In issuing its fiscal outlook Wednesday, the Legislative Analyst’s Office estimated general fund revenues will hit $202 billion next year, adding up to a surplus of $31 billion.
The windfall is due mostly to revenues for the current year coming in $28 billion higher than planned for in the budget, while spending has been $5 billion lower than expected. In the coming years, the LAO expects a surplus to continue at around $3-8 billion annually—a positive sign for ongoing budget commitments, like funding water conveyance.
A budget agreement between the governor and Legislature in September will allocate another $100 million for repairing conveyance canals again next year. That number could rise with new funding from the federal infrastructure bill and from the reintroduction of SB 559 next session. A ballot measure is also circulating that would commit ongoing funding to developing new water storage.
Meanwhile, the Water Commission is set to approve a new environmental review next month that would push the Sites Reservoir project closer to construction. Many in the San Joaquin Valley are also digging into new opportunities for groundwater recharge projects as a deluge of data is helping to build out funding requests.
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This is all happening in an election year for Gov. Newsom and the Legislature, as a wave of lawmakers are set to term out of office. And in the midst of an ongoing drought, voters may be more eager to put that budget surplus toward storage rather than cutting back on showers.
The governor’s initial budget proposal in January will be an indication of how willing Newsom is to spend more on water infrastructure. The move could shore up support for vulnerable Central Valley Democrats facing Republican challengers next November. It would also earn points among moderates as he advances a new water management strategy in the Delta.