to wait until later years to be given five years and eight years, respectively. fund project implementation. The administration indicates it based the length LAO Comments of the spending periods on the amount of funding being provided to a program (for example, giving Proposed Flood Management and Drinking longer periods for programs with larger total Water Spending Responds to Demonstrated amounts of funding), rather than on programmatic Needs and Timing Reflects Program Capacity considerations. Given that SWRCB administers all and Plans. The Governor’s proposals for flood drinking water funds through the same programs, management ($173 million in 2025-26) and drinking we do not find a strong rationale for requiring that water programs including a separate subprogram tribal entities complete their drinking water projects for tribal projects ($194 million in 2025-26) will on a more expedited time line than other grantees. be administered through existing programs. 12 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET Figure 6 Governor’s Proposition 4 Proposal: Safe Drinking Water, Drought, Flood, Water (In Millions) 2025-26 Proposed Code Implementing Bond Percent of Purpose Section Department Total Amount Bond Totala Water Quality, Safe Drinking Water $610 $194 32% Water quality, safe drinking water 91011(a) SWRCB $585 $183 32% Tribal water infrastructure 91011(a)(8)(B) SWRCB 25 11 45 Flood Risk, Stormwater Management $1,140 $406 36% Sacramento-San Joaquin Delta levees 91021(a) DWR $150 — — Flood Control Subventions Program 91021(b) DWR 150 $110 74% State Plan of Flood Control projects 91021(c) DWR 250 63 25 Dam Safety and Climate Resilience Local Assistance 91022 DWR 480 232 49 Urban stormwater management 91023 SWRCB 110 1 1 Rivers, Lakes, Streams; Watershed Resilience $605 $191 32% Integrated regional water management 91031 DWR $100 $0.5 0.5% Los Angeles River Watershed—Lower 91032(a) RMC 40 0.6 2 Los Angeles River Watershed—Upper 91032(b) SMMC 40 15 39 Riverine Stewardship Program 91032(c) DWR 50 0.1 0.2 Santa Ana River Conservancy Program 91032(d) SCC 25 10 40 Urban Streams Restoration Program 91032(e) DWR 25 0.3 1 Wildlife refuges and wetland habitat areas 91032(f) CNRA 25 0.2 1 Lower American River Conservancy Program 91032(g) WCB 10 3 30 Coyote Valley Conservation Program 91032(h) SCC 25 3 12 West Coyote Hills Program 91032(i) SCC 25 — — California-Mexico rivers and coastal waters 91032(j) SWRCB 50 9 19 Clear Lake Watershed 91032(k) CNRA 20 0.1 1 Salton Sea Management Program 91033(a) DWR/CNRA 160 148 93 Salton Sea Conservancy or Salton Sea Authority 91033(b) TBD 10 —b — Streamflow Enhancement Program $150 $31 21% Streamflow Enhancement Program 91040(a) WCB $100 $21 21% Habitat Enhancement and Restoration Program 91040(b) WCB 50 11 21 Other $1,295 $252 20% Groundwater management 91012(a) DWR $386 $10 3% Multibenefit Land Repurposing Program 91013 DOC 200 12 6 Water reuse and recycling 91014 SWRCB 386 153 40 Water Storage Investment Program 91015 CWC 75 74 100 Brackish desalination, salinty management 91016 DWR 63 0.2 0.3 Water data management, stream gages 91017 SWRCB/DWR 15 1 7 Regional conveyance projects and repairs 91018 DWR 75 0.7 1 Water conservation—agricultural and urban 91019 DWR 75 0.3 0.5 Nature and climate education and research 91045 CNRA 20 0.1 1 Totals $3,800 $1,074 28% a Percent of total available funding after accounting for estimated statewide bond costs (which the Governor estimates at less than 1 percent). b The Governor indicates a proposal is forthcoming this spring. SWRCB = State Water Resources Control Board; DWR = Department of Water Resources; RMC = San Gabriel and Lower Los Angeles Rivers and Mountains Conservancy; SMMC = Santa Monica Mountains Conservancy; SCC = State Coastal Conservancy; CNRA = California Natural Resources Agency; WCB = Wildlife Conservation Board; TBD = to be determined; DOC = Department of Conservation; and CWC = California Water Commission. www.lao.ca.gov 13 2025-26 BUDGET Moreover, this could disadvantage tribes that completed, with another approximately 15,000 cannot spend the funds as quickly. The Legislature acres currently undergoing planning or permitting.) could consider modifying the proposed budget bill While the Governor’s budget did not include a language to align the spending periods for tribal proposal to create the Salton Sea Conservancy, the and other drinking water projects. administration indicates that it plans to present one For New and Modified Programs, Legislature this spring. Could Require More Detailed Proposals Before The Governor’s proposal for project funding Signing Off on Future Years’ Spending. For seems reasonable. It will support three projects that a number of programs, departments still are in are about ready to start construction in furtherance the process of scoping the program or revising/ of the state’s goals at the Salton Sea. However, updating guidelines (such as for programs that given the priority the Legislature placed on creation have not received funding in recent years). These of a Salton Sea Conservancy through its approval include urban stormwater management (SWRCB), of Chapter 771, the short time line for completing regional conveyance projects and repairs (DWR), projects by 2028, and the serious public health water conservation in agricultural and urban risks posed by the receding Sea, the Legislature areas (DWR), and climate education and research likely will want to monitor these issues closely. (CNRA). The Governor proposes to provide funding in 2025-26 for program planning and then fund WILDFIRE AND project implementation in later years, which is a FOREST RESILIENCE reasonable approach. However, the proposal is asking the Legislature to sign off on the proposed Proposal multiyear funding plan now even though it provides Governor Proposes Appropriating About limited information about how those future funds One-Fifth of Wildfire Funding in 2025-26. will be spent. Given the current planning stages of Proposition 4 includes a total of $1.5 billion these programs, the Legislature could require the for a variety of activities related to wildfire and administration to submit more detailed proposals forest resilience. Figure 7 provides detail on when project funding is requested in the future. how the Governor proposes to appropriate This would allow the Legislature to review proposed $325 million—22 percent—of this total in 2025-26. implementation plans and determine if they align As shown, the largest category of funding with its priorities before agreeing to the timing of proposed for the budget year is $82 million for when project funding will be provided. the forest health program. The administration’s Proposal for Forming the Salton Sea plan would allocate most of the rest of the wildfire Conservancy Forthcoming. Proposition 4 and forest resilience funding over the next five includes two amounts for Salton Sea-related years—including $375 million in 2026-27—with activities—$160 million for projects and smaller amounts of funding for program delivery $10 million to create the Salton Sea Conservancy. and administration continuing in subsequent The conservancy will operate and maintain years. The Governor’s implementation plan does projects undertaken around the Salton Sea to not yet include an appropriation time line for three mitigate the harmful effects of toxic air pollution bond-specified activities: watershed improvement resulting from the water receding. The Governor funding for the Wildfire Conservancy and California proposes to allocate nearly all of the project Fire Foundation, both of which are specified funding ($148 million) to DWR in 2025-26 to recipients in Proposition 4 but have not yet been commence construction on three projects totaling established; fire ignition detection technology; approximately 4,900 acres. (The state’s current and reducing risk from electricity transmission. As Salton Sea ten-year plan requires completion of highlighted earlier in Figure 3, the administration habitat restoration or dust mitigation projects indicates it will develop a funding plan for these on 29,800 acres by the end of 2028. Thus far, activities pending discussions with the Legislature. fewer than 3,000 acres of projects have been 14 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET Figure 7 Governor’s Proposition 4 Proposal: Wildfire and Forest Resilience (In Millions) 2025-26 Proposed Code Implementing Bond Percent of Purpose Section Department Total Amount Bond Totala Wildfire Mitigation Grant Program 91510 OES $135 $9 7% Regional Forest and Fire Capacity Program 91520(a) DOC 185 6 3 CalFire 128 60 47 Regional projects 91520(b) SNC 43 20 46 Forest health program 91520(c) CalFire 175 82 47 Local fire prevention grants 91520(d) CalFire 185 59 32 Fire training center 91520(e) CalFire 25 3 10 Forest health and watershed projects 91520(f) Parks 200 33 17 Fuel reduction, structure hardening, defensible space, 91520(g) CalFire 50 10 20 reforestation, acquisitions 91520(h) SNC 34 — — 91520(i) TC 26 0.7 3 91520(j) SMMC 34 10 31 Watershed improvement, forest health, biomass utilization, chaparral and forest restoration, and 91520(k) SCC 34 5 15 workforce development 91520(l) RMC 34 3 9 91520(m) SDRC 26 3 12 91520(n) WC 15 — — 91520(o) CFF 15 — — Infrastructure for vegetative waste 91530 DOC 50 11 21 Fire ignition detection technology 91535 CalFire 25 — — Reducing risk from electricity transmission 91540 TBD 35 — — Demonstrated jobs projects 91545(a) CCC 50 10 20 Totals $1,500 $325 22% a Percent of total available funding after accounting for estimated statewide bond costs (which the Governor estimates at less than 1 percent). OES = Governor’s Office of Emergency Services; DOC = Department of Conservation; CalFire = Department of Forestry and Fire Protection; SNC = Sierra Nevada Conservancy; Parks = Department of Parks and Recreation; TC = Tahoe Conservancy; SMMC = Santa Monica Mountains Conservancy; SCC = State Coastal Conservancy; RMC = San Gabriel and Lower Los Angeles Rivers and Mountains Conservancy; SDRC = San Diego River Conservancy; WC = Wildfire Conservancy; CFF = California Fire Foundation; TBD = to be determined; and CCC = California Conservation Corps. LAO Comments raise significant concerns. Such programs include forest health, local fire prevention grants, and Some Programs Represent Continuations of resilience activities overseen by Parks and state Existing Activities… Several of the wildfire-related conservancies. In two examples—the Wildfire spending categories included within Proposition 4 Mitigation Grant Program (WMGP) and the Regional represent existing state programs. For such Forest and Fire Capacity (RFFC) Program—even programs, less new decision-making exists though the bond funds are available for existing around how the program will operate or funds programs, the administration proposes providing will be spent as compared to new programs the a relatively small amount of funding in 2025-26, bond is establishing for the first time. Moreover, instead allocating the bulk of the funds across the administration does not need to create new the subsequent five years. The administration program guidelines, demand for funding likely indicates this is because it plans to make some already exists as potential grantees are aware revisions to how it administers these two programs of the program, and administering departments and potential grantees still are in the process should be able to allocate funding for projects of developing projects so it does not anticipate relatively quickly. As such, appropriating a needing larger appropriations until a future year. comparatively larger amount of Proposition 4 funds in the first year of implementation does not www.lao.ca.gov 15 2025-26 BUDGET …But The Legislature Still Could Seek to forest health program provides funding for fuel Guide Spending Priorities. Even for established reduction, and CalFire indicates it is not aware wildfire-related programs, if the Legislature has of land available for acquiring), the Legislature particular spending priorities, it could guide the may have written the Proposition 4 language administration’s implementation through adopting as flexibly as it did to preserve the ability statutory direction. For example, the Legislature to spend these funds across a wider range could direct CalFire to administer the forest of activities, despite the availability of other health funding based on a certain set of priorities, funds. As another example, section 91520(d) such as related to location in the state, land provides $185 million that can be used for fire ownership, or type of project (such as prescribed prevention grants or workforce development fire as compared to forest thinning). Similarly, it activities. The administration proposes using could direct the RFFC program to ensure funded $180 million for the former and $5 million for projects focus on key state priorities (please the latter, which may or may not align with see our 2021 report, An Initial Review of the legislative priorities. Finally, section 91520(e) Regional Forest and Fire Capacity Program, for provides $25 million for the creation or specific suggestions). expansion of a CalFire training center with no Certain Bond Categories Allow for Significant further details specified in the bond language. Discretion, and Legislature May Have Different The department proposes using $20 million Priorities Than Administration. Proposition 4 also for projects at its existing Ione Training Center includes funding for two groups of wildfire-related and $5 million to establish a “Prescribed Burn activities that allow for significantly more discretion Learning Hub” website. around how exactly the funds might be used. • Administration Would Design While the administration’s proposed plan seems Implementation Details for New Programs. reasonable, the Legislature may have had a In some cases, Proposition 4 would fund different approach in mind when it drafted the activities for the first time but does not provide bond language. If this is the case, it may want to significant detail or guidance within the modify the administration’s proposals based on bond language. As such, absent additional these considerations. statutory direction from the Legislature, the administration is left with significant • Administration Selected Its Priorities From discretion over designing implementation Among a Number of Allowable Activities. details and how specifically funds will In a few instances, Proposition 4 lists a be used. This includes the new regional number of different activities for which specific projects funding and defensible space categories of wildfire funding could be used, program. If the Legislature had specific and the administration is only choosing to intentions, ideas, or priorities around these fund some of them. The Legislature may want programs as it designed the bond, it may to fund a different mix of activities and/or want to further clarify this guidance for allocate funding differently across them. For CalFire through trailer bill language or policy example, Section 91520(g) states that a total legislation. For both of these programs, the of $50 million can be used for fuel reduction, administration is proposing appropriating structure hardening, defensible space, funding and beginning implementation in reforestation, or targeted land acquisitions. 2025-26. Additionally, the Legislature could CalFire is proposing to allocate half of this provide direction to the administration funding to create a new defensible space grant around how it would like to design programs program and the other half for reforestation which the Governor has identified as still grants, and no funding for the other allowable pending, such as to reduce the fire risk from activities. While the department has some electricity transmission. rationale for its approach (for example, WMGP funds are available for structure hardening, the 16 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET COASTAL RESILIENCE the $135 million authorized for OPC for projects to increase ocean and coastal resilience, the proposal Proposal would provide $7.5 million in 2025-26, while waiting Governor Proposes Appropriating 14 Percent to allocate more significant project implementation of Coastal Resilience Funding in 2025-26. funding until 2027-28. The proposed timing reflects Proposition 4 authorizes $1.2 billion for coastal current funding availability and demand. OPC has resilience activities led by SCC, the Ocean $46 million still available and unspent from recent Protection Council (OPC), Parks, and CDFW. Proposition 68 and GGRF funds the Legislature As shown in Figure 8, the Governor proposes already appropriated. Because it has identified appropriating $173 million (14 percent) of total more than $50 million in priority projects, OPC funding for various coastal resilience purposes in would use the $7.5 million from Proposition 4 in 2025-26, such as coastal and flood management 2025-26 together with its existing funds to help ($33 million) and implementing Chapter 236 of support these projects. 2021 (SB 1, Atkins) to support local sea-level rise While both Parks and SCC also have projects planning ($20 million). The Governor’s plan would lined up that are ready to be funded in 2025-26, allocate remaining coastal resilience bond funding neither has significant amounts of funding over the next decade, including $129 million remaining from previous appropriations and in 2026-27. therefore each is requesting comparatively larger amounts from Proposition 4 in the budget LAO Comments year—$24 million and $31 million, respectively. Proposed Time Lines Reflect Appropriate However, the Governor’s multiyear spending plan Considerations About Project Readiness, would take a different approach for each of these Staffing Capacity, and Availability of Existing two departments in the out-years, reflecting their Funds. For each of the proposed 2025-26 unique considerations. From the total of $50 million allocations and multiyear time lines within the available in Proposition 4 for implementing Parks’ coastal resilience bond category, the Governor’s Sea Level Rise Adaptation Strategy, the multiyear budget appears to reasonably account for project proposal would provide a small amount of planning readiness, staffing capacity, the availability of funds in 2026-27 to scope more complex projects, existing funds, and grant cycles. For example, of and then provide the final $24 million for project Figure 8 Governor’s Proposition 4 Proposal: Coastal Resilience (In Millions) 2025-26 Proposed Code Implementing Bond Percent of Purpose Section Department Total Amount Bond Totala Coastal resilience projects and programs 92010(a) SCC $330 $31 9% San Francisco Bay programs 92010(b) SCC 85 20 24 Coastal/flood management for developed shoreline 92015 SCC 350 33 9 Ocean and coastal resilience 92020 OPC 135 8 6 Implementation SB 1 92030 OPC 75 20 27 Implementing Sea Level Rise Adaptation Strategy 92040 Parks 50 24 48 Island ecosystems; fisheries; kelp ecosystems 92050 CDFWb 75 24 32 Dam removal and water infrastructure 92060 SCC 75 9 11 Hatchery upgrades, Central Valley Chinook salmon 92070 CDFW 25 5 20 Totals $1,200 $173 14% a Percent of total available funding after accounting for estimated statewide bond costs (which the Governor estimates at less than 1 percent). SCC = State Coastal Conservancy; OPC = Ocean Protection Council; SB 1 = Chapter 236 of 2021 (SB 1, Atkins); Parks = Department of Parks and Recreation; CDFW = California Department of Fish and Wildlife; and CNRA = California Natural Resources Agency. www.lao.ca.gov 17 2025-26 BUDGET implementation in 2027-28. For SCC’s coastal BIODIVERSITY AND resilience funding ($330 million total Proposition 4 NATURE-BASED CLIMATE funds), the proposal would allocate about SOLUTIONS 10 percent each year for the next decade. SCC indicates that it took two main factors into account Proposal in proposing a steady distribution of funds over Governor Proposes Appropriating 24 Percent a longer time frame: departmental capacity and of Biodiversity and Nature-Based Climate uncertainty about whether it would receive General Solutions Funding in 2025-26. Proposition 4 Fund over the coming decade. includes a total of $1.2 billion for a variety of By contrast, the Governor’s budget would activities related to supporting biodiversity and provide nearly all of SCC’s funding for dam removal nature-based climate activities. As shown in and related water infrastructure ($75 million) over Figure 9, the Governor proposes to appropriate just three years, with most in 2026-27 and 2027-28. $286 million—24 percent—of this total in 2025-26. This decision reflects the schedule and budget for The largest category of funding proposed for the one major project SCC proposes to support 2025-26 is $176 million for WCB to support with the funding—removal of the Matilija Dam (which projects that protect and enhance fish and wildlife has numerous funding partners and an established resources and habitats. The administration’s plan schedule for sediment release, dam removal, and would allocate the rest of the funding over the site restoration). next 12 years—including $135 million in 2026-27. One of CDFW’s Allocations Reflects The Governor’s implementation plan does not yet Administration’s Priority Activity, but include an appropriation time line for two bond Legislature Could Provide Statutory Direction activities: (1) the San Andreas Corridor Program if It Has Different Intentions. Proposition 4 ($80 million) and (2) the Southern Ballona Creek authorizes $75 million for CNRA and CDFW watershed ($22 million). to (1) protect and restore island ecosystems, (2) advance climate-ready fisheries management, LAO Comments and (3) restore and manage kelp ecosystems. Proposal Allocates Conservancy Funding The Governor proposes to have CDFW administer Based on Various Factors. Proposition 4 allocates all of this funding and to use it for only the specific amounts to various state conservancies second purpose—fisheries management. (CDFW for the purposes of reducing climate change notes that OPC will provide some support impacts on communities, fish and wildlife, and for kelp ecosystems with one of its separate natural resources, as well as increasing public allocations.) The administration’s proposed access. The proposal distributes funding to activities—including salmon monitoring through the conservancies over the multiyear period at parental-based tagging and cohort reconstruction, differing rates. For example, some conservancies undertaking new approaches for data collection are scheduled to receive the majority of their and resource management, and expanding the funding in 2025-26, while the Governor proposes Whale Safe Fisheries Program—could all provide to provide appropriations for others over a more valuable information to help to improve fisheries extended period. In determining the budget-year management. However, given the Legislature and multiyear allocation schedule for each included three different categories of activities in its conservancy, the administration indicates that it drafting of Proposition 4, it may have had a different utilized the following factors: (1) current staffing set of actions and priorities in mind for these funds. capacity, (2) the amount of uncommitted funds If that is the case, the Legislature may wish to from previous budget packages, and (3) the provide additional direction in budget bill language number of shovel-ready projects to be supported to ensure its objectives are met. with bond funding. Overall, we find this to be a reasonable approach that provides funding in a targeted manner. While the bond language 18 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET Figure 9 Governor’s Proposition 4 Proposal: Biodiversity and Nature-Based Climate Solutions (In Millions) 2025-26 Proposed Code Implementing Bond Percent of Purpose Section Department Total Amount Bond Totala Fish and Wildlife Resources and Habitats $870 $197 23% Fish and wildlife resources and habitats 93010 WCB $668 $176 27% Wildlife crossings and corridors 93030 WCB 100 21 21 San Andreas Corridor Program 93030 WCB 80 — — Southern Ballona Creek Watershed 93050 WCB 22 — — Climate Change Risk Reduction and Public Access b $320 $80 25% Baldwin Hills Conservancy 93020(a)(1) $48 $13 27% California Tahoe Conservancy 93020(a)(2) 29 5 19 Coachella Valley Mountains Conservancy 93020(a)(3) 11 2 21 Sacramento-San Joaquin Delta Conservancy 93020(a)(4) 29 0.3 1 San Diego River Conservancy 93020(a)(5) 48 8 17 San Gabriel and Lower Los Angeles Rivers and Mountains 93020(a)(6) 48 10 22 Conservancy San Joaquin River Conservancy 93020(a)(7) 11 5 49 Santa Monica Mountains Conservancy 93020(a)(8) 48 25 53 Sierra Nevada Conservancy 93020(a)(9) 48 10 21 Tribal Nature-Based Solutions $10 $9 95% Tribal Nature-Based Solutions Program 93040 CNRA $10 $9 95% Totals $1,200 $286 24% a Percent of total available funding after accounting for estimated statewide bond costs (which the Governor estimates at less than 1 percent). b The applicable conservancy under “Purpose” is the implementing department. WCB = Wildlife Conservation Board and CNRA = California Natural Resources Agency. around these funds is relatively broad and grants under this bond section. However, WCB has not yet significant discretion over spending decisions to determined how it will distribute the funds across each conservancy’s board, such an approach is the eligible programs. The board plans to make consistent with how the state has allocated prior these allocations based on its 2025-2030 strategic bond and General Fund allocations. The Legislature plan, which it expects to finalize in summer 2025. could maintain this historical practice—as the It intends to use the strategic plan to help guide administration proposes—or provide more specific bond spending over the next five years. While spending guidance through budget bill language such an approach has some merit in that it should if it has particular goals it wants to ensure this help make allocations more coordinated and funding achieves. strategic, the board’s plan may not exactly reflect WCB Plans to Allocate Funding Based on the priorities the Legislature had in mind when Upcoming Strategic Plan, but Legislature May designing the bond. The Legislature may want Want to Provide Statutory Guidance. to provide statutory guidance now on how the Proposition 4 includes funding to support grant board should prioritize funding across the eligible programs that protect and enhance fish and wildlife programs. Moreover, if the strategic plan will not resources and habitats. The proposition lists ten be adopted until partway through the coming fiscal eligible programs that could be used to administer year, whether the board can expend $176 million this funding category. (We note that funding is not in 2025-26 may be questionable. The Legislature only limited to these programs.) The administration’s could consider waiting to appropriate more of this proposal includes $176 million in the budget year funding until a future year after it has a chance to for the board to begin awarding funding to projects review WCB’s strategic plan and funding intentions. www.lao.ca.gov 19 2025-26 BUDGET Proposal Includes Two Funding Categories go to the Demand Side Grid Support (DSGS) Where Administration Is Seeking Additional Program, which supports load reduction and Statutory Guidance. As mentioned above, the backup generation efforts to increase electric Governor’s implementation plan does not yet grid reliability during extreme weather events. include an appropriation time line for two bond The Governor’s implementation plan does not yet activities: (1) the San Andreas Corridor Program include a time line for appropriating the $325 million and (2) the Southern Ballona Creek watershed. reserved for public financing of electricity The administration has indicated that it is seeking transmission infrastructure. additional legislative input on how to administer Proposes Fund Shifts and Specific Allocation these funds, so the Legislature will have the Related to the Clean Energy Reliability opportunity to help develop statutory guidance for Investment Plan (CERIP). The Legislature these programs. For example, the Legislature could established CERIP through Chapter 239 of 2022 consider specifying program priorities, design (SB 846, Dodd) to support various activities features, and/or project selection criteria. aimed at helping the state reach its clean energy goals. Chapter 239 stated an intention CLEAN ENERGY to provide a total of $1 billion over multiple years for implementing CERIP, but deferred decisions Proposal on which specific activities would be funded Governor Proposes Appropriating About and when to future budget deliberations. The One-Third of Energy Funding in 2025-26. 2024-25 budget agreement made some revisions Proposition 4 includes a total of $850 million for to the planned schedule and fund sources for activities related to clean energy. As shown in CERIP implementation, including intent to provide Figure 10, the Governor proposes to appropriate $50 million from GGRF for to-be-determined roughly one-third of this total—$275 million—to the activities in 2025-26. The Governor’s budget California Energy Commission (CEC) in 2025-26. includes three CERIP-related proposals in 2025-26: Most of the funding proposed for 2025-26— (1) allocates the planned $50 million CERIP funding $228 million—would support port infrastructure specifically for DSGS, (2) shifts $18 million in needed for the development of wind turbines off 2024-25 DSGS funding from the General Fund the California coast. (The administration’s plan to Proposition 4, and (3) shifts $32 million of the would allocate essentially all the remaining funding planned 2025-26 CERIP funding (now specified to for offshore wind in 2026-27.) The rest of the be used for DSGS) from GGRF to Proposition 4. 2025-26 proposed funding—$47 million—would Figure 10 Governor’s Proposition 4 Proposal: Clean Energy (In Millions) 2025-26 Proposed Code Implementing Bond Percent of Purpose Section Department Total Amount Bond Totala Public financing of transmission projects 94520 TBD $325 — — Demand Side Grid Support Programb 94530 CEC 50 $47 93% Development of offshore wind generation 94540 CEC 475 228 48 Totals $850 $275 32% a Percent of total available funding after accounting for estimated statewide bond costs (which the Governor estimates at less than 1 percent). b Under Proposition 4, funding can be used for the Long-Duration Energy Storage Program, zero-emissions distributed energy backup assets, virtual power plants, and/or demand side grid support. The Governor proposes to use all of this funding for CEC’s Demand Side Grid Support Program. TBD = to be determined and CEC = California Energy Commission. 20 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET LAO Comments additional information on the administration’s developing plans for the Proposition 4 offshore wind Offshore Wind Program Still Under funds, and (3) get more information on the potential Development, Raising Questions About Pressing implications of recent federal actions and their Need for Funding. The Governor is requesting potential impacts on the state’s offshore wind plans. that essentially all of the funding Proposition 4 contains for offshore wind activities be appropriated Legislature May Want to Consider if DSGS in 2025-26 and 2026-27. However, this program is Proposal Is Consistent With Its Intent. As new and the administration still is in the early stages described above, the Governor’s proposal includes of setting it up. Specifically, CEC currently is in the both fund shifts and a specific allocation related to process of launching a grant program—the Offshore CERIP and the DSGS program. These proposals Wind Waterfront Facility Improvement Grant Program raise two key questions for the Legislature. The first (OWWFIGP) authorized by Chapter 251 of 2022 is whether this dedication of CERIP funds to DSGS (AB 209, Committee on Budget) and funded with is consistent with its priorities, or whether it wants $45 million General Fund in the energy package to use that planned funding for a different clean adopted in the 2022-23 budget. The deadline for energy-related activity. Second, the Legislature applications for OWWFIGP, which supports planning faces the considerations we discussed in the initial and design activities for offshore wind-related port section of this report about the trade-offs associated improvements, was December 2024 and awards with the proposed fund shifts—specifically, that have not yet been announced. CEC anticipates this $50 million of Proposition 4 would not be available process and program will inform the expenditure of to expand upon previously planned clean energy the offshore wind funding provided by Proposition 4. activities but the approach would free up General Fund and GGRF to be used for other purposes. CEC indicates that it expects to undertake a public process to solicit input on program design Legislature Could Use Coming Year to and priority setting for the Proposition 4 offshore Refine Its Own Priorities for Transmission wind funding prior to publishing draft grant Funding. The Governor’s implementation plan guidelines for the program, activities which it has not does not yet include a time line for appropriating yet commenced. As the process of implementing the $325 million Proposition 4 dedicates to public OWWFIGP and setting up the new Proposition 4 financing of electricity transmission infrastructure. offshore wind program will take time, CEC reports The administration indicates that such a plan will be that the earliest it anticipates Proposition 4 awards forthcoming sometime after the release of a report could be made is December 2026 (for the 2025-26 on electricity transmission that is required to be proposed funding) and December 2027 (for the completed by July 2025 pursuant to Chapter 762 of 2026-27 proposed funding). This time line raises 2024 (AB 3264, Petrie-Norris). Chapter 762 requires questions about the necessity of committing all this report to provide findings and proposals to the funding for offshore wind through a 2025-26 reduce the cost to ratepayers of expanding the appropriation and multiyear spending plan now. state’s electrical transmission grid as necessary to Moreover, recent actions have created some achieve the state’s climate goals. uncertainty around the role the federal government In general, we find that the Governor’s approach will play in wind development off California’s coast. of waiting to allocate funding for electricity For example, a January 20, 2025 presidential transmission until decisions can be informed by the executive order directed a review of legal bases forthcoming study makes sense. The Legislature for removing existing offshore wind leases. In light could use this additional time to further develop of these considerations, waiting until a future year and refine its own priorities for the use of these to both provide initial amounts from Proposition 4 Proposition 4 funds, such as related to wildfire and set a plan for future appropriations could have mitigation, offsetting ratepayer costs, a few advantages. Specifically, it could allow the and/or supporting the state’s environmental goals. Legislature the benefit of additional time to (1) learn Additionally, the Legislature could consider how from the implementation of OWWFIGP, (2) gather it would like Proposition 4 funding to complement www.lao.ca.gov 21 2025-26 BUDGET other available funding for transmission values and expanding trail access. In addition, while improvements, such as an August 2024 federal the proposal does not include funding in 2025-26 for Grid Resilience and Innovation Partnerships 2 grant nature education facilities, the Governor’s multiyear award of roughly $600 million (which is anticipated plan would provide funding for this purpose in to be matched by about $900 million, mostly from 2026-27. Figure 11 provides additional details on utility ratepayers). To the extent the Legislature proposed 2025-26 appropriations for park creation develops a clear idea of its priorities for Proposition 4 and outdoor access. transmission funding, it could communicate them LAO Comments to the administration—either informally or formally through mechanisms such as budget bill language— Proposal Would Allocate Significant Portion for inclusion in the administration’s future proposal(s). of Parks Funding in First Two Years to Address Pent-Up Demand and Needs. The administration’s PARK CREATION AND multiyear plan would appropriate 58 percent of the available funding for park creation and outdoor OUTDOOR ACCESS access across 2025-26 and 2026-27, largely due Proposal to plans to allocate nearly all the funding for the Statewide Parks Program and deferred maintenance Governor Proposes Appropriating $286 Million in these first two years of bond implementation. for Park Creation and Outdoor Access in While in some cases this approach could raise 2025-26. Out of the $700 million in bond funding questions about the department’s and grantees’ available for park creation and outdoor access ability to expend so much funding over a short through Proposition 4, the Governor proposes to period of time, Parks indicates sufficient demand appropriate $286 million in 2025-26 (41 percent and uses for these two programs exist and it is of the total authorized). Under the administration’s confident funds can be committed and expended plan, an additional $177 million would be allocated relatively quickly. Based on our initial review, in future years (mostly in 2026-27 and 2027-28), the department’s evidence and rationale for this with $231 million remaining pending. The pending approach seem reasonable. For the Statewide appropriations include $139 million (out of the Parks Program ($190 million proposed in 2025-26 $200 million available) for reducing climate impacts with the remaining $10 million set aside to support on disadvantaged communities and expanding annual program delivery costs through 2030-31), outdoor recreation, and $92 million (out of the the administration intends to allocate grants as $100 million available) for enhancing natural resource Figure 11 Governor’s Proposition 4 Proposal: Park Creation and Outdoor Access (In Millions) 2025-26 Proposed Code Implementing Bond Percent of Purpose Section Department Total Amount Bond Totala Statewide Park Program 94010(a) Parks $200 $190 96% Reducing climate impacts on disadvantaged 94020 CNRA, CDFW 200 11 6 communities and expanding outdoor recreation Enhancing natural resource value and expanding 94030 CNRA/Others TBD 100 0.7 1 trail access Deferred maintenance 94040 Parks 175 84 49 Nature education facilities 94050 CNRA 25 0.2 1 Totals $700 $286 41% a Percent of total available funding after accounting for estimated statewide bond costs (which the Governor estimates at less than 1 percent). Parks = Department of Parks and Recreation; CNRA = California Natural Resources Agency; and CDFW = California Department of Fish and Wildlife. 22 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET a continuation of the existing Statewide Park is in the process of determining how this funding Development and Community Revitalization will be used. This creates an opportunity for the Program. This provides funding for the creation, Legislature to help design the programs based on expansion, and renovation of safe neighborhood its priorities and what it had in mind when drafting parks in park-poor neighborhoods. The prior funding the bond. Specifically, for reducing climate impacts provided in previous years has been exhausted on disadvantaged communities, the administration and Parks indicates high demand for this program indicates that it still is considering whether the exists, with $1.9 billion in unfunded requests during pending $139 million should be used to support the last grant cycle. Also notable is $84 million new or existing programs. The Legislature could proposed for 2025-26 plus another $70 million consider whether there are particular activities that planned for 2026-27 to help address Parks’ deferred it would want this funding to support, and direct the maintenance backlog. (As noted earlier, this administration accordingly. Similarly, for enhancing includes $14 million from a previous General Fund natural resources and expanding trail access— appropriation that the Governor proposes shifting to which are new activities established through the Proposition 4 support.) The department estimates bond—the administration plans to develop next addressing its current deferred maintenance backlog steps after soliciting desired goals and outcomes would cost over $1 billion. As a result, Parks intends from stakeholders. The Legislature could consider to prioritize projects based on various factors such weighing in on what the process for soliciting input as impacts to health, safety, and disadvantaged from stakeholders should be and/or whether it wants communities, with consideration for other factors to direct the administration to focus on certain goals that might affect project delivery such as permitting and outcomes based on its priorities. and legal issues. Because the appropriation plan for deferred maintenance is based on expected cash EXTREME HEAT MITIGATION flow needs, the administration notes that it may request some adjustments to the multiyear plan in Proposal future years. Governor Proposes Appropriating $102 Million Legislature May Want to Weigh in on for Extreme Heat-Related Activities in 2025-26. Determining Plans for Two Pending Programs. Proposition 4 includes $450 million for activities As noted above, the Governor’s multiyear plan to mitigate the impacts of extreme heat. As does not yet incorporate funding for two programs. shown in Figure 12, the Governor proposes The administration indicates this is because it still appropriating $102 million of this total in 2025-26. Figure 12 Governor’s Proposition 4 Proposal: Extreme Heat (In Millions) 2025-26 Proposed Code Implementing Bond Percent of Purpose Section Department Total Amount Bond Totala Extreme Heat and Community Resilience Program 92510 LCI $50 $16 32% Transformative Climate Communities Program 92520 LCI 150 — — Urban Greening Program 95230 CNRA 100 47 47 Urban forests 92540 CalFire 50 0.5 1 Community resiliency centers 92550 LCI 60 0.8 1 Fairground updates 92560 CDFA 40 38 95 Totals $450 $102 23% a Percent of total available funding after accounting for estimated statewide bond costs (which the Governor estimates at less than 1 percent). LCI = Governor’s Office of Land Use and Climate Innovation; CNRA = California Natural Resources Agency; CalFire = California Department of Forestry and Fire Protection; and CDFA = California Department of Food and Agriculture. www.lao.ca.gov 23 2025-26 BUDGET The administration’s proposal includes planned Fund and $7.5 million GGRF planned for a second appropriations for the remaining bond amounts grant cycle in 2025-26. The Governor’s proposal for extreme heat mitigation in future years, mostly would revert that $15 million of General Fund so across 2026-27 and 2027-28. Notably, certain that it can be used elsewhere, then use $16 million programs have little to no funding proposed in in Proposition 4 funds to replace the General Fund 2025-26 but significant planned expenditures in and slightly augment the previously appropriated 2026-27 and 2027-28, including for Transformative funding for the planned second round of grant Climate Communities, urban forests, and funding. An additional $34 million in bond funding community resilience centers. The Governor also for the program would be available in future years. proposes to shift $15 million that was previously For some other programs for which new grant appropriated for the Extreme Heat and Community cycles will need to be launched, the administration Resilience Program from the General Fund to anticipates beginning awards in 2026-27 and its Proposition 4 funds. multiyear spending plan therefore includes larger amounts of funding in the out-years as opposed LAO Comments to 2025-26. For example, for the urban forests Proposition 4 Provides Comparatively Little program, CalFire plans to revise grant guidelines Flexibility on How Extreme Heat Funding Can and prepare solicitations for the funding in 2025-26, Be Used. In contrast to several other sections of with awards beginning in 2026-27. Similarly, LCI Proposition 4 discussed in this report, the extreme indicates that the earliest it anticipates being able heat mitigation chapter of the bond specifies the to award new grants for Transformative Climate dollar amounts that should go to each existing Communities and community resilience centers program and does not include any new programs. would be in 2026-27. (However, LCI indicates As such, comparatively less discretion exists for that it is evaluating whether it can modify its how the funding can be used. program delivery structure to begin awarding Administration’s Proposed Timing of funding sooner.) Appropriations Is Based on Projected Ability to Move Forward With Grant Cycles. While CLIMATE SMART AGRICULTURE Proposition 4 does not provide flexibility on the amount of extreme heat funding to be allocated to Proposal each program, the Legislature does have discretion Governor Proposes Appropriating 45 Percent over when this funding is appropriated. The of Climate Smart Agriculture Funding in administration’s multiyear spending plan is based 2025-26. Proposition 4 includes a total of on when it anticipates being able to move forward $300 million for a variety of activities related to with new grant cycles for each particular program. supporting climate smart agriculture. As shown in For example, CDFA anticipates it will be able to Figure 13, the Governor proposes to appropriate quickly disperse funding for fairground upgrades $134 million—45 percent—of this total in 2025-26. because, due to its oversight role, the department The administration’s plan would allocate most of has extensive knowledge and data about the the rest of the funding over the next two years— emergency uses and conditions of fairground including $84 million in 2026-27—with smaller infrastructure across the state. amounts of funding for program delivery and Similarly, LCI indicates it will be able to begin administration continuing in subsequent years. using bond funding in 2025-26 for the Extreme The Governor’s implementation plan does not yet Heat and Community Resilience Program because include an appropriation time line for three bond it will incorporate the funding into a previously activities: (1) increasing land access and tenure, planned grant cycle. Specifically, LCI used the (2) deployment of vanpool vehicles and related General Fund it received from the previous climate facilities, and (3) research farms at postsecondary packages to award a first round of grants for this education institutions. program in 2024-25 and has $15 million General 24 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET Figure 13 Governor’s Proposition 4 Proposal: Climate Smart Agriculture (In Millions) 2025-26 Proposed Code Implementing Bond Percent of Purpose Section Department Total Amount Bond Totala Climate Resilience of Agricultural Lands $105 $74 71% Soil health and carbon sequestration 93510(a) CDFA $65 $36 56% State Water Efficiency and Enhancement Program 93510(b) CDFA 40 38 95 Food Systems and Market Access $90 $38 43% Certified mobile farmers’ markets 93540(a) CDFA $20 $10 48% Year-round certified farmers’ markets 93540(b) CDFA 20 10 48 Urban agriculture projects 93540(c) CDFA 20 19 95 Regional farm equipment sharing 93540(d) CDFA 15 0.2 1 Tribal food sovereignty 93540(e) CDFA 15 0.2 1 Other $105 $22 21% Invasive Species Account 93520 CDFA $20 $20 100% Conservation and enhancement of farmland and 93530 DOC 15 2 17 rangeland Increasing land access and tenure 93550 DOC 30 — — Deployment of vanpool vehicles and related facilities 93560 CalVans 15 — — Research farms at postsecondary education institutions 93570 CDE 15 — — Low-Income Weatherization Program—farmworker 93580 CSD 10 — — housing Totals $300 $134 45% a Percent of total available funding after accounting for estimated statewide bond costs (which the Governor estimates at less than 1 percent). CDFA = California Department of Food and Agriculture; DOC = Department of Conservation; CalVans = California Vanpool Authority; CDE = California Department of Education; and CSD = Department of Community Services and Development. LAO Comments Overall, we find that the programs chosen by the administration seem to align well with the Proposal Utilizes Existing Programs to language included in Proposition 4. Furthermore, Administer Certain Funding Categories. In a utilizing existing programs allows the state to more number of cases, Proposition 4 outlines categories efficiently distribute funds. of climate smart agriculture activities without specifying particular programs through which In a few instances, Proposition 4 explicitly the funds should be implemented. For several of states which existing state programs should be these categories, the administration proposes to used to administer certain funding categories. use the funds to support existing state programs. These include the State Water Efficiency and This includes categories related to soil health and Enhancement Program, the farmworker housing carbon sequestration as well as urban agriculture component of the Low-Income Weatherization projects, which will be administered through CDFA’s Program (LIWP), and the Invasive Species Account. Healthy Soils Program and Urban Agriculture Because these established programs can begin Program, respectively. Additionally, funding implementation immediately, the Governor’s dedicated to conserving and enhancing farmland proposed plan allocates funding for all of them in and rangeland will be administered through the the budget year to begin awarding grant funds and Department of Conservation’s California Farmland supporting projects, with the exception of LIWP. Conservancy Program and Working Lands and For this program, the multiyear plan would wait and Riparian Corridors Program. (We note that the provide most funds in 2027-28. As of this writing, administration has not specified how the funds the administration had not yet provided us with its will be divided between these two programs.) rationale for the delayed implementation. www.lao.ca.gov 25 2025-26 BUDGET Proposal Would Establish New Programs, funded under these categories. Overall, we find the but Legislature May Want to Provide Statutory Governor’s proposal to be a reasonable approach Guidance. The Governor also proposes to allocate that allows for sufficient planning in new areas, funding for certain bond categories through while enabling the department to proceed in areas establishing new programs. However, the proposed where it has established expertise and guidance timing for allocating planning and project funding from the bond. varies by program. For instance, budget-year While the overall approach the Governor funding for regional farm equipment sharing and proposes appears sound, the Legislature may tribal food sovereignty would be used to plan and want to consider providing statutory guidance on establish the new programs, with funding for project how these new programs should be administered, awards scheduled to be provided in 2026-27. particularly if it had certain components in mind CDFA indicates it believes this phased-in approach when drafting the bond. Adding statutory guidance is appropriate given that these programs would now would ensure that these new programs are support activities in areas that the department implemented in a way that aligns with legislative does not currently oversee. The department also priorities and policy objectives. This is particularly indicates that Proposition 4’s statutory guidance for true for the categories where Proposition 4 does these funding categories is broad, and therefore it not provide directions around how funds should must undertake further planning efforts to prepare be administered. For example, the Legislature for implementation. In contrast, for year-round could consider specifying program priorities, and certified mobile farmers’ markets (also new design features, and/or project selection criteria. programs for CDFA), the administration proposes Additionally, the administration is asking the appropriating funding in 2025-26 to support both Legislature to provide more guidance around its program development and project awards. The intentions for the three bond activities for which administration indicates that this accelerated the Governor’s implementation plan does not yet approach is better suited for these programs include an appropriation time line: (1) increasing given that (1) CDFA has an established role in land access and tenure, (2) deployment of vanpool overseeing farmers’ markets and (2) Proposition 4 vehicles and related facilities, and (3) research is more explicit on what types of activities must be farms at postsecondary education institutions. 26 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET www.lao.ca.gov 27 2025-26 BUDGET ENVIRONMENT AND TRANSPORTATION UNIT Sonja Petek Overarching Comments Sonja.Petek@lao.ca.gov Water, Drought, Flood (916) 319-8340 Coastal Resilience Rachel Ehlers Wildfire and Forest Resilience Rachel.Ehlers@lao.ca.gov (916) 319-8330 Frank Jimenez Biodiversity and Nature-Based Solutions Frank.Jimenez@lao.ca.gov Climate Smart Agriculture (916) 319-8324 Helen Kerstein Clean Energy Helen.Kerstein@lao.ca.gov (916) 319-8364 Luke Koushmaro Parks and Outdoor Access Luke.Koushmaro@lao.ca.gov Extreme Heat Mitigation (916) 319-8355 LAO PUBLICATIONS This report was reviewed by Rachel Ehlers and Ross Brown. 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, CA 95814. 28 LEGISLATIVE ANALYST’S OFFICE