California lawmakers, Gavin Newsom hammer out $311 billion budget — without major water project

California lawmakers and Gov. Gavin Newsom agreed on a $310.8 billion budget deal Monday, a compromise reached by dropping the governor’s proposal to fast-track a 45-mile Delta water tunnel that would pump water from the Sacramento River to other parts of the state.

The agreement reflects the broad outlines of a spending plan lawmakers released during the weekend, which includes more money for public transit, child care, prison reform and Medi-Cal. The deal also includes spending cuts and deferrals needed to close the state’s estimated $31.5 billion budget gap.

The compromise over the hotly contested Delta tunnel project allowed the spending plan to move forward just in time for leaders to meet state deadlines. Newsom announced the budget deal late Monday with Assembly Speaker Anthony Rendon, D-Lakewood, and Senate President Pro Tem Toni Atkins, D-San Diego.

“In the face of continued global economic uncertainty, this budget increases our fiscal discipline by growing our budget reserves to a record $38 billion, while preserving historic investments in public education, health care, climate and public safety,” Newsom said in a statement late Monday evening.

The governor must sign Tuesday what is essentially a placeholder budget that the Legislature approved June 15. Lawmakers will take up bills tied to the spending plan this week, before the new fiscal year begins Saturday.

The final accord was stymied by the Newsom’s proposal to revise the California Environmental Quality Act and expedite the massive $16 billion Delta Conveyance, which would divert water from the Sacramento River to a tunnel under the Sacramento-San Joaquin Delta for farms and cities in the south.

Legislators and Newsom ended the logjam by removing the project from the list of clean energy, transportation and water projects the governor wants to streamline, Sen. Susan Talamantes Eggman, D-Stockton, confirmed to The Sacramento Bee.

The Senate and Assembly have yet to officially release the details of the negotiated infrastructure package, which could change during legislative hearings this week.

Delta tunnel opposition

Newsom has insisted the CEQA alterations are necessary to reduce the lengthy environmental review process that has slowed or killed large-scale projects.

The CEQA reforms and Delta tunnel are not technically a part of the state’s budget package. However, Newsom tied them to his approval of the spending plan, irking lawmakers who felt he was trying to use it as a wedge during negotiations.

“They’re calling it infrastructure streamlining, which is cute,” said Eggman, who represents communities near the Delta. “But really it’s just really an end-run around the process that has provided the Delta protection.”

The highly controversial Sacramento-San Joaquin Delta tunnel project, in particular, became a major sticking point in discussions.

A group of lawmakers — including Eggman and Assemblyman Carlos Villapudua, who also represents the Stockton area — last week sent a letter to Newsom and legislative leaders urging them to remove the Delta tunnel from the infrastructure package.

The project is Newsom’s version of a long-debated proposal for a tunnel to bypass the Delta by conveying water from the Sacramento River in Northern California to communities in Southern California.

The California Department of Water Resources says the project is necessary to adapt to the state’s increasingly inconsistent water supply, which is subject to droughts and sudden severe storms. However, environmental groups and Native American tribes argue it would devastate the region’s already threatened ecosystems and wildlife.

“If you think about pumping water from the Sacramento River underneath, 40 miles, to tunnel and divert that water from entering the Delta, I think you’re talking about an ecological collapse of a really important estuary for the world but especially California,” Eggman said.

The state Legislative Analyst’s Office warned against rushing such complicated deliberations.

States are jockeying for money to fund clean energy and climate projects from a $1 trillion infrastructure package President Joe Biden signed in 2021. Newsom is aiming to make California more competitive for that funding by streamlining the state’s lengthy environmental permitting processes for big projects.

The governor wanted the Delta tunnel project in the budget as a way to appeal for those dollars, said Sonja Petek, an LAO fiscal and policy analyst. But it’s unclear how much money is even on the line.

“When you get down to it, we’re not exactly clear on how these particular proposals would really necessarily increase our chance of getting funding,” Petek said.

“What would it actually mean? Would it speed these projects up, and by how much? A lot of those questions from our perspective are still unanswered.”