AB 2739: Water: affordability and system stabilization.
- Session Year: 2025-2026
- House: Assembly
- Latest Version Date: 2026-09-03
Current Status:
Failed
(2026-09-30: Vetoed by Governor.)
Introduced
In Committee
Awaiting First Chamber Vote
Passed First Chamber
In Committee
Awaiting Second Chamber Vote
Passed Second Chamber
Enacted
What does this bill do?
This bill creates a state trust and fund, managed by the State Treasurer, to provide ongoing money for low‑income water bill help and grants to community water systems, affecting struggling households and local utilities. It directs annual trust income to the State Water Board’s Water Rate Assistance Fund and the Department of Water Resources’ Community Water Affordability Assistance Fund (45% to each and 10% reinvested for the first 25 years, then 50% to each), and sets up a grant program that generally requires applicants to provide at least 25% matching funds (waivable for extreme hardship).
The summary is provided by generative AI which can make mistakes. For original language, please view the details in the table below.
Existing law establishes in the Natural Resources Agency the Department of Water Resources. Existing law vests in the department powers, duties, purposes, responsibilities, and jurisdiction in matters pertaining to water or dams. Existing law declares the responsibility of the state to assist local governments in providing certain essential services and facilities where water resource construction projects financed, in whole or in part, by the state or by the state jointly with the federal government create an undue burden on a local areas ability to provide these services and facilities.
Existing law, the California Safe Drinking Water Act, requires the State Water Resources Control Board to administer provisions relating to the regulation of drinking water to protect public health. Existing law declares it to be the established policy of the state that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes.
This bill would establish in the State Treasury the Water Affordability and System Stabilization Fund for holding the principal and income of the Water Affordability and System Stabilization Trust, which the bill would create. The bill would designate the Treasurer as trustee of the trust, as specified, and would require the trustee, among other things, to hold, manage, and invest the principal of the trust with the obligation of providing a growing perpetual source of annual funding to the Water Rate Assistance Fund, administered by the state board, and the Community Water Affordability Assistance Fund, administered by the department, beginning 25 years after the Legislature transfers funding from the General Fund to the Water Affordability and System Stabilization Fund.
This bill would require, during the first 25 years following the Legislatures transfer, 45% of the income of the trust to be transferred from the Water Affordability and System Stabilization Fund to each of the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund, and would continuously appropriate the remaining 10% of the income of the trust to be invested as part of the principal of the trust. After the first 25 years, the bill would require 50% of the income of the trust to be transferred from the Water Affordability and System Stabilization Fund to each of the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund. The bill would continuously appropriate no more than 1% of the annual income of the trust to pay for administration of the trust. By making continuous appropriations and by transferring moneys into a continuously appropriated fund, the bill would make an appropriation.
Existing law requires the Controller to transfer surplus money in any special fund from that fund to the Surplus Money Investment Fund in the State Treasury, a continuously appropriated fund.
The bill would authorize the trustee to enter into a trust agreement with a fiscal intermediary to support its duties, as provided, and would authorize the fund to be invested in the Surplus Money Investment Fund, thereby making an appropriation.
This bill would require the department, subject to a transfer of moneys by the Legislature, to develop and administer the Community Water Affordability Program to provide funding in the form of grants to community water systems for local water system infrastructure projects, as specified, for the purpose of reducing the amount of local ratepayer funding required for those projects and for avoiding costs that would otherwise be paid for by ratepayers. The bill would require the department to develop and adopt program guidelines and project solicitation documents before disbursing grant funds, and would exempt those guidelines and documents from the rulemaking procedures of the Administrative Procedure Act. The bill would require the program guidelines to, among other things, require an applicant for a grant to provide at least 25% of the total funding required for the project, as provided. The bill would authorize the department to waive or reduce that minimum amount if that requirement would cause extreme financial hardship to the applicant. The bill would also establish the Community Water Affordability Assistance Fund in the State Treasury and would provide for deposit into the fund of contributions from private and public entities, as specified. The bill would make moneys in the fund available to the department for purposes of the program, including up to 5% annually for administration of the fund, upon appropriation by the Legislature, as provided.
Existing law establishes in the Natural Resources Agency the Department of Water Resources. Existing law vests in the department powers, duties, purposes, responsibilities, and jurisdiction in matters pertaining to water or dams. Existing law declares the responsibility of the state to assist local governments in providing certain essential services and facilities where water resource construction projects financed, in whole or in part, by the state or by the state jointly with the federal government create an undue burden on a local areas ability to provide these services and facilities.
Existing law, the California Safe Drinking Water Act, requires the State Water Resources Control Board to administer provisions relating to the regulation of drinking water to protect public health. Existing law declares it to be the established policy of the state that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes.
This bill would establish in the State Treasury the Water Affordability and System Stabilization Fund for holding the principal and income of the Water Affordability and System Stabilization Trust, which the bill would create. The bill would designate the Treasurer as trustee of the trust, as specified, and would require the trustee, among other things, to hold, manage, and invest the principal of the trust with the obligation of providing a growing perpetual source of annual funding to the Water Rate Assistance Fund, administered by the state board, and the Community Water Affordability Assistance Fund, administered by the department, beginning 25 years after the Legislature transfers funding from the General Fund to the Water Affordability and System Stabilization Fund.
This bill would require, during the first 25 years following the Legislatures transfer, 45% of the income of the trust to be transferred from the Water Affordability and System Stabilization Fund to each of the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund, and would continuously appropriate the remaining 10% of the income of the trust to be invested as part of the principal of the trust. After the first 25 years, the bill would require 50% of the income of the trust to be transferred from the Water Affordability and System Stabilization Fund to each of the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund. The bill would continuously appropriate no more than 1% of the annual income of the trust to pay for administration of the trust. By making continuous appropriations and by transferring moneys into a continuously appropriated fund, the bill would make an appropriation.
Existing law requires the Controller to transfer surplus money in any special fund from that fund to the Surplus Money Investment Fund in the State Treasury, a continuously appropriated fund.
The bill would authorize the trustee to enter into a trust agreement with a fiscal intermediary to support its duties, as provided, and would authorize the fund to be invested in the Surplus Money Investment Fund, thereby making an appropriation.
This bill would require the department, subject to a transfer of moneys by the Legislature, to develop and administer the Community Water Affordability Program to provide funding in the form of grants to community water systems for local water system infrastructure projects, as specified, for the purpose of reducing the amount of local ratepayer funding required for those projects and for avoiding costs that would otherwise be paid for by ratepayers. The bill would require the department to develop and adopt program guidelines and project solicitation documents before disbursing grant funds, and would exempt those guidelines and documents from the rulemaking procedures of the Administrative Procedure Act. The bill would require the program guidelines to, among other things, require an applicant for a grant to provide at least 25% of the total funding required for the project, as provided. The bill would authorize the department to waive or reduce that minimum amount if that requirement would cause extreme financial hardship to the applicant. The bill would also establish the Community Water Affordability Assistance Fund in the State Treasury and would provide for deposit into the fund of contributions from private and public entities, as specified. The bill would make moneys in the fund available to the department for purposes of the program, including up to 5% annually for administration of the fund, upon appropriation by the Legislature, as provided.
Existing law establishes in the Natural Resources Agency the Department of Water Resources. Existing law vests in the department powers, duties, purposes, responsibilities, and jurisdiction in matters pertaining to water or dams. Existing law declares the responsibility of the state to assist local governments in providing certain essential services and facilities where water resource construction projects financed, in whole or in part, by the state or by the state jointly with the federal government create an undue burden on a local areas ability to provide these services and facilities.
Existing law, the California Safe Drinking Water Act, requires the State Water Resources Control Board to administer provisions relating to the regulation of drinking water to protect public health. Existing law declares it to be the established policy of the state that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes.
This bill would establish in the State Treasury the Water Affordability and System Stabilization Fund for holding the principal and income of the Water Affordability and System Stabilization Trust, which the bill would create. The bill would designate the Treasurer as trustee of the trust, as specified, and would require the trustee, among other things, to hold, manage, and invest the principal of the trust with the obligation of providing a growing perpetual source of annual funding to the Water Rate Assistance Fund, administered by the state board, and the Community Water Affordability Assistance Fund, administered by the department, beginning 25 years after the Legislature transfers funding from the General Fund to the Water Affordability and System Stabilization Fund.
This bill would require, during the first 25 years following the Legislatures transfer, 45% of the income of the trust to be transferred from the Water Affordability and System Stabilization Fund to each of the Water Rate Assistance Fund and the continuously appropriated Community Water Affordability Assistance Fund, and would continuously appropriate the remaining 10% of the income of the trust to be invested as part of the principal of the trust. After the first 25 years, the bill would require 50% of the income of the trust to be transferred from the Water Affordability and System Stabilization Fund to each of the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund. The bill would continuously appropriate no more than 1% of the annual income of the trust to pay for administration of the trust. By making continuous appropriations and by transferring moneys into a continuously appropriated fund, the bill would make an appropriation.
This bill would require the department, subject to a transfer of moneys by the Legislature, to develop and administer the Community Water Affordability Program to provide funding in the form of grants to community water systems for local water system infrastructure projects, as specified, for the purpose of reducing the amount of local ratepayer funding required for those projects and for avoiding costs that would otherwise be paid for by ratepayers. The bill would require the department to develop and adopt program guidelines and project solicitation documents before disbursing grant funds, and would exempt those guidelines and documents from the rulemaking procedures of the Administrative Procedure Act. The bill would require the program guidelines to, among other things, require an applicant for a grant to provide at least 25% of the total funding required for the project, as provided. The bill would authorize the department to waive or reduce that minimum amount if that requirement would cause extreme financial hardship to the applicant. The bill would also establish the Community Water Affordability Assistance Fund in the State Treasury and would provide for deposit into the fund of contributions from private and public entities, as specified. The bill would continuously appropriate make moneys in the fund available to the department for purposes of the program, including up to 5% annually for administration of the fund, thereby making an appropriation. upon appropriation by the Legislature, as provided.
Existing law establishes in the Natural Resources Agency the Department of Water Resources. Existing law vests in the department powers, duties, purposes, responsibilities, and jurisdiction in matters pertaining to water or dams. Existing law declares the responsibility of the state to assist local governments in providing certain essential services and facilities where water resource construction projects financed, in whole or in part, by the state or by the state jointly with the federal government create an undue burden on a local areas ability to provide these services and facilities.
Existing law, the California Safe Drinking Water Act, requires the State Water Resources Control Board to administer provisions relating to the regulation of drinking water to protect public health. Existing law declares it to be the established policy of the state that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes.
This bill would establish in the State Treasury the Water Affordability and System Stabilization Fund for holding the principal and income of the Water Affordability and System Stabilization Trust, which the bill would create. The bill would designate the Treasurer as trustee of the trust, as specified, and would require the trustee, among other things, to hold, manage, and invest the principal of the trust with the obligation of providing a growing perpetual source of annual funding to the Water Rate Assistance Fund, administered by the state board, and the Community Water Affordability Assistance Fund, administered by the department, beginning 25 years after the Legislature transfers funding from the General Fund to the Water Affordability and System Stabilization Fund.
This bill would require, during the first 25 years following the Legislatures transfer, 45% of the income of the trust to be transferred from the Water Affordability and System Stabilization Fund to each of the Water Rate Assistance Fund and the continuously appropriated Community Water Affordability Assistance Fund, and would continuously appropriate the remaining 10% of the income of the trust to be invested as part of the principal of the trust. After the first 25 years, the bill would require 50% of the income of the trust to be transferred from the Water Affordability and System Stabilization Fund to each of the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund. The bill would continuously appropriate no more than 1% of the annual income of the trust to pay for administration of the trust. By making continuous appropriations and by transferring moneys into a continuously appropriated fund, the bill would make an appropriation.
This bill would require the department, subject to a transfer of moneys by the Legislature, to develop and administer the Community Water Affordability Program to provide funding in the form of grants to community water systems for local water system infrastructure projects, as specified, for the purpose of reducing the amount of local ratepayer funding required for those projects and for avoiding costs that would otherwise be paid for by ratepayers. The bill would require the department to develop and adopt program guidelines and project solicitation documents before disbursing grant funds, and would exempt those guidelines and documents from the rulemaking procedures of the Administrative Procedure Act. The bill would require the program guidelines to, among other things, require an applicant for a grant to provide at least 25% of the total funding required for the project, as provided. The bill would authorize the department to waive or reduce that minimum amount if that requirement would cause extreme financial hardship to the applicant. The bill would also establish the Community Water Affordability Assistance Fund in the State Treasury and would provide for deposit into the fund of contributions from private and public entities, as specified. The bill would continuously appropriate moneys in the fund to the department for purposes of the program, including up to 5% annually for administration of the fund, thereby making an appropriation.
Existing law establishes in the Natural Resources Agency the Department of Water Resources. Existing law vests in the department powers, duties, purposes, responsibilities, and jurisdiction in matters pertaining to water or dams. Existing law declares the responsibility of the state to assist local governments in providing certain essential services and facilities where water resource construction projects financed, in whole or in part, by the state or by the state jointly with the federal government create an undue burden on a local areas ability to provide these services and facilities.
Existing law, the California Safe Drinking Water Act, requires the State Water Resources Control Board to administer provisions relating to the regulation of drinking water to protect public health. Existing law declares it to be the established policy of the state that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes.
This bill would establish in the State Treasury the Water Affordability and System Stabilization Fund for holding the principal and income of the Water Affordability and System Stabilization Trust, which the bill would create. The bill would designate the Treasurer as trustee of the trust, as specified, and would require the trustee, among other things, to hold, manage, and invest the principal of the trust with the obligation of providing a growing perpetual source of annual funding to the Water Rate Assistance Fund, administered by the state board, and the Community Water Affordability Assistance Fund, administered by the department, beginning 25 years after the Legislature transfers funding from the General Fund to the Water Affordability and System Stabilization Fund.
This bill would require, during the first 25 years following the Legislatures transfer, 45% of the income of the trust to be transferred from the Water Affordability and System Stabilization Fund to each of the Water Rate Assistance Fund and the continuously appropriated Community Water Affordability Assistance Fund, and would continuously appropriate the remaining 10% of the income of the trust to be invested as part of the principal of the trust. After the first 25 years, the bill would require 50% of the income of the trust to be transferred from the Water Affordability and System Stabilization Fund to each of the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund. The bill would continuously appropriate no more than 1% of the annual income of the trust to pay for administration of the trust. By making continuous appropriations and by transferring moneys into a continuously appropriated fund, the bill would make an appropriation.
This bill would establish require the department, subject to a transfer of moneys by the Legislature, to develop and administer the Community Water Affordability Program to provide funding in the form of grants to local water suppliers for water system repairs, rehabilitation, and enhancements, water safety and quality, and other community water systems for local water system infrastructure projects, as specified, for the purpose of reducing the amount of local ratepayer funding required for those projects. The bill would require the department, upon appropriation by the Legislature, to develop and administer the program. projects and for avoiding costs that would otherwise be paid for by ratepayers. The bill would require the department to develop and adopt program guidelines and project solicitation documents before disbursing grant funds. funds, and would exempt those guidelines and documents from the rulemaking procedures of the Administrative Procedure Act. The bill would require the program guidelines to to, among other things, require an applicant for a grant to provide at least 50% 25% of the total funding required for the project, as provided. The bill would authorize the department to waive or reduce that minimum amount if that requirement would cause extreme financial hardship to the applicant. The bill would also establish the Community Water Affordability Assistance Fund in the State Treasury. Treasury and would provide for deposit into the fund contributions from private and public entities, as specified. The bill would make continuously appropriate moneys in the fund available, upon appropriation by the Legislature, to the department for the purposes of the program. program, including up to 5% annually for administration of the fund, thereby making an appropriation.
Existing law establishes in the Natural Resources Agency the Department of Water Resources. Existing law vests in the department powers, duties, purposes, responsibilities, and jurisdiction in matters pertaining to water or dams. Existing law declares the responsibility of the state to assist local governments in providing certain essential services and facilities where water resource construction projects financed, in whole or in part, by the state or by the state jointly with the federal government create an undue burden on a local areas ability to provide these services and facilities.
This bill would establish the Community Water Affordability Program to provide funding in the form of grants to local water suppliers for water system repairs, rehabilitation, and enhancements, water safety and quality, and other local water system infrastructure projects, for the purpose of reducing the amount of local ratepayer funding required for those projects. The bill would require the department, upon appropriation by the Legislature, to develop and administer the program. The bill would require the department to develop and adopt program guidelines and project solicitation documents before disbursing grant funds. The bill would require the program guidelines to require an applicant for a grant to provide at least 50% of the total funding required for the project, as provided. The bill would authorize the department to waive or reduce that minimum amount if that requirement would cause extreme financial hardship to the applicant. The bill would also establish the Community Water Affordability Assistance Fund in the State Treasury. The bill would make moneys in the fund available, upon appropriation by the Legislature, to the department for the purposes of the program.
Existing law, the Sustainable Groundwater Management Act, states the intent of the Legislature to provide for the sustainable management of groundwater basins and to provide local groundwater agencies with the authority and the technical and financial assistance necessary to sustainably manage groundwater, among other purposes of the act.This bill would state the intent of the Legislature to enact subsequent legislation relating to groundwater.Existing law, the Sustainable Groundwater Management Act, states the intent of the Legislature to provide for the sustainable management of groundwater basins and to provide local groundwater agencies with the authority and the technical and financial assistance necessary to sustainably manage groundwater, among other purposes of the act.
This bill would state the intent of the Legislature to enact subsequent legislation relating to groundwater.
This chapter shall be known, and may be cited, as the Water Affordability and System Stabilization Act.
12965.5.The Legislature finds and declares all of the following:
(a)It is the established policy of the state, as stated in Section 106.3, that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes.
(b)Addressing Californias environmental justice challenges requires that the state work to improve water affordability for impacted communities and households.
(c)The cost of water has continued to rise, as has the cost of living in California. The increase in the cost of water is largely attributable to increases in the cost of infrastructure, energy, and regulatory compliance costs.
(d)Most of Californias public water systems are governed by Proposition 218, which was passed by voters in November 1996, and requires that customers only be charged proportional, cost of service-based rates. Proposition 218 has been interpreted as prohibiting customers from being charged higher rates to subsidize the costs of other customers.
(e)At the same time, climate change has added, and will continue to add, significant additional cost pressure to water systems, as providers must increasingly invest in climate resilience and adaptive infrastructure, which in turn places cost pressure on rates.
(f)A low-income rate assistance program will assist in addressing affordability challenges for struggling households, but without addressing system costs, such a program will not be sufficiently effective because these cost pressures will continue to result in increased water rates.
(g)Federal and state funding of local water infrastructure helps reduce the amount of ratepayer money that a water system needs to collect to ensure a reliable, safe, and clean water supply for its community and helps address system affordability constraints.
(h)It is in the interest of the people of the state to enact this chapter to establish a trust fund, funded by existing state revenues over multiple years, for the governmental purpose of providing a perpetual source of funding to assist with water system costs that place pressure on water affordability and to provide low-income Californian households with direct assistance with their water bills, which will provide a benefit to Californians across the state.
(i)This chapter does not impose a levy, charge, or exaction of any kind, such as a tax or fee.
12966.For purposes of this chapter, the following definitions apply:
(a)Beneficiary means the people of the state, as represented by the board in its implementation of Chapter 6.2 (commencing with Section 116930) of Part 12 of Division 104 of the Health and Safety Code and its administration of the Water Rate Assistance Fund established pursuant to Section 116932 of the Health and Safety Code, and the department in its implementation of Chapter 2 (commencing with Section 12968) and its administration of the Community Water Affordability Assistance Fund established pursuant to Section 12968. The beneficiarys interest in the trust shall only be the distributions required to be made from the trust pursuant to subdivision (b) of Section 12967.
(b)Board means the State Water Resources Control Board.
(c)Community Water Affordability Assistance Fund means the Community Water Affordability Assistance Fund established pursuant to Section 12968.
(d)Department means the Department of Water Resources.
(e)Income means the money, enhanced value, or other income the trust receives as current return from the investment of the trust principal.
(f)Net income means the trust income earned July 1 to June 30, inclusive, of the prior fiscal year minus all of the necessary and reasonable expenses incident to the administration of the trust during that same period, up to 1 percent of the trust income pursuant to paragraph (2) of subdivision (e) of Section 12967.
(g)Principal means the trust property, which is held in trust for the beneficiary and to accomplish the purposes described in Section 12966.5.
(h)Trust means the Water Affordability and System Stabilization Trust.
(i)Trust fund means the Water Affordability and System Stabilization Fund established pursuant to Section 12966.5 to hold the trust property.
(j)Trust property means the money transferred to the trust fund and any donation to the trust fund received and accepted by the trustee on or after January 1, 2027.
(k)Trustee means the Treasurer, who shall serve as the trustee of the trust having all of the fiduciary duties, responsibilities, and obligations consistent with serving as a trustee of a trust under existing law.
(l)Water Rate Assistance Fund means the Water Rate Assistance Fund established pursuant to Section 116932 of the Health and Safety Code.
2.Water Affordability and System Stabilization Trust12966.5.(a)(1)There is hereby created in the State Treasury the Water Affordability and System Stabilization Fund for holding the trust property of the Water Affordability and System Stabilization Trust and for the purpose of implementing the public and governmental purposes of this chapter. Notwithstanding Section 13340 of the Government Code, all moneys in the trust fund are continuously appropriated to the trustee, without regard to fiscal year, for expenditure in accordance with this chapter.
(2)The distributions by the trustee from the income of the trust are hereby transferred to the board and the department for deposit into, and expenditure from, the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund, respectively, in accordance with subdivision (b) of Section 12967.
(b)The primary purpose of the Water Affordability and System Stabilization Trust, a charitable trust established pursuant to this chapter, shall be to provide a perpetual source of funding each year to the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund in furtherance of the trust fund purposes described in subdivision (a).
(c)Moneys in the trust fund, including the trust principal and trust income, shall not be available for appropriation or be borrowed for use for any purpose not established in this chapter.
(d)Funding of the principal of the trust is hereby authorized and is subject to transfer by the Legislature from the General Fund into the trust fund. All future transfers to the trust fund are hereby irrevocably transferred from the General Fund during the fiscal year the moneys are transferred to the trustee for deposit into the Water Affordability and System Stabilization Fund for distribution and investment to accomplish the purposes of this chapter and subject to the conditions prescribed in Section 12967.
(e)Notwithstanding any other law, moneys deposited into the trust fund or to fund the trust shall not be transferred to the General Fund.
12966.7.The trustee may enter into a trust agreement with a fiscal intermediary to support its duties under this part. The trust agreement may contain provisions the trustee deems reasonable and proper to grow the fund to be a perpetual source of annual funding to support the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund. The trust funds shall be invested consistent with Section 16430 of the Government Code, and the funds may be invested in the Surplus Money Investment Fund.
12967.(a)(1)The trustee shall hold the property of the trust for the primary benefit of the trusts beneficiary.
(2)The trustee shall hold, manage, and invest the principal of the trust in accordance with existing law with the obligation of providing a growing perpetual source of annual funding to the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund, beginning 25 years after the Legislature transfers funding from the General Fund to the Water Affordability and System Stabilization Fund. The trustee shall not invade the principal of the trust.
(b)The trustee shall collect, receive, and monetize, if prudent and in accordance with existing law, the income of the trust, and the Controller, after coordination with the trustee, shall distribute the income of the trust annually as follows:
(1)During the first 25 years following the Legislatures first transfer of moneys from the General Fund to the trust fund, the trustee shall distribute the income of the trust as follows:
(A)Transfer 45 percent of the total income deposited into the trust fund during the prior fiscal year to the Water Rate Assistance Fund for the board to expend in accordance with Chapter 6.2 (commencing with Section 116930) of Part 12 of Division 104 of the Health and Safety Code.
(B)Transfer 45 percent of the total income deposited into the trust fund during the prior fiscal year to the Community Water Affordability Assistance Fund for the department to expend in accordance with Chapter 2 (commencing with Section 12968).
(C)In accordance with existing law, invest the remaining 10 percent of the total income deposited into the trust fund during the prior fiscal year as part of the trust principal.
(2)After the first 25 years following the Legislatures first transfer of moneys from the General Fund to the trust fund, the Controller, after coordination with the trustee, shall distribute the income of the trust as follows:
(A)Transfer 50 percent of the total income deposited into the trust fund during the prior fiscal year to the Water Rate Assistance Fund for the board to expend in accordance with Chapter 6.2 (commencing with Section 116930) of Part 12 of Division 104 of the Health and Safety Code.
(B)Transfer 50 percent of the total income deposited into the trust fund during the prior fiscal year to the Community Water Affordability Assistance Fund for the department to expend in accordance with Chapter 2 (commencing with Section 12968).
(c)Notwithstanding any other law, the trustee, and any employee or agent of the trustee, shall not sell, purchase, exchange, or otherwise deal with or dispose of all or any parts of the principal of the trust.
(d)The trustee shall exercise its administration of the trust as a fiduciary to the beneficiary. The trustee, in its administration of the trust, shall abide by the Uniform Prudent Investor Act (Article 2.5 (commencing with Section 16045) of Chapter 1 of Part 4 of Division 9 of the Probate Code). The trustee shall have the powers, obligations, and responsibilities of a trustee prescribed in Part 4 (commencing with Section 16000) of Division 9 of the Probate Code that are not inconsistent with the purposes of this chapter.
(e)The trustee shall:
(1)Have the power to accept donations that shall be deemed property of the trust and increase the principal of the trust. Donations shall not be expended or transferred until the Legislature transfers funding from the General Fund to the Water Affordability and System Stabilization Fund.
(2)Use no more than 1 percent of the income of the trust earned July 1 to June 30, inclusive, of each fiscal year to pay for the necessary and reasonable expenses incident to the administration of the trust during that same period.
(f)The trustee shall provide for appropriate, as determined by the trustee, audit, accounting, and fiscal management services, plans, and reports relative to the trust fund, in accordance with generally accepted accounting principles adopted by the Governmental Accounting Standards Board.
(g)The trustee annually shall provide the board and the department with an accounting of the investments of the trust fund and a forecast of the projected income to be distributed from the trust fund in future fiscal years.
(h)The trust shall be deemed a charitable trust subject to the supervision of the Attorney General.
2.Community Water Affordability Program12968.(a)For purposes of this chapter, the following definitions apply:
(1)Community water system has the same meaning as defined in Section 116275 of the Health and Safety Code.
(2)Fund means the Community Water Affordability Assistance Fund.
(3)Program means the Community Water Affordability Program.
(b)(1)The department shall, subject to transfer of moneys into the fund by the Legislature, develop and administer the Community Water Affordability Program. The program shall provide funding in the form of grants to community water systems for local water infrastructure projects that shall include, but are not limited to, projects that improve water supplies, resiliency, or quality, and projects that reduce energy costs for a community water system. The purpose of the grants shall be reducing the amount of local ratepayer funding required for those projects and for avoiding costs that would otherwise be paid for by ratepayers.
(2)(A)Before disbursing grant funds pursuant to this section, the department shall develop and adopt program guidelines and project solicitation documents after soliciting public comment and feedback inclusive of community water systems. The guidelines and project solicitation documents developed pursuant to this section are not subject to Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(B)The program guidelines shall do all of the following:
(i)Require an applicant for a grant to provide at least 25 percent of the total funding required for the project. Federal funding and other state loans and grants may be included in this amount. The department may waive or reduce that minimum amount if that requirement would cause extreme financial hardship to the applicant.
(ii)Establish a methodology for evaluating projects for purposes of a grant award by consideration of factors that include, but are not limited to, the net present value of the cost avoided on a per account basis over a 25-year period of time, the applicants ability to complete the project in a timely manner, the number of households it would benefit, and the benefits the system received in the past year from the Water Rate Assistance Fund established pursuant to Section 116932 of the Health and Safety Code averaged across the systems total residential connections.
(iii)Consider the characteristics of projects eligible for investment under this program so that the investments in the project would include those that demonstrate reduced long-term operation or maintenance costs, improved financial sustainability of the system, improved operational efficiency, strengthened service delivery, or enhanced long-term resilience of drinking water systems in ways that lower system costs over time.
(iv)The established methodology for evaluating projects for purposes of a grant award shall not consider an applicants ability to provide the minimum amount of total funding required by clause (i) and shall not prejudice an applicant for requesting that the department waive or reduce that minimum amount due to financial hardship.
(C)Before adopting program guidelines and project solicitation documents, the department shall hold at least three public workshops throughout the state on draft program guidelines and shall provide at least 45 days of public comment on the draft.
(3)The department shall annually post on its internet website a report on the revenues, expenditures, and benefits of the fund for the prior fiscal year. The report shall include the cumulative and fiscal year number of households the Community Water Affordability Program has benefited and the estimated amount of cost the program has caused to be avoided.
(4)The department shall coordinate with the board for projects that seek to combine funding from the program and the board.
(c)The department may undertake any of the following actions to implement the fund:
(1)Provide for the deposit of any of the following moneys into the fund:
(A)Federal contributions.
(B)Voluntary contributions, gifts, grants, or bequests.
(C)Financial participation by a public agency in an activity authorized for funding from the fund.
(2)Enter into agreements for contributions to the fund from the federal government, local or state agencies, or private corporations or nonprofit organizations.
(3)Take additional action as may be appropriate for adequate administration and operation of the fund.
(4)Expend moneys from the fund for reasonable costs associated with administration of the fund, including outreach regarding the availability of the funding. The department shall not expend more than 5 percent of the annual revenue from the fund for reasonable costs associated with the administration of the fund.
(5)Award grants for less than 75 percent of the project cost should the annual appropriation for fund expenditures be less than the cumulative amount of grants awarded for that fiscal year.
(d)The department may set appropriate requirements as a condition of funding, including, but not limited to, any of the following:
(1)An audit.
(2)Improvements to reduce costs and increase efficiencies of the infrastructure project funded.
(3)An evaluation of alternatives.
(e)The Community Water Affordability Assistance Fund is hereby established in the State Treasury. All moneys in the fund are available to the department, upon appropriation by the Legislature, in accordance with this chapter. Moneys in the fund at the close of the fiscal year shall remain in the fund and shall not revert to the General Fund. Moneys in the fund shall not be available for appropriation or borrowed for use for any purpose not established in this chapter unless that use of the moneys is authorized by statute that receives an affirmative vote of two-thirds of the membership in each house of the Legislature.
This chapter shall be known, and may be cited, as the Water Affordability and System Stabilization Act.
12965.5.The Legislature finds and declares all of the following:
(a)It is the established policy of the state, as stated in Section 106.3, that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes.
(b)Addressing Californias environmental justice challenges requires that the state work to improve water affordability for impacted communities and households.
(c)The cost of water has continued to rise, as has the cost of living in California. The increase in the cost of water is largely attributable to increases in the cost of infrastructure, energy, and regulatory compliance costs.
(d)Most of Californias public water systems are governed by Proposition 218, which was passed by voters in November 1996, and requires that customers only be charged proportional, cost of service-based rates. Proposition 218 has been interpreted as prohibiting customers from being charged higher rates to subsidize the costs of other customers.
(e)At the same time, climate change has added, and will continue to add, significant additional cost pressure to water systems, as providers must increasingly invest in climate resilience and adaptive infrastructure, which in turn places cost pressure on rates.
(f)A low-income rate assistance program will assist in addressing affordability challenges for struggling households, but without addressing system costs, such a program will not be sufficiently effective because these cost pressures will continue to result in increased water rates.
(g)Federal and state funding of local water infrastructure helps reduce the amount of ratepayer money that a water system needs to collect to ensure a reliable, safe, and clean water supply for its community and helps address system affordability constraints.
(h)It is in the interest of the people of the state to enact this chapter to establish a trust fund, funded by existing state revenues over multiple years, for the governmental purpose of providing a perpetual source of funding to assist with water system costs that place pressure on water affordability and to provide low-income Californian households with direct assistance with their water bills, which will provide a benefit to Californians across the state.
(i)This chapter does not impose a levy, charge, or exaction of any kind, such as a tax or fee.
12966.For purposes of this chapter, the following definitions apply:
(a)Beneficiary means the people of the state, as represented by the board in its implementation of Chapter 6.2 (commencing with Section 116930) of Part 12 of Division 104 of the Health and Safety Code and its administration of the Water Rate Assistance Fund established pursuant to Section 116932 of the Health and Safety Code, and the department in its implementation of Chapter 2 (commencing with Section 12968) and its administration of the Community Water Affordability Assistance Fund established pursuant to Section 12968. The beneficiarys interest in the trust shall only be the distributions required to be made from the trust pursuant to subdivision (b) of Section 12967.
(b)Board means the State Water Resources Control Board.
(c)Community Water Affordability Assistance Fund means the Community Water Affordability Assistance Fund established pursuant to Section 12968.
(d)Department means the Department of Water Resources.
(e)Income means the money, enhanced value, or other income the trust receives as current return from the investment of the trust principal.
(f)Net income means the trust income earned July 1 to June 30, inclusive, of the prior fiscal year minus all of the necessary and reasonable expenses incident to the administration of the trust during that same period, up to 1 percent of the trust income pursuant to paragraph (2) of subdivision (e) of Section 12967.
(g)Principal means the trust property, which is held in trust for the beneficiary and to accomplish the purposes described in Section 12966.5.
(h)Trust means the Water Affordability and System Stabilization Trust.
(i)Trust fund means the Water Affordability and System Stabilization Fund established pursuant to Section 12966.5 to hold the trust property.
(j)Trust property means the money transferred to the trust fund and any donation to the trust fund received and accepted by the trustee on or after January 1, 2027.
(k)Trustee means the Treasurer, who shall serve as the trustee of the trust having all of the fiduciary duties, responsibilities, and obligations consistent with serving as a trustee of a trust under existing law.
(l)Water Rate Assistance Fund means the Water Rate Assistance Fund established pursuant to Section 116932 of the Health and Safety Code.
2.Water Affordability and System Stabilization Trust12966.5.(a)(1)There is hereby created in the State Treasury the Water Affordability and System Stabilization Fund for holding the trust property of the Water Affordability and System Stabilization Trust and for the purpose of implementing the public and governmental purposes of this chapter. Notwithstanding Section 13340 of the Government Code, all moneys in the trust fund are continuously appropriated to the trustee, without regard to fiscal year, for expenditure in accordance with this chapter.
(2)The distributions by the trustee from the income of the trust are hereby transferred to the board and the department for deposit into, and expenditure from, the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund, respectively, in accordance with subdivision (b) of Section 12967.
(b)The primary purpose of the Water Affordability and System Stabilization Trust, a charitable trust established pursuant to this chapter, shall be to provide a perpetual source of funding each year to the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund in furtherance of the trust fund purposes described in subdivision (a).
(c)Moneys in the trust fund, including the trust principal and trust income, shall not be available for appropriation or be borrowed for use for any purpose not established in this chapter.
(d)Funding of the principal of the trust is hereby authorized and is subject to transfer by the Legislature from the General Fund into the trust fund. All future transfers to the trust fund are hereby irrevocably transferred from the General Fund during the fiscal year the moneys are transferred to the trustee for deposit into the Water Affordability and System Stabilization Fund for distribution and investment to accomplish the purposes of this chapter and subject to the conditions prescribed in Section 12967.
(e)Notwithstanding any other law, moneys deposited into the trust fund or to fund the trust shall not be transferred to the General Fund.
12966.7.The trustee may enter into a trust agreement with a fiscal intermediary to support its duties under this part. The trust agreement may contain provisions the trustee deems reasonable and proper to grow the fund to be a perpetual source of annual funding to support the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund. The trust funds shall be invested consistent with Section 16430 of the Government Code, and the funds may be invested in the Surplus Money Investment Fund.
12967.(a)(1)The trustee shall hold the property of the trust for the primary benefit of the trusts beneficiary.
(2)The trustee shall hold, manage, and invest the principal of the trust in accordance with existing law with the obligation of providing a growing perpetual source of annual funding to the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund, beginning 25 years after the Legislature transfers funding from the General Fund to the Water Affordability and System Stabilization Fund. The trustee shall not invade the principal of the trust.
(b)The trustee shall collect, receive, and monetize, if prudent and in accordance with existing law, the income of the trust, and the Controller, after coordination with the trustee, shall distribute the income of the trust annually as follows:
(1)During the first 25 years following the Legislatures first transfer of moneys from the General Fund to the trust fund, the trustee shall distribute the income of the trust as follows:
(A)Transfer 45 percent of the total income deposited into the trust fund during the prior fiscal year to the Water Rate Assistance Fund for the board to expend in accordance with Chapter 6.2 (commencing with Section 116930) of Part 12 of Division 104 of the Health and Safety Code.
(B)Transfer 45 percent of the total income deposited into the trust fund during the prior fiscal year to the Community Water Affordability Assistance Fund for the department to expend in accordance with Chapter 2 (commencing with Section 12968).
(C)In accordance with existing law, invest the remaining 10 percent of the total income deposited into the trust fund during the prior fiscal year as part of the trust principal.
(2)After the first 25 years following the Legislatures first transfer of moneys from the General Fund to the trust fund, the trustee Controller, after coordination with the trustee, shall distribute the income of the trust as follows:
(A)Transfer 50 percent of the total income deposited into the trust fund during the prior fiscal year to the Water Rate Assistance Fund for the board to expend in accordance with Chapter 6.2 (commencing with Section 116930) of Part 12 of Division 104 of the Health and Safety Code.
(B)Transfer 50 percent of the total income deposited into the trust fund during the prior fiscal year to the Community Water Affordability Assistance Fund for the department to expend in accordance with Chapter 2 (commencing with Section 12968).
(c)Notwithstanding any other law, the trustee, and any employee or agent of the trustee, shall not sell, purchase, exchange, or otherwise deal with or dispose of all or any parts of the principal of the trust.
(d)The trustee shall exercise its administration of the trust as a fiduciary to the beneficiary. The trustee, in its administration of the trust, shall abide by the Uniform Prudent Investor Act (Article 2.5 (commencing with Section 16045) of Chapter 1 of Part 4 of Division 9 of the Probate Code). The trustee shall have the powers, obligations, and responsibilities of a trustee prescribed in Part 4 (commencing with Section 16000) of Division 9 of the Probate Code that are not inconsistent with the purposes of this chapter.
(e)The trustee shall:
(1)Have the power to accept donations that shall be deemed property of the trust and increase the principal of the trust. Donations shall not be expended or transferred until the Legislature transfers funding from the General Fund to the Water Affordability and System Stabilization Fund.
(2)Use no more than 1 percent of the income of the trust earned July 1 to June 30, inclusive, of each fiscal year to pay for the necessary and reasonable expenses incident to the administration of the trust during that same period.
(f)The trustee shall provide for appropriate, as determined by the trustee, audit, accounting, and fiscal management services, plans, and reports relative to the trust fund, in accordance with generally accepted accounting principles adopted by the Governmental Accounting Standards Board.
(g)The trustee annually shall provide the board and the department with an accounting of the investments of the trust fund and a forecast of the projected income to be distributed from the trust fund in future fiscal years.
(h)The trust shall be deemed a charitable trust subject to the supervision of the Attorney General.
2.Community Water Affordability Program12968.(a)For purposes of this chapter, the following definitions apply:
(1)Community water system has the same meaning as defined in Section 116275 of the Health and Safety Code.
(2)Fund means the Community Water Affordability Assistance Fund.
(3)Program means the Community Water Affordability Program.
(b)(1)The department shall, subject to transfer of moneys into the fund by the Legislature, develop and administer the Community Water Affordability Program. The program shall provide funding in the form of grants to community water systems for local water infrastructure projects that shall include, but are not limited to, projects that improve water supplies, resiliency, or quality, and projects that reduce energy costs for a community water system. The purpose of the grants shall be reducing the amount of local ratepayer funding required for those projects and for avoiding costs that would otherwise be paid for by ratepayers.
(2)(A)Before disbursing grant funds pursuant to this section, the department shall develop and adopt program guidelines and project solicitation documents after soliciting public comment and feedback inclusive of community water systems. The guidelines and project solicitation documents developed pursuant to this section are not subject to Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(B)The program guidelines shall do all of the following:
(i)Require an applicant for a grant to provide at least 25 percent of the total funding required for the project. Federal funding and other state loans and grants may be included in this amount. The department may waive or reduce that minimum amount if that requirement would cause extreme financial hardship to the applicant.
(ii)Establish a methodology for evaluating projects for purposes of a grant award by consideration of factors that include, but are not limited to, the net present value of the cost avoided on a per account basis over a 25-year period of time, the applicants ability to complete the project in a timely manner, the number of households it would benefit, and the benefits the system received in the past year from the Water Rate Assistance Fund established pursuant to Section 116932 of the Health and Safety Code averaged across the systems total residential connections.
(iii)Consider the characteristics of projects eligible for investment under this program so that the investments in the project would include those that demonstrate reduced long-term operation or maintenance costs, improved financial sustainability of the system, improved operational efficiency, strengthened service delivery, or enhanced long-term resilience of drinking water systems in ways that lower system costs over time.
(iii)(iv)The established methodology for evaluating projects for purposes of a grant award shall not consider an applicants ability to provide the minimum amount of total funding required by clause (i) and shall not prejudice an applicant for requesting that the department waive or reduce that minimum amount due to financial hardship.
(C)Before adopting program guidelines and project solicitation documents, the department shall hold at least three public workshops throughout the state on draft program guidelines and shall provide at least 45 days of public comment on the draft.
(3)The department shall annually post on its internet website a report on the revenues, expenditures, and benefits of the fund for the prior fiscal year. The report shall include the cumulative and fiscal year number of households the Community Water Affordability Program has benefited and the estimated amount of cost the program has caused to be avoided.
(4)The department shall coordinate with the board for projects that seek to combine funding from the program and the board.
(c)The department may undertake any of the following actions to implement the fund:
(1)Provide for the deposit of any of the following moneys into the fund:
(A)Federal contributions.
(B)Voluntary contributions, gifts, grants, or bequests.
(C)Financial participation by a public agency in an activity authorized for funding from the fund.
(2)Enter into agreements for contributions to the fund from the federal government, local or state agencies, or private corporations or nonprofit organizations.
(3)Take additional action as may be appropriate for adequate administration and operation of the fund.
(4)Expend moneys from the fund for reasonable costs associated with administration of the fund, including outreach regarding the availability of the funding. The department shall not expend more than 5 percent of the annual revenue from the fund for reasonable costs associated with the administration of the fund.
(5)Award grants for less than 75 percent of the project cost should the annual appropriation for fund expenditures be less than the cumulative amount of grants awarded for that fiscal year.
(d)The department may set appropriate requirements as a condition of funding, including, but not limited to, any of the following:
(1)An audit.
(2)Improvements to reduce costs and increase efficiencies of the infrastructure project funded.
(3)An evaluation of alternatives.
(e)The Community Water Affordability Assistance Fund is hereby established in the State Treasury. All moneys in the fund are available to the department, upon appropriation by the Legislature, in accordance with this chapter. Moneys in the fund at the close of the fiscal year shall remain in the fund and shall not revert to the General Fund. Moneys in the fund shall not be available for appropriation or borrowed for use for any purpose not established in this chapter unless that use of the moneys is authorized by statute that receives an affirmative vote of two-thirds of the membership in each house of the Legislature.
This chapter shall be known, and may be cited, as the Water Affordability and System Stabilization Act.
12965.5.The Legislature finds and declares all of the following:
(a)It is the established policy of the state, as stated in Section 106.3, that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes.
(b)Addressing Californias environmental justice challenges requires that the state work to improve water affordability for impacted communities and households.
(c)The cost of water has continued to rise, as has the cost of living in California. The increase in the cost of water is largely attributable to increases in the cost of infrastructure, energy, and regulatory compliance costs.
(d)Most of Californias public water systems are governed by Proposition 218, which was passed by voters in November 1996, and requires that customers only be charged proportional, cost of service-based rates. Proposition 218 has been interpreted as prohibiting customers from being charged higher rates to subsidize the costs of other customers.
(e)At the same time, climate change has added, and will continue to add, significant additional cost pressure to water systems, as providers must increasingly invest in climate resilience and adaptive infrastructure, which in turn places cost pressure on rates.
(f)A low-income rate assistance program will assist in addressing affordability challenges for struggling households, but without addressing system costs, such a program will not be sufficiently effective because these cost pressures will continue to result in increased water rates.
(g)Federal and state funding of local water infrastructure helps reduce the amount of ratepayer money that a water system needs to collect to ensure a reliable, safe, and clean water supply for its community and helps address system affordability constraints.
(h)It is in the interest of the people of the state to enact this chapter to establish a trust fund, funded by existing state revenues over multiple years, for the governmental purpose of providing a perpetual source of funding to assist with water system costs that place pressure on water affordability and to provide low-income Californian households with direct assistance with their water bills, which will provide a benefit to Californians across the state.
(i)This chapter does not impose a levy, charge, or exaction of any kind, such as a tax or fee.
12966.For purposes of this chapter, the following definitions apply:
(a)Beneficiary means the people of the state, as represented by the board in its implementation of Chapter 6.2 (commencing with Section 116930) of Part 12 of Division 104 of the Health and Safety Code and its administration of the Water Rate Assistance Fund established pursuant to Section 116932 of the Health and Safety Code, and the department in its implementation of Chapter 2 (commencing with Section 12968) and its administration of the Community Water Affordability Assistance Fund established pursuant to Section 12968. The beneficiarys interest in the trust shall only be the distributions required to be made from the trust pursuant to subdivision (b) of Section 12967.
(b)Board means the State Water Resources Control Board.
(c)Community Water Affordability Assistance Fund means the Community Water Affordability Assistance Fund established pursuant to Section 12968.
(d)Department means the Department of Water Resources.
(e)Income means the money, enhanced value, or other income the trust receives as current return from the investment of the trust principal.
(f)Net income means the trust income earned July 1 to June 30, inclusive, of the prior fiscal year minus all of the necessary and reasonable expenses incident to the administration of the trust during that same period, up to 1 percent of the trust income pursuant to paragraph (2) of subdivision (e) of Section 12967.
(g)Principal means the trust property, which is held in trust for the beneficiary and to accomplish the purposes described in Section 12966.5.
(h)Trust means the Water Affordability and System Stabilization Trust.
(i)Trust fund means the Water Affordability and System Stabilization Fund established pursuant to Section 12966.5 to hold the trust property.
(j)Trust property means the money transferred to the trust fund and any donation to the trust fund received and accepted by the trustee on or after January 1, 2027.
(k)Trustee means the Treasurer, who shall serve as the trustee of the trust having all of the fiduciary duties, responsibilities, and obligations consistent with serving as a trustee of a trust under existing law.
(l)Water Rate Assistance Fund means the Water Rate Assistance Fund established pursuant to Section 116932 of the Health and Safety Code.
2.Water Affordability and System Stabilization Trust12966.5.(a)(1)There is hereby created in the State Treasury the Water Affordability and System Stabilization Fund for holding the trust property of the Water Affordability and System Stabilization Trust and for the purpose of implementing the public and governmental purposes of this chapter. Notwithstanding Section 13340 of the Government Code, all moneys in the trust fund are continuously appropriated to the trustee, without regard to fiscal year, for expenditure in accordance with this chapter.
(2)The distributions by the trustee from the income of the trust are hereby transferred to the board and the department for deposit into, and expenditure from, the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund, respectively, in accordance with subdivision (b) of Section 12967.
(b)The primary purpose of the Water Affordability and System Stabilization Trust, a charitable trust established pursuant to this chapter, shall be to provide a perpetual source of funding each year to the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund in furtherance of the trust fund purposes described in subdivision (a).
(c)Moneys in the trust fund, including the trust principal and trust income, shall not be available for appropriation or be borrowed for use for any purpose not established in this chapter.
(d)Funding of the principal of the trust is hereby authorized and is subject to transfer by the Legislature from the General Fund into the trust fund. All future transfers to the trust fund are hereby irrevocably transferred from the General Fund during the fiscal year the moneys are transferred to the trustee for deposit into the Water Affordability and System Stabilization Fund for distribution and investment to accomplish the purposes of this chapter and subject to the conditions prescribed in Section 12967.
(e)Notwithstanding any other law, moneys deposited into the trust fund or to fund the trust shall not be transferred to the General Fund.
12967.(a)(1)The trustee shall hold the property of the trust for the primary benefit of the trusts beneficiary.
(2)The trustee shall hold, manage, and invest the principal of the trust in accordance with existing law with the obligation of providing a growing perpetual source of annual funding to the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund, beginning 25 years after the Legislature transfers funding from the General Fund to the Water Affordability and System Stabilization Fund. The trustee shall not invade the principal of the trust.
(b)The trustee shall collect, receive, and monetize, if prudent and in accordance with existing law, the income of the trust, and shall distribute the income of the trust annually as follows:
(1)During the first 25 years following the Legislatures first transfer of moneys from the General Fund to the trust fund, the trustee shall distribute the income of the trust as follows:
(A)Transfer 45 percent of the total income deposited into the trust fund during the prior fiscal year to the Water Rate Assistance Fund for the board to expend in accordance with Chapter 6.2 (commencing with Section 116930) of Part 12 of Division 104 of the Health and Safety Code.
(B)Transfer 45 percent of the total income deposited into the trust fund during the prior fiscal year to the Community Water Affordability Assistance Fund for the department to expend in accordance with Chapter 2 (commencing with Section 12968).
(C)In accordance with existing law, invest the remaining 10 percent of the total income deposited into the trust fund during the prior fiscal year as part of the trust principal.
(2)After the first 25 years following the Legislatures first transfer of moneys from the General Fund to the trust fund, the trustee shall distribute the income of the trust as follows:
(A)Transfer 50 percent of the total income deposited into the trust fund during the prior fiscal year to the Water Rate Assistance Fund for the board to expend in accordance with Chapter 6.2 (commencing with Section 116930) of Part 12 of Division 104 of the Health and Safety Code.
(B)Transfer 50 percent of the total income deposited into the trust fund during the prior fiscal year to the Community Water Affordability Assistance Fund for the department to expend in accordance with Chapter 2 (commencing with Section 12968).
(c)Notwithstanding any other law, the trustee, and any employee or agent of the trustee, shall not sell, purchase, exchange, or otherwise deal with or dispose of all or any parts of the principal of the trust.
(d)The trustee shall exercise its administration of the trust as a fiduciary to the beneficiary. The trustee, in its administration of the trust, shall abide by the Uniform Prudent Investor Act (Article 2.5 (commencing with Section 16045) of Chapter 1 of Part 4 of Division 9 of the Probate Code). The trustee shall have the powers, obligations, and responsibilities of a trustee prescribed in Part 4 (commencing with Section 16000) of Division 9 of the Probate Code that are not inconsistent with the purposes of this chapter.
(e)The trustee shall:
(1)Have the power to accept donations that shall be deemed property of the trust and increase the principal of the trust. Donations shall not be expended or transferred until the Legislature transfers funding from the General Fund to the Water Affordability and System Stabilization Fund.
(2)Use no more than 1 percent of the income of the trust earned July 1 to June 30, inclusive, of each fiscal year to pay for the necessary and reasonable expenses incident to the administration of the trust during that same period.
(f)The trustee shall provide for appropriate, as determined by the trustee, audit, accounting, and fiscal management services, plans, and reports relative to the trust fund, in accordance with generally accepted accounting principles adopted by the Governmental Accounting Standards Board.
(g)The trustee annually shall provide the board and the department with an accounting of the investments of the trust fund and a forecast of the projected income to be distributed from the trust fund in future fiscal years.
(h)The trust shall be deemed a charitable trust subject to the supervision of the Attorney General.
2.Community Water Affordability Program12968.(a)For purposes of this chapter, the following definitions apply:
(1)Board means the State Water Resources Control Board.(2)(1)Community water system has the same meaning as defined in Section 116275 of the Health and Safety Code.
(3)Department means the Department of Water Resources.(4)(2)Fund means the Community Water Affordability Assistance Fund.
(5)(3)Program means the Community Water Affordability Program.
(b)(1)The department shall, subject to transfer of moneys into the fund by the Legislature, develop and administer the Community Water Affordability Program. The program shall provide funding in the form of grants to community water systems for local water infrastructure projects that shall include, but are not limited to, projects that improve water supplies, resiliency, or quality, and projects that reduce energy costs for a community water system. The purpose of the grants shall be reducing the amount of local ratepayer funding required for those projects and for avoiding costs that would otherwise be paid for by ratepayers.
(2)(A)Before disbursing grant funds pursuant to this section, the department shall develop and adopt program guidelines and project solicitation documents after soliciting public comment and feedback inclusive of community water systems. The guidelines and project solicitation documents developed pursuant to this section are not subject to Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(B)The program guidelines shall do all of the following:
(i)Require an applicant for a grant to provide at least 25 percent of the total funding required for the project. Federal funding and other state loans and grants may be included in this amount. The department may waive or reduce that minimum amount if that requirement would cause extreme financial hardship to the applicant.
(ii)Establish a methodology for evaluating projects for purposes of a grant award by consideration of factors that include, but are not limited to, the net present value of the cost avoided on a per account basis over a 25-year period of time, the applicants ability to complete the project in a timely manner, the number of households it would benefit, and the benefits the system received in the past year from the Water Rate Assistance Fund established pursuant to Section 116932 of the Heath Health and Safety Code averaged across the systems total residential connections.
(iii)The established methodology for evaluating projects for purposes of a grant award shall not consider an applicants ability to provide the minimum amount of total funding required by clause (i) and shall not prejudice an applicant for requesting that the department waive or reduce that minimum amount due to financial hardship.
(C)Before adopting program guidelines and project solicitation documents, the department shall hold at least three public workshops throughout the state on draft program guidelines and shall provide at least 45 days of public comment on the draft.
(3)The department shall annually post on its internet website a report on the revenues, expenditures, and benefits of the fund for the prior fiscal year. The report shall include the cumulative and fiscal year number of households the Community Water Affordability Program has benefited and the estimated amount of cost the program has caused to be avoided.
(4)The department shall coordinate with the board for projects that seek to combine funding from the program and the board.
(c)The department may undertake any of the following actions to implement the fund:
(1)Provide for the deposit of any of the following moneys into the fund:
(A)Federal contributions.
(B)Voluntary contributions, gifts, grants, or bequests.
(C)Financial participation by a public agency in an activity authorized for funding from the fund.
(2)Enter into agreements for contributions to the fund from the federal government, local or state agencies, or private corporations or nonprofit organizations.
(3)Take additional action as may be appropriate for adequate administration and operation of the fund.
(4)Expend moneys from the fund for reasonable costs associated with administration of the fund, including outreach regarding the availability of the funding. The department shall not expend more than 5 percent of the annual revenue from the fund for reasonable costs associated with the administration of the fund.
(d)The department may set appropriate requirements as a condition of funding, including, but not limited to, any of the following:
(1)An audit.
(2)Improvements to reduce costs and increase efficiencies of the infrastructure project funded.
(3)An evaluation of alternatives.
(e)The Community Water Affordability Assistance Fund is hereby established in the State Treasury. Notwithstanding Section 13340 of the Government Code, all All moneys in the fund are continuously appropriated available to the department, without regard to fiscal year, upon appropriation by the Legislature, in accordance with this chapter. Moneys in the fund at the close of the fiscal year shall remain in the fund and shall not revert to the General Fund. Moneys in the fund shall not be available for appropriation or borrowed for use for any purpose not established in this chapter unless that use of the moneys is authorized by statute that receives an affirmative vote of two-thirds of the membership in each house of the Legislature.
This chapter shall be known, and may be cited, as the Water Affordability and System Stabilization Act.
12965.5.The Legislature finds and declares all of the following:
(a)It is the established policy of the state, as stated in Section 106.3, that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes.
(b)Addressing Californias environmental justice challenges requires that the state work to improve water affordability for impacted communities and households.
(c)The cost of water has continued to rise, as has the cost of living in California. The increase in the cost of water is largely attributable to increases in the cost of infrastructure, energy, and regulatory compliance costs.
(d)Most of Californias public water systems are governed by Proposition 218, which was passed by voters in November 1996, and requires that customers only be charged proportional, cost of service-based rates. Proposition 218 has been interpreted as prohibiting customers from being charged higher rates to subsidize the costs of other customers.
(e)At the same time, climate change has added, and will continue to add, significant additional cost pressure to water systems, as providers must increasingly invest in climate resilience and adaptive infrastructure, which in turn places cost pressure on rates.
(f)A low-income rate assistance program will assist in addressing affordability challenges for struggling households, but without addressing system costs, such a program will not be sufficiently effective because these cost pressures will continue to result in increased water rates.
(g)Federal and state funding of local water infrastructure helps reduce the amount of ratepayer money that a water system needs to collect to ensure a reliable, safe, and clean water supply for its community, community and helps address system affordability constraints.
(h)It is in the interest of the people of the state to enact this chapter to establish a trust fund, funded by existing state revenues over multiple years, for the governmental purpose of providing a perpetual source of funding to assist with water system costs that place pressure on water affordability, affordability and to provide low-income Californian households with direct assistance with their water bills, which will provide a benefit to Californians across the state.
(i)This chapter does not impose a levy, charge, or exaction of any kind, such as a tax or fee.
12966.For purposes of this chapter, the following definitions apply:
(a)Beneficiary means the people of the state, as represented by the board in its implementation of Chapter 6.2 (commencing with Section 116930) of Part 12 of Division 104 of the Health and Safety Code and its administration of the Water Rate Assistance Fund established pursuant to Section 116932 of the Health and Safety Code, and the department in its implementation of Chapter 2 (commencing with Section 12968) and its administration of the Community Water Affordability Assistance Fund established pursuant to Section 12968. The beneficiarys interest in the trust shall only be the distributions required to be made from the trust pursuant to subdivision (b) of Section 12967.
(b)Board means the State Water Resources Control Board.
(c)Community Water Affordability Assistance Fund means the Community Water Affordability Assistance Fund established pursuant to Section 12968.
(d)Department means the Department of Water Resources.
(e)Income means the money, enhanced value, or other income the trust receives as current return from the investment of the trust principal.
(f)Net income means the trust income earned July 1 to June 30, inclusive, of the previous prior fiscal year minus all of the necessary and reasonable expenses incident to the administration of the trust during that same period, up to 1 percent of the trust income pursuant to paragraph (2) of subdivision (e) of Section 12967.
(g)Principal means the trust property, that which is held in trust for the beneficiary and to accomplish the purposes described in Section 12965.5. 12966.5.
(h)Trust means the Water Affordability and System Stabilization Trust.
(i)Trust fund means the Water Affordability and System Stabilization Fund established pursuant to Section 12966.5 to hold the trust property.
(j)Trust property means the money transferred to the trust fund and any donation to the trust fund received and accepted by the trustee on or after January 1, 2027.
(k)Trustee means the Treasurer, who shall serve as the trustee of the trust having all of the fiduciary duties, responsibilities, and obligations consistent with serving as a trustee of a trust under existing law.
(l)Water Rate Assistance Fund means the Water Rate Assistance Fund established pursuant to Section 116932 of the Health and Safety Code.
2.Water Affordability and System Stabilization Trust12966.5.(a)(1)There is hereby created in the State Treasury the Water Affordability and System Stabilization Fund for holding the trust property of the Water Affordability and System Stabilization Trust and for the purpose of implementing the public and governmental purposes of this chapter. Notwithstanding Section 13340 of the Government Code, all moneys in the trust fund are continuously appropriated to the trustee, without regard to fiscal year, for expenditure in accordance with this chapter.
(2)The distributions by the trustee from the income of the trust are hereby transferred to the board and the department for deposit into, and expenditure from, the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund, respectively, in accordance with subdivision (b) of Section 12967.
(b)The primary purpose of the Water Affordability and System Stabilization Trust, a charitable trust established pursuant to this chapter, shall be to provide a perpetual source of funding each year to the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund in furtherance of the trust fund purposes described in subdivision (a).
(c)Moneys in the trust fund, including the trust principal and trust income, shall not be available for appropriation or be borrowed for use for any purpose not established in this chapter.
(d)Funding of the principal of the trust is hereby authorized and is subject to transfer by the Legislature from the General Fund into the trust fund. All future transfers to the trust fund are hereby irrevocably transferred from the General Fund during the fiscal year the moneys are transferred to the trustee for deposit into the Water Affordability and System Stabilization Fund for distribution and investment to accomplish the purposes of this chapter and on subject to the conditions prescribed in Section 12967.
(e)Notwithstanding any other law, moneys deposited into the trust fund or to fund the trust shall not be transferred to the General Fund.
12967.(a)(1)The trustee shall hold the property of the trust for the primary benefit of the trusts beneficiary.
(2)The trustee shall hold, manage, and invest the principal of the trust in accordance with existing law with the obligation of providing a growing perpetual source of annual funding to the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund, beginning 25 years after the Legislature transfers funding from the General Fund to the Water Affordability and System Stabilization Fund. The trustee shall not invade the principal of the trust.
(b)The trustee shall collect, receive, and monetize, if prudent and in accordance with existing law, the income of the trust, and shall distribute the income of the trust annually as follows:
(1)During the first 25 years following the Legislatures first transfer of revenue moneys from the General Fund to the trust fund, the trustee shall distribute the income of the trust as follows:
(A)Transfer 45 percent of the total income deposited into the trust fund during the prior fiscal year to the Water Rate Assistance Fund for the board to expend in accordance with Chapter 6.2 (commencing with Section 116930) of Part 12 of Division 104 of the Health and Safety Code.
(B)Transfer 45 percent of the total income deposited into the trust fund during the prior fiscal year to the Community Water Affordability Assistance Fund for the department to expend in accordance with Chapter 2 (commencing with Section 12968).
(C)In accordance with existing law, invest the remaining 10 percent of the total income deposited into the trust fund during the prior fiscal year as part of the trust principal.
(2)After the first 25 years following the Legislatures first transfer of revenue moneys from the General Fund to the trust fund, the trustee shall distribute the income of the trust as follows:
(A)Transfer 50 percent of the total income deposited into the trust fund during the prior fiscal year to the Water Rate Assistance Fund for the board to expend in accordance with Chapter 6.2 (commencing with Section 116930) of Part 12 of Division 104 of the Health and Safety Code.
(B)Transfer 50 percent of the total income deposited into the trust fund during the prior fiscal year to the Community Water Affordability Assistance Fund for the department to expend in accordance with Chapter 2 (commencing with Section 12968).
(c)Notwithstanding any other law, the trustee, and any employee or agent of the trustee, shall not sell, purchase, exchange, or otherwise deal with or dispose of all or any parts of the principal of the trust.
(d)The trustee shall exercise its administration of the trust as a fiduciary to the beneficiary. The trustee, in its administration of the trust, shall abide by the Uniform Prudent Investor Act (Article 2.5 (commencing with Section 16045) of Chapter 1 of Part 4 of Division 9 of the Probate Code). The trustee shall have the powers, obligations, and responsibilities of a trustee prescribed in Part 4 (commencing with Section 16000) of Division 9 of the Probate Code that are not inconsistent with the purposes of this chapter.
(e)The trustee shall:
(1)Have the power to accept donations that shall be deemed property of the trust and increase the principal of the trust. Donations shall not be expended or transferred until the Legislature transfers funding from the General Fund to the Water Affordability and System Stabilization Fund.
(2)Use no more than 1 percent of the income of the trust earned July 1 to June 30, inclusive, of each fiscal year to pay for the necessary and reasonable expenses incident to the administration of the trust during that same period.
(f)The trustee shall provide for appropriate, as determined by the trustee, audit, accounting, and fiscal management services, plans, and reports relative to the trust fund, in accordance with generally accepted accounting principles adopted by the Governmental Accounting Standards Board.
(g)The trustee annually shall provide the board and the department with an accounting of the investments of the trust fund and a forecast of the projected income to be distributed from the trust fund in future fiscal years.
(h)The trust shall be deemed a charitable trust subject to the supervision of the Attorney General.
2.Community Water Affordability Program12968.(a)For purposes of this chapter, the following definitions apply:
(1)Board means the State Water Resources Control Board.
(2)Community water system has the same meaning as defined in Section 116275 of the Health and Safety Code.
(3)Department means the Department of Water Resources.
(4)Fund means the Community Water Affordability Assistance Fund.
(5)Program means the Community Water Affordability Program.
(b)(1)The department shall, subject to transfer of moneys into the fund by the Legislature, develop and administer the Community Water Affordability Program. The program shall provide funding in the form of grants to community water systems for local water infrastructure projects that shall include, but are not limited to, projects that improve water supplies, resiliency, or quality, and projects that reduce energy costs for a community water system. The purpose of the grants shall be reducing the amount of local ratepayer funding required for those projects and for avoiding costs that would otherwise be paid for by ratepayers.
(2)(A)Before disbursing grant funds pursuant to this section, the department shall develop and adopt program guidelines and project solicitation documents, documents after soliciting public comment and feedback inclusive of community water systems. The guidelines and project solicitation documents developed pursuant to this section are not subject to Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(B)The program guidelines shall do all of the following:
(i)Require an applicant for a grant to provide at least 25 percent of the total funding required for the project. Federal funding and other state loans and grants may be included in this amount. The department may waive or reduce that minimum amount if that requirement would cause extreme financial hardship to the applicant.
(ii)Establish a methodology for evaluating projects for purposes of a grant award by consideration of factors that include, but are not limited to, the net present value of the cost avoided on a per account basis over a 25-year period of time, the applicants ability to complete the project in a timely manner, and the number of households it would benefit. benefit, and the benefits the system received in the past year from the Water Rate Assistance Fund established pursuant to Section 116932 of the Heath and Safety Code averaged across the systems total residential connections.
(iii)The established methodology for evaluating projects for purposes of a grant award shall not consider an applicants ability to provide the minimum amount of total funding required by clause (i) and shall not prejudice an applicant for requesting that the department waive or reduce that minimum amount due to financial hardship.
(C)Before adopting program guidelines and project solicitation documents, the department shall hold at least three public workshops throughout the state on draft program guidelines and shall provide at least 45 days of public comment on the draft.
(3)The department shall annually post on its internet website a report on the revenues, expenditures, and benefits of the fund for the prior fiscal year. The report shall include the cumulative and fiscal year number of households the Community Water Assistance Affordability Program has benefited and the estimated amount of cost the program has caused to be avoided.
(4)The department shall coordinate with the board for projects that seek to combine funding from the program and the board.
(c)The department may undertake any of the following actions to implement the fund:
(1)Provide for the deposit of any of the following moneys into the fund:
(A)Federal contributions.
(B)Voluntary contributions, gifts, grants, or bequests.
(C)Financial participation by a public agency in an activity authorized for funding from the fund.
(2)Enter into agreements for contributions to the fund from the federal government, local or state agencies, or private corporations or nonprofit organizations.
(3)Take additional action as may be appropriate for adequate administration and operation of the fund.
(4)Expend moneys from the fund for reasonable costs associated with administration of the fund, including outreach regarding the availability of the funding. The department shall not expend more than 5 percent of the annual revenue from the fund for reasonable costs associated with the administration of the fund.
(d)The department may set appropriate requirements as a condition of funding, including, but not limited to, any of the following:
(1)An audit.
(2)Improvements to reduce costs and increase efficiencies of the infrastructure project funded.
(3)An evaluation of alternatives.
(e)The Community Water Affordability Assistance Fund is hereby established in the State Treasury. Notwithstanding Section 13340 of the Government Code, all moneys in the fund are continuously appropriated to the department, without regard to fiscal year, in accordance with this chapter. Moneys in the fund at the close of the fiscal year shall remain in the fund and shall not revert to the General Fund. Moneys in the fund shall not be available for appropriation or borrowed for use for any purpose not established in this chapter unless that use of the moneys is authorized by statute that receives an affirmative vote of two-thirds of the membership in each house of the Legislature.
This chapter shall be known, and may be cited, as the Water Affordability and System Stabilization Act.
12965.5.The Legislature finds and declares all of the following:
(a)It is the established policy of the state, as stated in Section 106.3, that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes.
(b)Addressing Californias environmental justice challenges requires that the state work to improve water affordability for impacted communities and households.
(c)The cost of water has continued to rise, as has the cost of living in California. The increase in the cost of water is largely attributable to increases in the cost of infrastructure, energy, and regulatory compliance costs.
(d)Most of Californias public water systems are governed by Proposition 218, which was passed by voters in November 1996, and requires that customers only be charged proportional, cost of service-based rates. Proposition 218 has been interpreted as prohibiting customers from being charged higher rates to subsidize the costs of other customers.
(e)At the same time, climate change has added, and will continue to add, significant additional cost pressure to water systems, as providers must increasingly invest in climate resilience and adaptive infrastructure, which in turn places cost pressure on rates.
(f)A low-income rate assistance program will assist in addressing affordability challenges for struggling households, but without addressing system costs, such a program will not be sufficiently effective because these cost pressures will continue to result in increased water rates.
(g)Federal and state funding of local water infrastructure helps reduce the amount of ratepayer money that a water system needs to collect to ensure a reliable, safe, and clean water supply for its community, and helps address system affordability constraints.
(h)It is in the interest of the people of the state to enact this chapter to establish a trust fund, funded by existing state revenues over multiple years, for the governmental purpose of providing a perpetual source of funding to assist with water system costs that place pressure on water affordability, and to provide low-income Californian households with direct assistance with their water bills, which will provide a benefit to Californians across the state.
(i)This chapter does not impose a levy, charge, or exaction of any kind, such as a tax or fee.
12966.For purposes of this chapter, the following definitions apply:
(a)Beneficiary means the people of the state, as represented by the board in its implementation of Chapter 6.2 (commencing with Section 116930) of Part 12 of Division 104 of the Health and Safety Code and its administration of the Water Rate Assistance Fund established pursuant to Section 116932 of the Health and Safety Code, and the department in its implementation of Chapter 2 (commencing with Section 12968) and its administration of the Community Water Affordability Assistance Fund established pursuant to Section 12968. The beneficiarys interest in the trust shall only be the distributions required to be made from the trust pursuant to subdivision (b) of Section 12967.
(b)Board means the State Water Resources Control Board.
(c)Community Water Affordability Assistance Fund means the Community Water Affordability Assistance Fund established pursuant to Section 12968.
(d)Department means the Department of Water Resources.
(e)Income means the money, enhanced value, or other income the trust receives as current return from the investment of the trust principal.
(f)Net income means the trust income earned July 1 to June 30, inclusive, of the previous fiscal year minus all of the necessary and reasonable expenses incident to the administration of the trust during that same period, up to 1 percent of the trust income pursuant to paragraph (2) of subdivision (e) of Section 12967.
(g)Principal means the trust property, that is held in trust for the beneficiary and to accomplish the purposes described in Section 12965.5.
(h)Trust means the Water Affordability and System Stabilization Trust.
(i)Trust fund means the Water Affordability and System Stabilization Fund established pursuant to Section 12966.5 to hold the trust property.
(j)Trust property means the money transferred to the trust fund and any donation to the trust fund received and accepted by the trustee on or after January 1, 2027.
(k)Trustee means the Treasurer, who shall serve as the trustee of the trust having all of the fiduciary duties, responsibilities, and obligations consistent with serving as a trustee of a trust under existing law.
(l)Water Rate Assistance Fund means the Water Rate Assistance Fund established pursuant to Section 116932 of the Health and Safety Code.
2.Water Affordability and System Stabilization Trust12966.5.(a)(1)There is hereby created in the State Treasury the Water Affordability and System Stabilization Fund for holding the trust property of the Water Affordability and System Stabilization Trust and for the purpose of implementing the public and governmental purposes of this chapter. Notwithstanding Section 13340 of the Government Code, all moneys in the trust fund are continuously appropriated to the trustee, without regard to fiscal year, for expenditure in accordance with this chapter.
(2)The distributions by the trustee from the income of the trust are hereby transferred to the board and the department for deposit into, and expenditure from, the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund, respectively, in accordance with subdivision (b) of Section 12967.
(b)The primary purpose of the Water Affordability and System Stabilization Trust, a charitable trust established pursuant to this chapter, shall be to provide a perpetual source of funding each year to the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund in furtherance of the trust fund purposes described in subdivision (a).
(c)Moneys in the trust fund, including the trust principal and trust income, shall not be available for appropriation or be borrowed for use for any purpose not established in this chapter.
(d)Funding of the principal of the trust is hereby authorized and is subject to transfer by the Legislature from the General Fund into the trust fund. All future transfers to the trust fund are hereby irrevocably transferred from the General Fund during the fiscal year the moneys are transferred to the trustee for deposit into the Water Affordability and System Stabilization Fund for distribution and investment to accomplish the purposes of this chapter and on the conditions prescribed in Section 12967.
(e)Notwithstanding any other law, moneys deposited into the trust fund or to fund the trust shall not be transferred to the General Fund.
12967.(a)(1)The trustee shall hold the property of the trust for the primary benefit of the trusts beneficiary.
(2)The trustee shall hold, manage, and invest the principal of the trust in accordance with existing law with the obligation of providing a growing perpetual source of annual funding to the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund, beginning 25 years after the Legislature transfers funding from the General Fund to the Water Affordability and System Stabilization Fund. The trustee shall not invade the principal of the trust.
(b)The trustee shall collect, receive, and monetize, if prudent and in accordance with existing law, the income of the trust, and shall distribute the income of the trust annually as follows:
(1)During the first 25 years following the Legislatures first transfer of revenue from the General Fund to the trust fund, the trustee shall distribute the income of the trust as follows:
(A)Transfer 45 percent of the total income deposited into the trust fund during the prior fiscal year to the Water Rate Assistance Fund for the board to expend in accordance with Chapter 6.2 (commencing with Section 116930) of Part 12 of Division 104 of the Health and Safety Code.
(B)Transfer 45 percent of the total income deposited into the trust fund during the prior fiscal year to the Community Water Affordability Assistance Fund for the department to expend in accordance with Chapter 2 (commencing with Section 12968).
(C)In accordance with existing law, invest the remaining 10 percent of the total income deposited into the trust fund during the prior fiscal year as part of the trust principal.
(2)After the first 25 years following the Legislatures first transfer of revenue from the General Fund to the trust fund, the trustee shall distribute the income of the trust as follows:
(A)Transfer 50 percent of the total income deposited into the trust fund during the prior fiscal year to the Water Rate Assistance Fund for the board to expend in accordance with Chapter 6.2 (commencing with Section 116930) of Part 12 of Division 104 of the Health and Safety Code.
(B)Transfer 50 percent of the total income deposited into the trust fund during the prior fiscal year to the Community Water Affordability Assistance Fund for the department to expend in accordance with Chapter 2 (commencing with Section 12968).
(c)Notwithstanding any other law, the trustee, and any employee or agent of the trustee, shall not sell, purchase, exchange, or otherwise deal with or dispose of all or any parts of the principal of the trust.
(d)The trustee shall exercise its administration of the trust as a fiduciary to the beneficiary. The trustee, in its administration of the trust, shall abide by the Uniform Prudent Investor Act (Article 2.5 (commencing with Section 16045) of Chapter 1 of Part 4 of Division 9 of the Probate Code). The trustee shall have the powers, obligations, and responsibilities of a trustee prescribed in Part 4 (commencing with Section 16000) of Division 9 of the Probate Code that are not inconsistent with the purposes of this chapter.
(e)The trustee shall:
(1)Have the power to accept donations that shall be deemed property of the trust and increase the principal of the trust. Donations shall not be expended or transferred until the Legislature transfers funding from the General Fund to the Water Affordability and System Stabilization Fund.
(2)Use no more than 1 percent of the income of the trust earned July 1 to June 30, inclusive, of each fiscal year to pay for the necessary and reasonable expenses incident to the administration of the trust during that same period.
(f)The trustee shall provide for appropriate, as determined by the trustee, audit, accounting, and fiscal management services, plans, and reports relative to the trust fund, in accordance with generally accepted accounting principles adopted by the Governmental Accounting Standards Board.
(g)The trustee annually shall provide the board and the department with an accounting of the investments and a forecast of the projected income to be distributed from the trust fund in future fiscal years.
(h)The trust shall be deemed a charitable trust subject to the supervision of the Attorney General.
2.Community Water Affordability Program12968.(a)For purposes of this chapter, the following definitions apply:
(1)Board means the State Water Resources Control Board.
(2)Community water system has the same meaning as defined in Section 116275 of the Health and Safety Code.
(3)Department means the Department of Water Resources.
(4)Fund means the Community Water Affordability Assistance Fund.
(5)Program means the Community Water Affordability Program.
(b)(1)The department shall, subject to transfer of moneys into the fund by the Legislature, develop and administer the Community Water Affordability Program. The program shall provide funding in the form of grants to community water systems for local water infrastructure projects that shall include, but are not limited to, projects that improve water supplies, resiliency, or quality, and projects that reduce energy costs for a community water system. The purpose of the grants shall be reducing the amount of local ratepayer funding required for those projects and for avoiding costs that would otherwise be paid for by ratepayers.
(2)(A)Before disbursing grant funds pursuant to this section, the department shall develop and adopt program guidelines and project solicitation documents, after soliciting public comment and feedback inclusive of community water systems. The guidelines and project solicitation documents developed pursuant to this section are not subject to Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(B)The program guidelines shall do all of the following:
(i)Require an applicant for a grant to provide at least 25 percent of the total funding required for the project. Federal funding and other state loans and grants may be included in this amount. The department may waive or reduce that minimum amount if that requirement would cause extreme financial hardship to the applicant.
(ii)Establish a methodology for evaluating projects for purposes of a grant award by consideration of factors that include, but are not limited to, the net present value of the cost avoided on a per account basis over a 25-year period of time, the applicants ability to complete the project in a timely manner, and the number of households it would benefit.
(iii)The established methodology for evaluating projects for purposes of a grant award shall not consider an applicants ability to provide the minimum amount of total funding required by clause (i) and shall not prejudice an applicant for requesting that the department waive or reduce that minimum amount due to financial hardship.
(C)Before adopting program guidelines and project solicitation documents, the department shall hold at least three public workshops throughout the state on draft program guidelines and shall provide at least 45 days of public comment on the draft.
(3)The department shall annually post on its internet website a report on the revenues, expenditures, and benefits of the fund for the prior fiscal year. The report shall include the cumulative and fiscal year number of households the Community Water Assistance Program has benefited and the estimated amount of cost the program has caused to be avoided.
(4)The department shall coordinate with the board for projects that seek to combine funding from the program and the board.
(c)The department may undertake any of the following actions to implement the fund:
(1)Provide for the deposit of any of the following moneys into the fund:
(A)Federal contributions.
(B)Voluntary contributions, gifts, grants, or bequests.
(C)Financial participation by a public agency in an activity authorized for funding from the fund.
(2)Enter into agreements for contributions to the fund from the federal government, local or state agencies, or private corporations or nonprofit organizations.
(3)Take additional action as may be appropriate for adequate administration and operation of the fund.
(4)Expend moneys from the fund for reasonable costs associated with administration of the fund, including outreach regarding the availability of the funding. The department shall not expend more than 5 percent of the annual revenue from the fund for reasonable costs associated with the administration of the fund.
(d)The department may set appropriate requirements as a condition of funding, including, but not limited to, any of the following:
(1)An audit.
(2)Improvements to reduce costs and increase efficiencies of the infrastructure project funded.
(3)An evaluation of alternatives.
(e)The Community Water Affordability Assistance Fund is hereby established in the State Treasury. Notwithstanding Section 13340 of the Government Code, all moneys in the fund are continuously appropriated to the department, without regard to fiscal year, in accordance with this chapter. Moneys in the fund at the close of the fiscal year shall remain in the fund and shall not revert to the General Fund. Moneys in the fund shall not be available for appropriation or borrowed for use for any purpose not established in this chapter unless that use of the moneys is authorized by statute that receives an affirmative vote of two-thirds of the membership in each house of the Legislature.
SECTION 1.Part 7.5 (commencing with Section 12965) is added to Division 6 of the Water Code, to read:7.5.Community Water Affordability Program 12965.(a)For purposes of this part, the following definitions apply:(1)Fund means the Community Water Affordability Assistance Fund.(2)Program means the Community Water Affordability Program.(b)(1)The department shall, upon appropriation by the Legislature, develop and administer the Community Water Affordability Program. The program shall provide funding in the form of grants to local water suppliers for water system repairs, rehabilitation, and enhancements, water safety and quality, and other local water system infrastructure projects, for the purpose of reducing the amount of local ratepayer funding required for those projects.(2)(A)Before disbursing grant funds pursuant to this section, the department shall develop and adopt program guidelines and project solicitation documents. The guidelines and project solicitation documents developed pursuant to this section are not subject to Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.(B)The program guidelines shall require an applicant for a grant to provide at least 50 percent of the total funding required for the project. Federal funding and other state loans and grants may be included in this amount. The department may waive or reduce that minimum amount if that requirement would cause extreme financial hardship to the applicant.(c)The Community Water Affordability Assistance Fund is hereby established in the State Treasury. Upon appropriation by the Legislature, moneys in the fund shall be made available to the department for the purposes of the program.(a)For purposes of this part, the following definitions apply:
(1)Fund means the Community Water Affordability Assistance Fund.
(2)Program means the Community Water Affordability Program.
(b)(1)The department shall, upon appropriation by the Legislature, develop and administer the Community Water Affordability Program. The program shall provide funding in the form of grants to local water suppliers for water system repairs, rehabilitation, and enhancements, water safety and quality, and other local water system infrastructure projects, for the purpose of reducing the amount of local ratepayer funding required for those projects.
(2)(A)Before disbursing grant funds pursuant to this section, the department shall develop and adopt program guidelines and project solicitation documents. The guidelines and project solicitation documents developed pursuant to this section are not subject to Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(B)The program guidelines shall require an applicant for a grant to provide at least 50 percent of the total funding required for the project. Federal funding and other state loans and grants may be included in this amount. The department may waive or reduce that minimum amount if that requirement would cause extreme financial hardship to the applicant.
(c)The Community Water Affordability Assistance Fund is hereby established in the State Treasury. Upon appropriation by the Legislature, moneys in the fund shall be made available to the department for the purposes of the program.
SECTION 1.It is the intent of the Legislature to enact subsequent legislation relating to groundwater.It is the intent of the Legislature to enact subsequent legislation relating to groundwater.
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Date
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Status
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|---|---|
| Sep 30, 2026 | Vetoed by Governor. |
| Sep 10, 2026 | Enrolled and presented to the Governor at 3 p.m. |
| Aug 30, 2026 | In Assembly. Concurrence in Senate amendments pending. |
| Aug 30, 2026 | Senate amendments concurred in. To Engrossing and Enrolling. |
| Aug 30, 2026 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 78. Noes 0. Page 6939.). |
| Aug 30, 2026 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 78. Noes 0.). |
| Aug 30, 2026 | Read third time. Passed. Ordered to the Assembly. (Ayes 40. Noes 0.). |
| Aug 30, 2026 | Ordered to special consent calendar. |
| Aug 24, 2026 | Read second time. Ordered to third reading. |
| Aug 21, 2026 | Read third time and amended. Ordered to second reading. |
| Aug 13, 2026 | Read second time. Ordered to third reading. |
| Aug 13, 2026 | From committee: Do pass. (Ayes 7. Noes 0.) (August 13). |
| Aug 3, 2026 | In committee: Referred to APPR. suspense file. |
| Jul 2, 2026 | Read second time and amended. Re-referred to Com. on APPR. |
| Jul 2, 2026 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. with recommendation: To Consent Calendar. (Ayes 7. Noes 0.) (July 1). |
| Jun 24, 2026 | From committee: Do pass and re-refer to Com. on E.Q. with recommendation: To Consent Calendar. (Ayes 7. Noes 0.) (June 23). Re-referred to Com. on E.Q. |
| Jun 11, 2026 | From committee chair, with author's amendments: Amend, and re-refer to committee. Read second time, amended, and re-referred to Com. on N.R. & W. |
| Jun 3, 2026 | Referred to Coms. on N.R. & W. and E.Q. |
| May 27, 2026 | In Senate. Read first time. To Com. on RLS. for assignment. |
| May 26, 2026 | Read third time. Passed. Ordered to the Senate. (Ayes 78. Noes 0.) |
| May 26, 2026 | Read third time. Passed. Ordered to the Senate. (Ayes 78. Noes 0. Page 5344.) |
| May 26, 2026 | Read third time. Passed. Ordered to the Senate. |
| May 18, 2026 | Read second time. Ordered to third reading. |
| May 14, 2026 | From committee: Do pass. (Ayes 15. Noes 0.) (May 14). |
| Apr 29, 2026 | In committee: Set, first hearing. Referred to APPR. suspense file. |
| Apr 15, 2026 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 12. Noes 0.) (April 14). Re-referred to Com. on APPR. |
| Apr 7, 2026 | Re-referred to Com. on W., P., & W. |
| Apr 6, 2026 | From committee chair, with author's amendments: Amend, and re-refer to Com. on W., P., & W. Read second time and amended. |
| Mar 23, 2026 | Re-referred to Com. on W., P., & W. |
| Mar 19, 2026 | Referred to Com. on W., P., & W. |
| Mar 19, 2026 | From committee chair, with author's amendments: Amend, and re-refer to Com. on W., P., & W. Read second time and amended. |
| Feb 21, 2026 | From printer. May be heard in committee March 23. |
| Feb 20, 2026 | Read first time. To print. |
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Date
|
Description
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Location
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Votes
|
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|---|---|---|---|---|
| Aug 30, 2026 | AB 2739 Soria Concurrence in Senate Amendments | Assembly Floor |
Passed |
|
| Aug 30, 2026 | Assembly 3rd Reading AB2739 Soria et al. By Menjivar | Senate Floor |
Passed |
|
| Aug 13, 2026 | Do pass | Senate Standing Committee on Appropriations |
Passed |
|
| Aug 3, 2026 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
|
| Jul 1, 2026 | Do pass as amended, but first amend, and re-refer to the Committee on [Appropriations] with the recommendation: To Consent Calendar | Senate Standing Committee on Environmental Quality |
Passed |
|
| Jun 23, 2026 | Do pass, but first be re-referred to the Committee on [Environmental Quality] with the recommendation: To Consent Calendar | Senate Standing Committee on Natural Resources and Water |
Passed |
|
| May 26, 2026 | AB 2739 Soria Assembly Third Reading | Assembly Floor |
Passed |
|
| May 14, 2026 | Do pass. | Assembly Standing Committee on Appropriations |
Passed |
|
| Apr 14, 2026 | Do pass and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Water, Parks, and Wildlife |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| Association of California Cities - Orange County | ** Support | |
| Association Of California Water Agencies | ** Support | |
| California Chamber Of Commerce | ** Support | |
| California Council for Environment and Economic Balance | ** Support | |
| California Council for Environment and Economic Balance (CEEB) | ** Support | |
| California Farm Bureau Federation | ** Support | |
| California Municipal Utilities Association | ** Support | |
| California Special Districts Association | ** Support | |
| California State Association Of Counties | ** Support | |
| California Water Association | ** Support | |
| Calleguas Municipal Water District | ** Support | |
| City Of Delano | ** Support | |
| City of Farmersville | ** Support | |
| City of Lindsay | ** Support | |
| City of Roseville | ** Support | |
| City Of Sacramento | ** Support | |
| City of Thousand Oaks | ** Support | |
| City of Tulare | ** Support | |
| Clean Water Action | ** Support | |
| Clean Water Action Community Water Center | ** Support | |
| Communitiy Water Center | ** Support | |
| Contra Costa Water District | ** Support | |
| County Of Los Angeles | ** Support | |
| Crescenta Valley Water District | ** Support | |
| East Bay Municipal Utility District | ** Support | |
| Eastern Municipal Water District | ** Support | |
| El Dorado Irrigation District | ** Support | |
| El Toro Water District | ** Support | |
| Elsinore Valley Municipal Water District | ** Support | |
| Honorable Bryan Osorio, Councilmember, City of Delano | ** Support | |
| Honorable Gregorio Gomez, Councilmember, City of Farmersville | ** Support | |
| Honorable Joe Soria, Mayor Pro Tem, City of Lindsey | ** Support | |
| Honorable Jose Sigala, Councilmember, City of Tulare | ** Support | |
| Honorable Krista Bernasconi, Mayor, City of Roseville | ** Support | |
| Irvine Ranch Water District | ** Support | |
| Irvine Ranch Water District (co-source) | ** Support | |
| Leadership Counsel for Justice and Accountability | ** Support | |
| League Of California Cities | ** Support | |
| Metropolitan Water District Of Southern California | ** Support | |
| Mission Springs Water District | ** Support | |
| Mountain Counties Water Resources Association | ** Support | |
| Municipal Water District Of Orange County | ** Support | |
| Orange County Business Council | ** Support | |
| Rancho California Water District | ** Support | |
| Rancho California Water District (co-source) | ** Support | |
| Rancho Water | ** Support | |
| Regional Water Authority | ** Support | |
| Rincon del Diablo Municipal Water District | ** Support | |
| San Diego County Water Authority | ** Support | |
| San Joaquin Valley Water Collaborative Action Program | ** Support | |
| santa fe irrigation district | ** Support | |
| Santa Margarita Water District | ** Support | |
| South Coast Water District | ** Support | |
| South Orange County Economic Coalition | ** Support | |
| Southern California Water Coalition | ** Support | |
| Southwest California Legislative Council | ** Support | |
| State Treasurer’s Office | ** Against | |
| Sustainable Conservation | ** Support | |
| The Honorable Bryan Osorio, Councilmember, City of Delano | ** Support | |
| The Honorable Gregorio Gomez, Councilmember, City of Farmersville | ** Support | |
| The Honorable Joe Soria, Mayor Pro Tem, City of Lindsay | ** Support | |
| The Honorable Jose Sigala, Councilmember, City of Tulare | ** Support | |
| Three Valleys Municipal Water District | ** Support | |
| Upper San Gabriel Valley Municipal Water District | ** Support | |
| Valley Water | ** Support | |
| Walnut Valley Water District | ** Support | |
| West Basin Municipal Water District | ** Support | |
| Western Municipal Water District | ** Support |
GOVERNOR′S VETO
GV Bill Id:AB 2739
Author:(Soria)
As Enrolled Ver:September 3, 2026
2/3 vote
SUMMARY
Establishes the Water Affordability and System Stabilization Trust (Trust Fund) as a charitable trust to generate ongoing funding for the Community Water Affordability Program (Affordability Program) administered by the Department of Water Resources (DWR) and the Water Rate Assistance Fund administered by the State Water Resources Control Board (State Water Board).
- Provides that funds for the Affordability Program shall be available upon appropriation by the Legislature (rather than continuously appropriated).
- Provides that the State Treasurer may enter into an agreement with a fiscal intermediary to support management of the monies in the Trust Fund. The agreement may contain provisions the State Treasurer deems reasonable and proper to grow the Trust Fund to a perpetual source of funding for the Affordability Program and Water Rate Assistance Program.
- Provides that monies in the Trust Fund shall be invested consistent with requirements for the investment of other surplus state funds (i.e., generally allows for investments in bonds from the U.S. or other governmental entities not in default) and may be invested in the Surplus Money Investment Fund.
- Clarifies that the Controller shall distribute monies from the Trust Fund after coordinating with the State Treasurer.
Governor′s Veto Message
″This bill establishes the [Trust Fund] to theoretically generate ongoing funding for two programs – one to provide water rate assistance and another to provide infrastructure grants for community water systems.
Ensuring access to safe and affordable drinking water in California has been a top priority of my Administration over the last eight years. We have made tremendous progress in bringing clean, affordable drinking water to California′s most disadvantaged communities – over one million people who lacked this most basic need now have it thanks to this work. That said, much more work remains, and I deeply appreciate the intent behind this proposal. But by creating a permanent program without identifying a sustainable, ongoing funding source, this bill – as well as SB 11125 – misses the mark. I encourage the Legislature to revisit this issue next year as part of the annual budget process, in order to balance the funding needed to support a proposal of this nature with other fiscal considerations."
COMMENTS
California residents are served by various types of water utilities or water systems, including publicly-owned utilities, investor-owned utilities, and small community water systems. Most of California′s residential water customers are served by cities, special districts, and mutual water companies. These utilities are governed by the city council, or other local governing body, which set their own water rates; however, the vast majority of these agencies are subject to Proposition 218 (enacted in 1996) that sets state constitutional and statutory requirements that ensure water rates are directly tied to the cost-of-service. As a result, these water agencies are currently not able to increase rates in order to fund low-income rate relief programs for customers and oftentimes face challenges relying on rate revenue to fund water conveyance, storage, and treatment infrastructure.
A 2020 State Water Board report to the Legislature required by AB 401 (Dodd), ″Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance,″ found that California households ″…find it increasingly difficult to satisfy this need as the retail cost of water has risen substantially over the last decade and is expected to rise significantly over the coming years…adjusting for inflation, the average Californian household paid around 45% more per month for drinking water service in 2015 than in 2007.″ The 2020 Report also recommends the creation of a statewide water rate assistance program funded through taxes on personal income, business income, and bottled water, as most water systems are not able to fund low-income assistance programs.
The water affordability outlook does not appear to have improved since 2020. According to the State Water Board 2025 Needs Assessment (2025 Assessment), there was a steady increase in drinking water rates across the state from 2020 to 2023. The 2025 Assessment compares drinking water affordability across all 2,815 community water systems and 363 non-transient non-community water systems that serve K-12 schools. Interestingly, the 2025 Assessment found that larger water systems saw the highest increase since 2020, 17% on average, even though smaller systems generally charge more per unit of water than larger systems. Overall, the 2025 Assessment found ″Statewide, the average drinking water customer charges have increased by $6.64 (10%) since 2020.″ The affordability challenge is even more acute in poorer communities. Of the water systems assessed, 45% are experiencing a low affordability burden, 12% are experiencing a medium affordability burden, and 3% are experiencing a high affordability burden (40% of systems are experiencing no affordability burden).
This bill requires that half of the income generated by the Trust Fund be transferred to the Water Rate Assistance Fund, though this fund does not currently exist and is not created by this bill. SB 1125 (Menjivar) of the current legislative session, however, establishes the Water Rate Assistance Fund and associated Water Rate Assistance Program to be administered by the State Water Board that will receive funding from the Trust Fund created by this bill if both bills are enacted.
According to the Author
″Water affordability and system stability are increasingly interconnected challenges across California. Rising costs associated with infrastructure modernization, climate resilience, regulatory compliance, and energy continue to place pressure on water systems and the communities they serve, which is especially true for households living at or near poverty.
Further, the author contends, ″The California Water Affordability and System Stabilization Act proposes a durable, California-based solution by addressing affordability at the household, system, and community levels. The Act advances a sustainable funding solution to support a statewide Low-Income Rate Assistance program for water while also supporting strategic investments that stabilize water systems and help reduce cost pressures before they are passed on to ratepayers.″
Arguments in Support
The Irvine Ranch Water District and Rancho Water are co-sponsoring this bill. They note that ″water affordability and system stability are increasingly interconnected challenges across California. Rising costs associated with infrastructure modernization, climate resilience, regulatory compliance, and energy continue to place pressure on water systems and the communities they serve, particularly for households living at or near poverty.″ The co-sponsors assert that this bill proposes a lasting solution that does not include any new taxes or fees and that will help to advance the Human Right to Water: ″[This bill′s] proposed funding structure provides predictable, long-term resources without placing new burdens on local governments or water ratepayers. This approach strengthens water planning, and enhances statewide resilience while preserving local decision-making.″
Arguments in Opposition
None on file.
FISCAL COMMENTS
According to the Senate Appropriations Committee, this bill has the following fiscal impact:
- The State Water Board estimates ongoing costs of about $1.5 million in the first year and $1 million annually thereafter (General Fund) to manage and track fund disbursements, make updates to the Loans and Grants Tracking System, and provide administrative, fiscal, and IT support, among other things.
- DWR estimates ongoing costs of approximately $600,000 (General Fund) to develop and administer the Affordability Program. However, the magnitude of DWR′s workload and associated costs would ultimately depend on the level of funding it receives and must administer. This bill allows DWR to expend up to 5% of the Trust Fund′s annual revenue on reasonable administrative costs.
- The State Treasurer′s Office raises concerns that it does not traditionally administer trusts, and estimates that its costs are unknown but significant (ongoing, General Fund).
- General Fund cost pressure of an unknown but significant amount, potentially in the millions of dollars (one-time or annually), to fund the Water Affordability and System Stabilization Fund principal, subject to transfer by the Legislature from the General Fund. The State Treasurer, acting as the trustee, must invest this principal under standard fiduciary rules, theoretically earning the Trust Fund investment income over time. For the first 25 years, the trustee must reinvest 10% of the Trust Fund′s annual income to grow the principal and increase future earnings.
VOTES
ASM WATER, PARKS, AND WILDLIFE: 12-0-1
YES: Papan, Jeff Gonzalez, Alanis, Alvarez, Ávila Farías, Bains, Bennett, Boerner, Caloza, Hart, Muratsuchi, Rogers
ABS, ABST OR NV: Gallagher
ASM APPROPRIATIONS: 15-0-0
YES: Wicks, Hoover, Aguiar-Curry, Calderon, Caloza, Dixon, Fong, Mark González, Krell, Pacheco, Pellerin, Sharp-Collins, Solache, Ta, Tangipa
ASSEMBLY FLOOR: 78-0-2
YES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
ABS, ABST OR NV: Muratsuchi, Celeste Rodriguez
SENATE FLOOR: 40-0-0
YES: Allen, Alvarado-Gil, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Choi, Cortese, Dahle, Durazo, Gonzalez, Grayson, Grove, Hurtado, Jones, Laird, Limón, McGuire, McNerney, Menjivar, Niello, Ochoa Bogh, Padilla, Pérez, Reyes, Richardson, Rubio, Seyarto, Smallwood-Cuevas, Stern, Strickland, Umberg, Valladares, Wahab, Weber Pierson, Wiener
ASSEMBLY FLOOR: 78-0-1
YES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Lackey, Lee, Lowenthal, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Celeste Rodriguez, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
ABS, ABST OR NV: Krell
UPDATED
VERSION: September 3, 2026
CONSULTANT: Pablo Garza / W., P., & W. / (916) 319-2096 FN: 0004650
CONCURRENCE IN SENATE AMENDMENTS
CSA1 Bill Id:AB 2739
Author:(Soria)
As Amended Ver:August 21, 2026
2/3 vote. Urgency
SUMMARY
Establishes the Water Affordability and System Stabilization Trust (Trust Fund) as a charitable trust to generate ongoing funding for the Community Water Affordability Program (Affordability Program) administered by the Department of Water Resources (DWR) and the Water Rate Assistance Fund administered by the State Water Resources Control Board (State Water Board).
Senate Amendments
- Provide that funds for the Affordability Program shall be available upon appropriation by the Legislature (rather than continuously appropriated).
- Provide that the State Treasurer may enter into an agreement with a fiscal intermediary to support management of the monies in the Trust Fund. The agreement may contain provisions the State Treasurer deems reasonable and proper to grow the Trust Fund to a perpetual source of funding for the Affordability Program and Water Rate Assistance Program.
- Provide that monies in the Trust Fund shall be invested consistent with requirements for the investment of other surplus state funds (i.e., generally allows for investments in bonds from the U.S. or other governmental entities not in default) and may be invested in the Surplus Money Investment Fund.
- Clarify that the Controller shall distribute monies from the Trust Fund after coordinating with the State Treasurer.
- Make technical and clarifying changes.
COMMENTS
California residents are served by various types of water utilities or water systems, including publicly-owned utilities, investor-owned utilities, and small community water systems. Most of California′s residential water customers are served by cities, special districts, and mutual water companies. These utilities are governed by the city council, or other local governing body, which set their own water rates; however, the vast majority of these agencies are subject to Proposition 218 (enacted in 1996) that sets state constitutional and statutory requirements that ensure water rates are directly tied to the cost-of-service. As a result, these water agencies are currently not able to increase rates in order to fund low-income rate relief programs for customers and oftentimes face challenges relying on rate revenue to fund water conveyance, storage, and treatment infrastructure.
A 2020 State Water Board report to the Legislature required by AB 401 (Dodd), ″Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance,″ found that California households ″…find it increasingly difficult to satisfy this need as the retail cost of water has risen substantially over the last decade and is expected to rise significantly over the coming years…adjusting for inflation, the average Californian household paid around 45% more per month for drinking water service in 2015 than in 2007.″ The 2020 Report also recommends the creation of a statewide water rate assistance program funded through taxes on personal income, business income, and bottled water, as most water systems are not able to fund low-income assistance programs.
The water affordability outlook does not appear to have improved since 2020. According to the State Water Board 2025 Needs Assessment (2025 Assessment), there was a steady increase in drinking water rates across the state from 2020 to 2023. The 2025 Assessment compares drinking water affordability across all 2,815 community water systems and 363 non-transient non-community water systems that serve K-12 schools. Interestingly, the 2025 Assessment found that larger water systems saw the highest increase since 2020, 17% on average, even though smaller systems generally charge more per unit of water than larger systems. Overall, the 2025 Assessment found ″Statewide, the average drinking water customer charges have increased by $6.64 (10%) since 2020.″ The affordability challenge is even more acute in poorer communities. Of the water systems assessed, 45% are experiencing a low affordability burden, 12% are experiencing a medium affordability burden, and 3% are experiencing a high affordability burden (40% of systems are experiencing no affordability burden).
This bill requires that half of the income generated by the Trust Fund be transferred to the Water Rate Assistance Fund, though this fund does not currently exist and is not created by this bill. SB 1125 (Menjivar) of the current legislative session, however, establishes the Water Rate Assistance Fund and associated Water Rate Assistance Program to be administered by the State Water Board that will receive funding from the Trust Fund created by this bill if both bills are enacted.
According to the Author
″Water affordability and system stability are increasingly interconnected challenges across California. Rising costs associated with infrastructure modernization, climate resilience, regulatory compliance, and energy continue to place pressure on water systems and the communities they serve, which is especially true for households living at or near poverty.
Further, the author contends, ″The California Water Affordability and System Stabilization Act proposes a durable, California-based solution by addressing affordability at the household, system, and community levels. The Act advances a sustainable funding solution to support a statewide Low-Income Rate Assistance program for water while also supporting strategic investments that stabilize water systems and help reduce cost pressures before they are passed on to ratepayers.″
Arguments in Support
The Irvine Ranch Water District and Rancho Water are co-sponsoring this bill. They note that ″water affordability and system stability are increasingly interconnected challenges across California. Rising costs associated with infrastructure modernization, climate resilience, regulatory compliance, and energy continue to place pressure on water systems and the communities they serve, particularly for households living at or near poverty.″ The co-sponsors assert that this bill proposes a lasting solution that does not include any new taxes or fees and that will help to advance the Human Right to Water: ″[This bill′s] proposed funding structure provides predictable, long-term resources without placing new burdens on local governments or water ratepayers. This approach strengthens water planning, and enhances statewide resilience while preserving local decision-making.″
Arguments in Opposition
None on file.
FISCAL COMMENTS
According to the Senate Appropriations Committee, this bill has the following fiscal impact:
- The State Water Board estimates ongoing costs of about $1.5 million in the first year and $1 million annually thereafter (General Fund) to manage and track fund disbursements, make updates to the Loans and Grants Tracking System, and provide administrative, fiscal, and IT support, among other things.
- DWR estimates ongoing costs of approximately $600,000 (General Fund) to develop and administer the Affordability Program. However, the magnitude of DWR′s workload and associated costs would ultimately depend on the level of funding it receives and must administer. This bill allows DWR to expend up to 5% of the Trust Fund′s annual revenue on reasonable administrative costs.
- The State Treasurer′s Office raises concerns that it does not traditionally administer trusts, and estimates that its costs are unknown but significant (ongoing, General Fund).
- General Fund cost pressure of an unknown but significant amount, potentially in the millions of dollars (one-time or annually), to fund the Water Affordability and System Stabilization Fund principal, subject to transfer by the Legislature from the General Fund. The State Treasurer, acting as the trustee, must invest this principal under standard fiduciary rules, theoretically earning the Trust Fund investment income over time. For the first 25 years, the trustee must reinvest 10% of the Trust Fund′s annual income to grow the principal and increase future earnings.
VOTES:
ASM WATER, PARKS, AND WILDLIFE: 12-0-1
YES: Papan, Jeff Gonzalez, Alanis, Alvarez, Ávila Farías, Bains, Bennett, Boerner, Caloza, Hart, Muratsuchi, Rogers
ABS, ABST OR NV: Gallagher
ASM APPROPRIATIONS: 15-0-0
YES: Wicks, Hoover, Aguiar-Curry, Calderon, Caloza, Dixon, Fong, Mark González, Krell, Pacheco, Pellerin, Sharp-Collins, Solache, Ta, Tangipa
ASSEMBLY FLOOR: 78-0-2
YES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
ABS, ABST OR NV: Muratsuchi, Celeste Rodriguez
UPDATED
VERSION: August 21, 2026
CONSULTANT: Pablo Garza / W., P., & W. / (916) 319-2096 FN: 0004520
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-4171 | AB 2739 |
THIRD READING
Bill No: AB 2739
Author: Soria (D), et al.
Amended: 8/21/26 in Senate
Vote: 27
SENATE NATURAL RES. & WATER COMMITTEE: 7-0, 6/23/26
AYES: Becker, Seyarto, Allen, Cabaldon, Grove, Laird, Stern
SENATE ENVIRONMENTAL QUALITY COMMITTEE: 7-0, 7/1/26
AYES: Blakespear, Valladares, Allen, Dahle, Gonzalez, Hurtado, Menjivar
ASSEMBLY FLOOR: 78-0, 5/26/26 - See last page for vote
SUBJECT: Water: affordability and system stabilization
SOURCE: Irvine Ranch Water District
Rancho California Water District
DIGEST:
This bill establishes the Water Affordability and System Stabilization Trust as a charitable trust to fund the Community Water Affordability Program administered by the Department of Water Resources (DWR) and the Water Rate Affordability Assistance Fund administered by the State Water Resources Control Board (SWRCB).
Senate Floor amendments of 8/21/26 provide DWR and the State Treasurer’s Office (STO) with some flexibility to carry out this bill’s provisions and shift certain responsibilities from the STO to the State Controller’s Office (SCO).
ANALYSIS:
Existing law:
- Gives DWR broad authority to manage and oversee various aspects of water management in California, including dams, flood control projects, the State Water Project, sustainable groundwater management, and the California Water Plan.
- Declares it is the responsibility of the state to help local governments when state or joint state and federal water resource construction projects create an undue burden on a local area’s ability to provide certain services and facilities.
- Defines a “community water system” as a public water system serving at least 15 service connections used by yearlong residents or one that regularly serves at least 25 yearlong residents of the area.
This bill:
- Enacts the Water Affordability and System Stabilization Act (Act).
- Creates the Water Affordability and System Stabilization Fund (Trust Fund) to hold the trust property of the Water Affordability and System Stabilization Trust (Trust). The primary purpose of the Trust is to provide perpetual source of funding to the Water Rate Assistance Fund (WRAF) and Community Water Affordability Assistance Fund (CWAAF).
- Creates the CWAAF, but does not create the WRAF, which does not exist in statute.
- Transfers distributions by the trustee (the State Treasurer’s Office (STO)) from the income of the Trust to the SWRCB and DWR for deposit into, and expenditure from, the WRAF and the CWAAF. Includes requirements to:
- Prohibit Trust Fund money from being used for any purpose not established by the Act;
- Require the trustee to hold, manage, and invest the principal of the Trust in accordance with existing law to proving a growing perpetual source of annual funding to the WRAF and the CWAAF.
- Transfer specific percentages of money to the WRAF and the CWAAF, and invest a specific percentage of money at specified time intervals.
- Creates a number of responsibilities for and imposes a number of limitations on the trustee, and allows the trustee to accept donations to the Trust.
- Requires DWR to develop and adopt program guidelines and project solicitation documents, and exempts those from the Administrative Procedure Act.
- Requires DWR to develop and administer the Community Water Affordability Program to provide grants to community water systems to improve water supplies, resiliency, or quality, and reduce energy costs.
- Establishes a methodology for DWR to evaluate grant applications and requires grant applicants to cover at least 25% of the cost of any project, though DWR can waive or reduce this amount based on a showing of extreme financial hardship.
- Requires DWR to hold public hearings and allow for public comment on its proposed program guidelines and requires DWR to post an annual report on the operations, spending, and benefits of the program.
Background
Water Service. California residents are served by various types of water utilities or water systems, including publicly owned utilities (POUs), investor-owned utilities (IOUs), and small community water systems (CWS). Most of California's residential water customers are served by cities, special districts, and mutual water companies. These utilities are governed by the city council, or other local governing body, which sets the water rates, which in the vast majority of cases are subject to 1996’s Proposition 218 that ties the rates to the cost of providing water service. This restriction limits an agency’s ability to increase rates to fund low-income rate relief programs for customers.
Affording The Cost of Water. A 2020 SWRCB report to the Legislature, Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance, found California households “…find it increasingly difficult to satisfy … [the need for water] … as the retail cost of water has risen substantially over the last decade and is expected to rise significantly over the coming years … adjusting for inflation, the average Californian household paid around 45% more per month for drinking water service in 2015 than in 2007.”
A 2025 SWRCB needs assessment found there was a steady increase in drinking water rates across the state from 2020 to 2023, concluding larger water systems saw the highest increase since 2020, 17% on average, even though smaller systems generally charge more per unit of water than larger systems. The affordability challenge is even more acute in poorer communities. Of the water systems assessed, 45% are experiencing a low affordability burden, 12% are experiencing a medium affordability burden, and 3% are experiencing a high affordability burden (40% of systems are experiencing no affordability burden).
Comments
Purpose of the bill. According to the author, “Water affordability and system stability are increasingly interconnected challenges across California. Rising costs associated with infrastructure modernization, climate resilience, regulatory compliance, and energy continue to place pressure on water systems and the communities they serve, which is especially true for households living at or near poverty.
“The California Water Affordability and System Stabilization Act proposes a durable, California-based solution by addressing affordability at the household, system, and community levels. The Act advances a sustainable funding solution to support a statewide Low-Income Rate Assistance (LIRA) program for water while also supporting strategic investments that stabilize water systems and help reduce cost pressures before they are passed on to ratepayers.”
Tracking cost avoidance. This bill creates the Community Water Affordability Program to provide grants to community water systems for local water infrastructure projects. It also requires DWR to annually post on its website a report on the revenues, expenditures, and benefits of the fund, including the “estimated amount of cost the program has caused to be avoided.” The goal is to help fund projects that – absent grant funding – would lead to ratepayer increases to finance the projects. So, the “estimated amount of cost the program has caused to be avoided” refers to what the project would have cost ratepayers had they been required to finance the infrastructure project.
Referring to a fund that doesn’t exist. The primary purpose of the trust created by this bill is to provide an ongoing source of funding to the Water Rate Assistance Fund (WRAF) and the Community Water Affordability Assistance Fund (CWAAF). While this bill creates CWAAF, the WRAF does not exist. Rather it would be created by SB 1125 (Menjivar), which is pending on the Assembly Floor.
If this bill is enacted, with reference to the WRAF and SB 1125 – which creates the WRAF – is not signed into law, references to the WRAF in this bill will likely cause confusion and it is unclear how the bill will be implemented.
FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: No
According to the Senate Appropriations Committee’s analysis, the bill creates General Fund cost pressure of an unknown but significant amount, potentially in the millions of dollars (one-time or annually).
SUPPORT: (Verified 8/5/26)
Irvine Ranch Water District (co-sponsor)
Rancho California Water District (co-sponsor)
Association of California Cities - Orange County
Association of California Water Agencies
California Chamber of Commerce
California Council for Environment and Economic Balance
California Farm Bureau Federation
California Municipal Utilities Association
California Special Districts Association
California State Association of Counties
California Water Association
Calleguas Municipal Water District
City of Sacramento
City of Thousand Oaks
Clean Water Action Community Water Center
Contra Costa Water District
County of Los Angeles
Crescenta Valley Water District
East Bay Municipal Utility District
Eastern Municipal Water District
El Dorado Irrigation District
El Toro Water District
Elsinore Valley Municipal Water District
Honorable Bryan Osorio, Councilmember, City of Delano
Honorable Gregorio Gomez, Councilmember, City of Farmersville
Honorable Joe Soria, Mayor Pro Tem, City of Lindsey
Honorable Jose Sigala, Councilmember, City of Tulare
Honorable Krista Bernasconi, Mayor, City of Roseville
Leadership Counsel for Justice and Accountability
League of California Cities
Metropolitan Water District of Southern California
Mission Springs Water District
Mountain Counties Water Resources Association
Municipal Water District of Orange County
Orange County Business Council
Regional Water Authority
Rincon Del Diablo Municipal Water District
San Diego County Water Authority
San Joaquin Valley Water Collaborative Action Program
Santa Fe Irrigation District
Santa Margarita Water District
South Coast Water District
South Orange County Economic Coalition
Southern California Water Coalition
Southwest California Legislative Council
Three Valleys Municipal Water District
Upper San Gabriel Valley Municipal Water District
Valley Water
Walnut Valley Water District
West Basin Municipal Water District
Western Municipal Water District
OPPOSITION: (Verified 8/5/26)
None received
ASSEMBLY FLOOR: 78-0, 5/26/26
AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
NO VOTE RECORDED: Muratsuchi, Celeste Rodriguez
Prepared by: Evan Goldberg/ N.R. & W. / (916) 651-4116
8/24/26 13:35:58
**** END ****
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-4171 | AB 2739 |
THIRD READING
Bill No: AB 2739
Author: Soria (D), et al.
Amended: 7/2/26 in Senate
Vote: 27
SENATE NATURAL RES. & WATER COMMITTEE: 7-0, 6/23/26
AYES: Becker, Seyarto, Allen, Cabaldon, Grove, Laird, Stern
SENATE ENVIRONMENTAL QUALITY COMMITTEE: 7-0, 7/1/26
AYES: Blakespear, Valladares, Allen, Dahle, Gonzalez, Hurtado, Menjivar
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/13/26
AYES: Cervantes, Seyarto, Cabaldon, Dahle, Grayson, Richardson, Wahab
ASSEMBLY FLOOR: 78-0, 5/26/26 - See last page for vote
SUBJECT: Water: affordability and system stabilization
SOURCE: Irvine Ranch Water District
Rancho California Water District
DIGEST:
Establishes the Water Affordability and System Stabilization Trust as a charitable trust to generate ongoing funding for the Community Water Affordability Program administered by the Department of Water Resources (DWR) and the Water Rate Affordability Assistance Fund administered by the State Water Resources Control Board (SWRCB).
ANALYSIS:
Existing law:
- Gives DWR broad authority to manage and oversee various aspects of water management in California, including dams, flood control projects, the State Water Project, sustainable groundwater management, and the California Water Plan.
- Declares it is the responsibility of the state to help local governments when state or joint state and federal water resource construction projects create an undue burden on a local area’s ability to provide certain services and facilities.
- Declares it is state policy that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary.
- Defines a “community water system” as a public water system serving at least 15 service connections used by yearlong residents or one that regularly serves at least 25 yearlong residents of the area.
This bill:
- Enacts the Water Affordability and System Stabilization Act (Act).
- Creates the Water Affordability and System Stabilization Fund (Trust Fund) to hold the trust property of the Water Affordability and System Stabilization Trust (Trust) and to implement the Act. The primary purpose of the Trust, as a charitable trust, is to provide perpetual source of funding to the Water Rate Assistance Fund (WRAF) and Community Water Affordability Assistance Fund (CWAAF).
- Creates the CWAAF, but does not create the WRAF, which does not currently exist in statute.
- Transfers distributions by the trustee from the income of the Trust to the SWRCB and DWR for deposit into, and expenditure from, the WRAF and the CWAAF. Includes requirements to:
- Prohibit money in the Trust Fund from being available for appropriation or being borrowed for use for any purpose not established by the Act or from being transferred to the state’s General Fund.
- Require the trustee to hold, manage, and invest the principal of the Trust in accordance with existing law with the obligation of providing a growing perpetual source of annual funding to the WRAF and the CWAAF.
- Transfer specific percentages of money to the WRAF and CWAAF, and invest a specific percentage of money at specified time intervals.
- Creates a number of responsibilities for and imposes a number of limitations on the trustee, and allows the trustee to accept donations to the Trust.
- Requires DWR to develop and adopt program guidelines and project solicitation documents, and exempts those from the Administrative Procedure Act.
- Requires DWR to develop and administer the Community Water Affordability Program to provide grants to community water systems for local water infrastructure projects that include projects that improve water supplies, resiliency, or quality, and projects that reduce energy costs for a community water system.
- Establishes a methodology for DWR to evaluate grant applications and requires grant applicants to cover at least 25% of the cost of any project, though DWR can waive or reduce this amount based on a showing of extreme financial hardship.
- Requires DWR to hold public hearings and allow for public comment on its proposed program guidelines and requires DWR to post an annual report on the operations, spending, and benefits of the program.
Background
Water Service. California residents are served by various types of water utilities or water systems, including publicly owned utilities (POUs), investor-owned utilities (IOUs), and small community water systems (CWS). Most of California's residential water customers are served by cities, special districts, and mutual water companies. These utilities are governed by the city council, or other local governing body, which set their own water rates, which in the vast majority of cases are subject to 1996’s Proposition 218 that ties the rates to the cost of providing water service. This restriction limits an agency’s ability to increase rates to fund low-income rate relief programs for customers.
Affording The Cost of Water. A 2020 SWRCB report to the Legislature, Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance, found that California households “…find it increasingly difficult to satisfy … [the need for water] … as the retail cost of water has risen substantially over the last decade and is expected to rise significantly over the coming years … adjusting for inflation, the average Californian household paid around 45% more per month for drinking water service in 2015 than in 2007.”
A 2025 SWRCB needs assessment found there was a steady increase in drinking water rates across the state from 2020 to 2023, concluding larger water systems saw the highest increase since 2020, 17% on average, even though smaller systems generally charge more per unit of water than larger systems. The affordability challenge is even more acute in poorer communities. Of the water systems assessed, 45% are experiencing a low affordability burden, 12% are experiencing a medium affordability burden, and 3% are experiencing a high affordability burden (40% of systems are experiencing no affordability burden).
Comments
Purpose of the bill. According to the author, “Water affordability and system stability are increasingly interconnected challenges across California. Rising costs associated with infrastructure modernization, climate resilience, regulatory compliance, and energy continue to place pressure on water systems and the communities they serve, which is especially true for households living at or near poverty.
“The California Water Affordability and System Stabilization Act proposes a durable, California-based solution by addressing affordability at the household, system, and community levels. The Act advances a sustainable funding solution to support a statewide Low-Income Rate Assistance (LIRA) program for water while also supporting strategic investments that stabilize water systems and help reduce cost pressures before they are passed on to ratepayers.”
Tracking cost avoidance. This bill creates the Community Water Affordability Program to provide grants to community water systems for local water infrastructure projects. It also requires DWR to annually post on its website a report on the revenues, expenditures, and benefits of the fund, including the “estimated amount of cost the program has caused to be avoided.” The goal is to help fund projects that – absent grant funding – would lead to ratepayer increases to finance the projects. So, the “estimated amount of cost the program has caused to be avoided” refers to what the project would have cost ratepayers had they been required to finance the infrastructure project.
Referring to a fund that doesn’t exist. The primary purpose of the trust created by this bill is to provide an ongoing source of funding to the WRAF and the CWAAF. While this bill creates CWAAF, the WRAF does not exist. Rather it would be created by SB 1125 (Menjivar), which is pending on the Assembly Floor.
If this bill is enacted, with reference to the WRAF and SB 1125 – which creates the WRAF – is not signed into law, references to the WRAF in this bill will likely cause confusion and it is unclear how the bill will be implemented.
FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: No
According to the Senate Appropriations Committee’s analysis, this bill creates General Fund cost pressure of an unknown but significant amount, potentially in the millions of dollars (one-time or annually).
SUPPORT: (Verified 8/5/26)
Irvine Ranch Water District (co-source)
Rancho California Water District (co-source)
Association of California Cities - Orange County
Association of California Water Agencies
California Chamber of Commerce
California Council for Environment and Economic Balance (CEEB)
California Farm Bureau Federation
California Municipal Utilities Association
California Special Districts Association
California State Association of Counties (CSAC)
California Water Association
Calleguas Municipal Water District
City of Sacramento
City of Thousand Oaks
Clean Water Action Community Water Center
Contra Costa Water District
County of Los Angeles
Crescenta Valley Water District
East Bay Municipal Utility District
Eastern Municipal Water District
El Dorado Irrigation District
El Toro Water District
Elsinore Valley Municipal Water District
Honorable Bryan Osorio, Councilmember, City of Delano
Honorable Gregorio Gomez, Councilmember, City of Farmersville
Honorable Joe Soria, Mayor Pro Tem, City of Lindsey
Honorable Jose Sigala, Councilmember, City of Tulare
Honorable Krista Bernasconi, Mayor, City of Roseville
Leadership Counsel for Justice and Accountability
League of California Cities
Metropolitan Water District of Southern California
Mission Springs Water District
Mountain Counties Water Resources Association
Municipal Water District of Orange County
Orange County Business Council
Regional Water Authority
Rincon Del Diablo Municipal Water District
San Diego County Water Authority
San Joaquin Valley Water Collaborative Action Program
Santa Fe Irrigation District
Santa Margarita Water District
South Coast Water District
South Orange County Economic Coalition
Southern California Water Coalition
Southwest California Legislative Council
Three Valleys Municipal Water District
Upper San Gabriel Valley Municipal Water District
Valley Water
Walnut Valley Water District
West Basin Municipal Water District
Western Municipal Water District
OPPOSITION: (Verified 8/5/26)
None received
ASSEMBLY FLOOR: 78-0, 5/26/26
AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Johnson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
NO VOTE RECORDED: Muratsuchi, Celeste Rodriguez
Prepared by: Evan Goldberg/ N.R. & W. / (916) 651-4116
8/14/26 9:49:58
**** END ****
SENATE COMMITTEE ON
Senator Sabrina Cervantes, Chair
2025 - 2026 Regular Session
AB 2739 (Soria) - Water: affordability and system stabilization
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: | Consultant: |
Bill Summary:
This bill would establish the Water Affordability and System Stabilization Trust, a perpetual charitable trust in the State Treasury administered by the Treasurer and funded by legislative transfers from the General Fund, and would direct its annual investment income to the existing Water Rate Assistance Fund and to a new Community Water Affordability Program providing infrastructure grants to community water systems, as specified.
Fiscal Impact:
- The State Water Board estimates ongoing costs of about $1.5 million in the first year and $1 million annually thereafter (General Fund) to manage and track fund disbursements. update to the Loans and Grants Tracking System, and provide administrative, fiscal, and IT support, among other things.
- The Department of Water Resources (DWR) estimates ongoing costs of approximately $600,000 (General Fund) to develop and administer the Affordability Program. However, the magnitude of the department’s workload and associated costs would ultimately depend on the level of funding it receives and must administer. This bill allows DWR to expend up to 5% of the Fund's annual revenue on reasonable administrative costs.
- The State Treasurer’s Office raises concerns that it does not traditionally administer Trusts, and estimates that its costs are unknown but significant (ongoing, General Fund).
- General Fund cost pressure of an unknown but significant amount, potentially in the millions of dollars (one-time or annually), to fund the Water Affordability and System Stabilization Fund principal, subject to transfer by the Legislature from the General Fund. The State Treasurer, acting as the trustee, must invest this principal under standard fiduciary rules, theoretically earning the Trust Fund investment income over time. For the first 25 years, the trustee must reinvest 10% of the Trust Fund's annual income to grow the principal and increase future earnings.
Background:
A 2020 State Water Board report to the Legislature required by AB 401 (Dodd), Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance, found that California households “…find it increasingly difficult to satisfy this need as the retail cost of water has risen substantially over the last decade and is expected to rise significantly over the coming years…adjusting for inflation, the average Californian household paid around 45% more per month for drinking water service in 2015 than in 2007.” The 2020 Report also recommends the creation of a statewide water rate assistance program funded through taxes on personal income, business income, and bottled water, as most water systems are not able to fund low-income assistance programs.
The water affordability outlook does not appear to have improved since 2020. According to the State Water Board 2025 Needs Assessment (2025 Assessment), there was a steady increase in drinking water rates across the state from 2020 to 2023. The 2025 Assessment compares drinking water affordability across all 2,815 community water systems and 363 non-transient non-community water systems that serve K-12 schools.
Interestingly, the 2025 Assessment found that larger water systems saw the highest increase since 2020, 17% on average, even though smaller systems generally charge more per unit of water than larger systems. Overall, the 2025 Assessment found that “Statewide, the average drinking water customer charges have increased by $6.64 (10%) since 2020.” The affordability challenge is even more acute in poorer communities. Of the water systems assessed, 45% are experiencing a low affordability burden, 12% are experiencing a medium affordability burden, and 3% are experiencing a high affordability burden (40% of systems are experiencing no affordability burden).
Water systems depend on public dollars and revenue from ratepayers to maintain and improve their systems. Therefore, lacking sufficient public funding, a water system cannot both maintain quality drinking water and pass savings along to consumers. Providing ratepaying assistance is one means to decrease the burden on Californians, but it doesn’t address the root cause: aging water infrastructure with increasing costs shouldered by ratepayers.
Proposed Law:
This bill would:
- Establish the Water Affordability and System Stabilization Act and make legislative findings and declarations, including that every human being has the right to safe, clean, affordable, and accessible water under Water Code §106.3; that rising water costs are largely attributable to infrastructure, energy, and regulatory compliance costs; that Proposition 218 requires proportional, cost-of-service-based rates and has been interpreted as prohibiting customers from being charged higher rates to subsidize other customers; that climate change will add further cost pressure as providers invest in resilience and adaptive infrastructure; that a low-income rate assistance program alone will not be sufficiently effective without addressing system costs; and that the chapter does not impose a levy, charge, or exaction of any kind, such as a tax or fee.
- Create in the State Treasury the Water Affordability and System Stabilization Fund to hold the trust property, continuously appropriate all moneys in the trust fund to the Treasurer as trustee without regard to fiscal year, and provide that trust moneys would not be available for appropriation or borrowing for any purpose outside the chapter and would not be transferred to the General Fund.
- Authorize funding of the trust principal by legislative transfer from the General Fund, with all future transfers irrevocably transferred during the fiscal year they are made.
- Require the Treasurer, as trustee, to hold, manage, and invest the principal to provide a growing perpetual source of annual funding beginning 25 years after the first transfer, and prohibit the trustee from invading the principal or from selling, purchasing, exchanging, or otherwise disposing of any part of it.
- Require the trustee to distribute trust income annually as follows:
- During the first 25 years following the first transfer, 45% of the prior fiscal year's income to the Water Rate Assistance Fund, 45% to the Community Water Affordability Assistance Fund, and 10% reinvested as principal.
- After the first 25 years, 50% to the Water Rate Assistance Fund and 50% to the Community Water Affordability Assistance Fund.
- Require the trustee to administer the trust as a fiduciary subject to the Uniform Prudent Investor Act, limit administrative expenses to no more than 1% of annual trust income, authorize the trustee to accept donations that would become trust property, require audit and accounting services consistent with Governmental Accounting Standards Board principles, require an annual accounting and income forecast to the State Water Resources Control Board and the Department of Water Resources, and deem the trust a charitable trust subject to Attorney General supervision.
- Require DWR, subject to transfer of moneys into the fund, to develop and administer the Community Water Affordability Program, providing grants to community water systems for local water infrastructure projects — including projects improving water supplies, resiliency, or quality, and projects reducing a system's energy costs — for the purpose of reducing local ratepayer funding required for those projects and avoiding costs otherwise paid by ratepayers.
- Require DWR to adopt program guidelines and project solicitation documents, exempt from the Administrative Procedure Act, after at least three public workshops throughout the state and at least 45 days of public comment, and require the guidelines to:
- Require an applicant to provide at least 25% of total project funding, which may include federal funding and other state loans and grants, subject to waiver or reduction where the requirement would cause extreme financial hardship.
- Establish a methodology for evaluating projects considering factors including the net present value of cost avoided per account over 25 years, the applicant's ability to complete the project timely, the number of households benefited, and benefits the system received in the past year from the Water Rate Assistance Fund averaged across total residential connections.
- Provide that the methodology would not consider an applicant's ability to provide the minimum match and would not prejudice an applicant for requesting a hardship waiver.
- Require DWR to post an annual report on the fund's revenues, expenditures, and benefits, including cumulative and fiscal year household counts and estimated costs avoided, and to coordinate with the Water Board on projects seeking combined funding.
- Authorize DWR to accept federal contributions, voluntary contributions, gifts, grants, or bequests, and public agency participation; to enter into contribution agreements; to set funding conditions including audits, efficiency improvements, and alternatives evaluation; and to expend no more than 5% of annual fund revenue on administration, including outreach.
- Establish the Community Water Affordability Assistance Fund in the State Treasury, make moneys available to DWR upon appropriation by the Legislature, provide that moneys would not revert to the General Fund at fiscal year close, and bar appropriation or borrowing for other purposes absent a two-thirds vote of each house.
Related Legislation:
SB 1125 (Menjivar, 2026) would establish the Water Rate Assistance Program to provide financial assistance to help low-income customers pay their water and wastewater bills.
SB 350 (Durazo, 2025) would have established the Water Rate Assistance Program and the Water Rate Assistance Fund to provide financial assistance to help low-income customers pay their water and wastewater bills. The bill died in this committee.
AB 532 (Ransom, 2025) would have authorized public urban retail water suppliers to provide water rate assistance to their ratepayers. The bill died in this committee.
SB 1255 (Durazo, 2024) would have required a retail water supplier that serves over 3,300 residential connections to establish a water rate assistance program to help eligible low-income customers pay their water and wastewater bills. Funding would have come from voluntary contributions paid by other customers through charges on water bills. Would have required the State Water Board to conduct a needs assessment for a similar program for low-income customers of smaller water suppliers. The bill died in the Assembly Appropriations Committee.
SB 222 (Dodd, 2022) would have required the State Water Board to develop and administer a statewide Water Rate Assistance Program to provide rate assistance to low-income residential ratepayers of a community water system or wastewater system. SB 222 was vetoed by the Governor.
SB 200 (Monning, Chapter 120, Statutes of 2019) establishes the Safe and Affordable Drinking Water Fund (SADWF) to help water systems provide an adequate and affordable supply of safe drinking water in both the near and the long term. Beginning in fiscal year 2020-21 and until June 30, 2030, it annually transfers five percent of the proceeds of the Greenhouse Gas Reduction Fund (but no more than $130 million) to SADWF. Further requires the State Water Board to adopt a fund implementation plan and requires expenditures of the fund to be consistent with the plan.
SB 401 (Dodd, Chapter 662, Statutes of 2015) requires the State Water Board, in collaboration with the State Board of Equalization and stakeholders, to develop a plan for the funding and implementation of a new program to provide water rate relief for low-income ratepayers by January 1, 2018, and provide a corresponding report to the Legislature by February 1, 2018.
AB 685 (Eng, Chapter 524, Statutes of 2012) enacts the Human Right to Water state policy.
Staff Comments:
Amendments taken in the Senate Natural Resources and Water Committee removed the continuous appropriation for administrative activities. State Water Board and DWR costs would now be contingent upon appropriation, consistent with the state’s traditional approach to budgeting departmental workload.
-- END --
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Blakespear, Chair
2025 - 2026 Regular
Bill No: AB 2739
Author: | Soria | ||
Version: | 6/11/2026 | Hearing Date: | 7/1/2026 |
Urgency: | No | Fiscal: | Yes |
Consultant: | Alyssa Poletti | ||
SUBJECT: Water: affordability and system stabilization
DIGEST: This bill establishes the Water Affordability and System Stabilization Trust (Trust Fund) as a charitable trust to generate ongoing funding for the Community Water Affordability Program (Affordability Program) administered by the Department of Water Resources (DWR) and the Water Rate Assistance Fund administered by the State Water Resources Control Board (State Water Board).
ANALYSIS:
Existing federal law:
- Authorizes, pursuant to the federal Safe Drinking Water Act (SDWA), the United States Environmental Protection Agency (U.S. EPA) to set standards for drinking water quality and to oversee the states, localities, and water suppliers who implement those standards. (42 United States Code (USC) § 300(f) et seq.)
Existing state law:
- Establishes Department of Water Resources (DWR) (Water Code (WAT) § 120) and grants it broad authority to manage and oversee various aspects of water management in California, including:
- dams (WAT § 6000 et seq.);
- flood control projects (WAT § 8300 et seq.);
- the State Water Project (WAT § 11419 et seq.);
- sustainable groundwater management (WAT § 10720 et seq.); and
- the California Water Plan. (WAT § 10004 et seq.).
- Declares the responsibility of the state to assist local governments in providing certain essential services and facilities where water resource construction projects financed, in whole or in part, by the state or by the state jointly with the federal government create an undue burden on a local area’s ability to provide these services and facilities (Water Code § 12950).
- Establishes the California SDWA and requires the State Water Board to maintain a drinking water program to protect public health. (Health & Safety Code (HSC) § 116270 et seq.)
- Declares that it is state policy that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes and directs all relevant state agencies to consider this policy when administering programs (Water Code § 106.3).
- Defines “public water system” as a system for the provision of water for human consumption through pipes or other constructed conveyances that has 15 or more service connections or regularly serves an average of at least 25 individuals daily at least 60 days out of the year. (Health and Safety Code § 116275).
- Defines “community water system” as a public water system that serves at least 15 service connections used by yearlong residents or regularly serves at least 25 yearlong residents of the area served by the system (Health and Safety Code § 116275).
This bill:
- Establishes the Water Affordability and System Stabilization Trust (Trust Fund) and provides that funding in the Trust Fund shall be continuously appropriated to the State Treasurer, who shall serve as trustee to the Trust Fund, to expend funds to accomplish the goals of this bill.
- Provides that the income generated by the Trust Fund shall be transferred to the Water Rate Assistance Fund (as specified in SB 1125 (Menjivar)) and the Community Water Affordability Assistance Fund (Affordability Assistance Fund).
- Provides that the Trust Fund is a charitable trust established to provide a perpetual source of funding for the Water Rate Assistance Fund and the Affordability Assistance Fund.
- Provides that moneys in the Trust Fund shall not be appropriated nor borrowed for purposes inconsistent with this bill.
- Authorizes the Legislature to transfer General Fund moneys to fund the Trust Fund principal. Provides that transfers to the Trust Fund are irrevocably transferred from the General Fund to the Trust Fund to accomplish the purposes of this bill.
- Provides, notwithstanding any other law, that moneys deposited into the Trust Fund shall not be transferred to the General Fund.
- Requires the State Treasurer to hold, manage, and invest the principal of the Trust Fund in accordance with existing law and to generate a growing perpetual source of annual funding for the Water Rate Assistance Fund and the Affordability Assistance Fund. Provides that the State Treasurer shall not invade the principal of the Trust Fund.
- Requires the State Treasurer to annually distribute the funding in the Trust Fund as follows:
- In the first 25 years following the Legislature’s first transfer of General Fund dollars to the Trust Fund:
- 45% of the income shall go to the State Water Board for purposes of the Water Rate Assistance Fund;
- 45% of the income shall go to DWR for the purposes of the Affordability Assistance Fund; and
- 10% of the income shall remain in the Trust Fund to increase the Trust Fund’s principal.
- 25 years after the Legislature’s first transfer of General Fund dollars to the Trust Fund:
- 50% of the income shall go to the State Water Board for purposes of the Water Rate Assistance Fund; and
- 50% of the income shall go to DWR for the purposes of the Affordability Assistance Fund.
- In the first 25 years following the Legislature’s first transfer of General Fund dollars to the Trust Fund:
- Provides that the State Treasurer, and any employee or agent of the State Treasurer, shall not sell, purchase, exchange, or otherwise deal with or dispose of all or any parts of the principal of the Trust Fund.
- Provides that the State Treasurer shall exercise their administration of the Trust Fund as a fiduciary to the beneficiary and shall abide by the Uniform Prudent Investor Act and provides that the State Treasurer shall have the powers, obligations, and responsibilities of a trustee consistent with existing law.
- Provides that the State Treasurer may accept donations to increase the principal of the Trust Fund but prohibits expenditure of donations until the Legislature transfers General Fund dollars into the Trust Fund.
- Prohibits the State Treasurer from using more than 1% of Trust Fund income for costs associated with administering the Trust Fund.
- Requires the State Treasurer to provide the State Water Board and DWR with an annual accounting of investments in, and an annual forecast of projected income from, the Trust Fund to be distributed in future fiscal years.
- Provides that the Trust Fund shall be a charitable trust subject to supervision of the Attorney General.
- Establishes the Affordability Program to be administered by DWR to provide grants to community water systems for local water infrastructure projects including, projects that improve water supplies and quality and reduce energy costs for a community water system. The purpose of the grants shall be to reduce the amount of ratepayer funds required for local water infrastructure projects.
- Requires DWR to develop and adopt program guidelines for the Affordability Program before providing grants. DWR shall solicit public comment and feedback on guidelines. Adoption of the program guidelines shall be exempt from the Administrative Procedures Act.
- Provides that the guidelines for the Affordability Program shall:
- Require a grantee to provide a 25% match. Allows DWR to waive or reduce this amount if it would cause extreme financial hardship on a grant applicant;
- Establish a methodology to evaluate a project’s net present value of the cost avoided on a per account basis over a 25-year time frame, the applicant’s ability to complete a project in a timely manner, the number of households that will benefit from a project, and the benefits the system received in the past year from the Water Rate Assistance Fund; and
- Prohibit DWR from penalizing an applicant that requests a waiver or reduction of the 25% match requirement.
- Requires DWR to hold at least three public workshops throughout the state and allow for a 45-day public comment period before adopting program guidelines for the Affordability Program.
- Requires DWR to report annually on the Affordability Program’s expenditures and benefits, including cumulative benefits of and estimated costs avoided by the Affordability Program.
- Authorizes DWR to accept federal, state, local, or private donations to advance the goals of the Affordability Program.
- Authorizes DWR to expend up to 5% of the annual revenue from the Community Water Affordability Fund for administration of the Affordability Program.
- Establishes the Affordability Assistance Fund in the State Treasury and provides all moneys in the Affordability Assistance Fund are continuously appropriated to DWR for the Affordability Program. Provides moneys in the Affordability Assistance Fund shall not revert back to the General Fund and shall not be appropriated or borrowed unless authorized by a 2/3’s vote of the Legislature.
- Makes legislative findings and declarations regarding the increasing cost of water service and the need to invest in water system upgrades and a low-income rate assistance program to help Californians afford water service.
- Defines various terms for the purposes of this bill.
Background
- California’s drinking water program. The federal SDWA was enacted in 1974 to protect public health by regulating drinking water. California has enacted its own safe drinking water act to implement the federal law and establish state standards under the state SDWA. Senate Bill 861 (Committee on Budget and Fiscal Review, Chapter 35, Statutes of 2014) transferred the drinking water program from the California Department of Public Health to the State Water Board effective July 1, 2014, creating the new Division of Drinking Water within the State Water Board and made other statutory changes to create efficiencies and adoption and administration of the drinking water program.
The State Water Board directly enforces the federal SDWA for all large water systems (those with 200 or more service connections), including those water systems regulated under the CPUC, Division of Corporations, or Department of Housing and Community Development (DHCD). For small water systems (those with less than 200 connections), local health departments can be delegated to have regulatory authority as the local primacy agency. Along with the regulation of drinking water, the State Water Board and the Regional Water Quality Control Boards (Regional Water Boards) are responsible for protecting the waters of the state, including drinking water sources, both surface water and groundwater supplies.
- Human right to water. In 2012, California became the first state to enact a Human Right to Water law, AB 685 (Eng, Chapter 524, Statutes of 2012). Public policy continues to focus on the right of every human being to have safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitation. Water supply, contaminants, costs of treatment and distribution systems, affordability to ratepayers, the number and nature of small public water systems, especially in disadvantaged communities, and many other factors will continue to challenge progress in ensuring the Human Right to Water.
- Water utilities. California residents are served by various types of water utilities or water systems, including publicly owned utilities, investor-owned utilities, and small community water systems.
- Publicly owned water utilities. The majority of California's residential water customers are served by cities, special districts, and mutual water companies. These utilities are governed by the city council, or other local governing body, which set their own water rates. As established by Proposition 218 (1996), the majority of these utilities are subject to state constitutional and statutory requirements that ensure water rates are directly tied to the cost-of-service. As a result, these utilities are currently not able to increase rates in order to fund low-income rate relief programs for customers.
- CPUC-regulated water utilities. The CPUC has jurisdiction over water companies that provide water service to about 16% of California's residents with annual water and wastewater revenues totaling about $1.4 billion. Approximately 95% of those residents are served by nine large water utilities, each serving more than 10,000 service connections. Combined, the nine largest utilities serve approximately 1.175 million customers. However, the majority of the CPUC-regulated water utilities (92) have service connections of 2,000 or less, and 87 of those have service connections of 500 or less. As with other investor-owned utilities, the CPUC regulates rates of the water utilities under its jurisdiction, as well as rules regarding discontinuation of service due to nonpayment.
Both publicly owned water utilities and CPUC-regulated water utilities are community water systems. A water system with fewer than 15 service connections or a private well are examples of systems which are not community water systems.
- The growing water affordability challenge. A 2020 State Water Board report to the Legislature required by AB 401 (Dodd), Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance, found that California households “…find it increasingly difficult to satisfy this need as the retail cost of water has risen substantially over the last decade and is expected to rise significantly over the coming years…adjusting for inflation, the average Californian household paid around 45% more per month for drinking water service in 2015 than in 2007.”[1] The 2020 Report also recommends the creation of a statewide water rate assistance program funded through taxes on personal income, business income, and bottled water, as most water systems are not able to fund low-income assistance programs.
The water affordability outlook does not appear to have improved since 2020. According to the State Water Board 2025 Needs Assessment (2025 Assessment), there was a steady increase in drinking water rates across the state from 2020 to 2023.[2] The 2025 Assessment compares drinking water affordability across all 2,815 community water systems and 363 non-transient non-community water systems that serve K-12 schools.
Interestingly, the 2025 Assessment found that larger water systems saw the highest increase since 2020, 17% on average, even though smaller systems generally charge more per unit of water than larger systems. Overall, the 2025 Assessment found that “Statewide, the average drinking water customer charges have increased by $6.64 (10%) since 2020.” The affordability challenge is even more acute in poorer communities. Of the water systems assessed, 45% are experiencing a low affordability burden, 12% are experiencing a medium affordability burden, and 3% are experiencing a high affordability burden (40% of systems are experiencing no affordability burden).
Water systems depend on public dollars and revenue from ratepayers to maintain and improve their systems.[3] Therefore, lacking sufficient public funding, a water system cannot both maintain quality drinking water and pass savings along to consumers. Providing ratepaying assistance is one means to decrease the burden on Californians, but it doesn’t address the root cause: aging water infrastructure with increasing costs shouldered by ratepayers.
Comments
- Purpose of Bill. According to the author, “Water affordability and system stability are increasingly interconnected challenges across California. Rising costs associated with infrastructure modernization, climate resilience, regulatory compliance, and energy continue to place pressure on water systems and the communities they serve, which is especially true for households living at or near poverty.
“The California Water Affordability and System Stabilization Act proposes a durable, California-based solution by addressing affordability at the household, system, and community levels. The Act advances a sustainable funding solution to support a statewide Low-Income Rate Assistance (LIRA) program for water while also supporting strategic investments that stabilize water systems and help reduce cost pressures before they are passed on to ratepayers.”
- Water Rate Assistance Fund. This bill requires that nearly half of the income generated by the Trust Fund be transferred to the Water Rate Assistance Fund, though this fund does not currently exist and is not created by this bill. SB 1125 (Menjivar) of the current legislative session, however, establishes the Water Rate Assistance Fund and the associated Water Rate Assistance Program to be administered by the State Water Board that will receive funding from the Trust Fund created by AB 2739 if both bills are enacted. Should SB 1125 not be enacted, 45 to 50% of the trust established in AB 2739 would not be allocated.
- A two-pronged approach. Complementary to the Water Rate Assistance Fund, the Affordability Program aims to decrease the cost to ratepayers through grants to community water systems, as opposed to direct rate assistance. Though AB 2739 allocates moneys to both the Water Rate Assistance fund and the Affordability Program, the Water Rate Assistance Program is not detailed in AB 2739 but instead in SB 1125 (Menjivar). The grant programs eligible for the Affordability Program, as specified in AB 2739, are programs which would improve water supplies, resiliency, or quality, or reduce the energy costs for the water system, with the ultimate purpose of “reducing the amount of local ratepayer funding required.” Additionally, AB 2739 may be less burdensome to implement than SB 1125 as the implementation is done by DWR rather than individual water systems. Ultimately, the Water Rate Assistance Fund and the Affordability Program provide a two-pronged approach to the water affordability crisis, should both bills be enacted.
- Build it and they will fund. AB 2739 creates a trust but does not allocate funding to that trust. In time between the creation of the trust and a successful budget change proposal, DWR must complete the necessary rulemaking for the grant process. However, there is no guarantee that AB 2739 (and by extension, SB 1125) will ever be funded. A similar program in Texas, a trust used for water infrastructure projects, received an initial allocation of $1 billion and an additional $1 billion of annual allocations for 20 years.[4]
- Previously committed amendments incoming. AB 2739 was amended in the Senate Natural Resources and Water on June 23, 2026. However, due to timing restraints, those amendments will be adopted in this committee. The amendments include creating the Community Water Affordability Assistance Fund upon appropriation along with technical amendments.
DOUBLE REFERRAL:
This measure was heard in Senate Natural Resources and Water on June 23, 2026, and passed out of committee.
Related/Prior Legislation
SB 1125 (Menijvar) establishes the Water Rate Assistance Program to provide financial assistance to help low-income customers pay their water and wastewater bills. This bill has been referred to the Assembly Environmental Safety and Toxic Materials Committee and the Assembly Utilities and Energy Committee.
SB 350 (Durazo, 2025) would have established the Water Rate Assistance Program and the Water Rate Assistance Fund to provide financial assistance to help low-income customers pay their water and wastewater bills. SB 350 was held in the Senate Appropriations Committee.
AB 532 (Ransom, 2025) would have authorized public urban retail water suppliers to provide water rate assistance to their ratepayers. AB 532 was held in the Senate Appropriations Committee.
SB 1255 (Durazo, 2024) would have required a retail water supplier that serves over 3,300 residential connections to establish a water rate assistance program to help eligible low-income customers pay their water and wastewater bills. Funding would come from voluntary contributions paid by other customers through charges on water bills. Would have required the State Water Board to conduct a needs assessment for a similar program for low-income customers of smaller water suppliers. SB 1255 was held in the Assembly Appropriations Committee.
SB 222 (Dodd, 2022) would have required the State Water Board to develop and administer a statewide Water Rate Assistance Program to provide rate assistance to low-income residential ratepayers of a community water system or wastewater system. SB 222 was vetoed by the Governor.
SB 200 (Monning, Chapter 120, Statutes of 2019) establishes the Safe and Affordable Drinking Water Fund (SADWF) to help water systems provide an adequate and affordable supply of safe drinking water in both the near and the long term. Beginning in fiscal year 2020-21 and until June 30, 2030, it annually transfers five percent of the proceeds of the Greenhouse Gas Reduction Fund (but no more than $130 million) to SADWF. Further requires the State Water Board to adopt a fund implementation plan and requires expenditures of the fund to be consistent with the plan.
SB 401 (Dodd, Chapter 662, Statutes of 2015) requires the State Water Board, in collaboration with the State Board of Equalization and stakeholders, to develop a plan for the funding and implementation of a new program to provide water rate relief for low-income ratepayers by January 1, 2018, and provide a corresponding report to the Legislature by February 1, 2018.
AB 685 (Eng, Chapter 524, Statutes of 2012) enacts the Human Right to Water state policy.
SOURCE:
Irvine Ranch Water District, Rancho California Water District
SUPPORT:
Association of California Cities - Orange County |
Association of California Water Agencies |
California Chamber of Commerce |
California Council for Environmental & Economic Balance (CCEEB) |
California Farm Bureau |
California Municipal Utilities Association |
California Special Districts Association |
California State Association of Counties (CSAC) |
California Water Association |
Calleguas Municipal Water District |
City of Delano City of Farmersville City of Lindsay City of Roseville City of Sacramento City of Thousand Oaks City of Tulare Clean Water Action Communitiy Water Center Contra Costa Water District Crescenta Valley Water District East Bay Municipal Utility District Eastern Municipal Water District El Dorado Irrigation District El Toro Water District Elsinore Valley Municipal Water District Irvine Ranch Water District Irvine Ranch Water District Leadership Counsel for Justice and Accountability League of California Cities Los Angeles County Metropolitan Water District of Southern California Mission Springs Water District Municipal Water District of Orange County Orange County Business Council Rancho California Water District Rancho Water Regional Water Authority San Diego County Water Authority San Joaquin Valley Water Collaborative Action Program Santa Fe Irrigation District Santa Margarita Water District South Coast Water District South Orange County Economic Coalition Southern California Water Coalition Southwest California Legislative Committee Sustainable Conservation Three Valleys Municipal Water District Upper San Gabriel Valley Municipal Water District Valley Water Walnut Valley Water District West Basin Municipal Water District Western Municipal Water District |
OPPOSITION:
None received
-- END --
Pierce, G., et. al. (2020). Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance Program, California State Water Resources Control Board. https://www.waterboards.ca.gov/water_issues/programs/conservation_portal/assistance/docs/ab401_report.pdf ↑
California State Water Resources Control Board (2025) Drinking Water Needs Assessment. https://www.waterboards.ca.gov/drinking_water/certlic/drinkingwater/needs.html ↑
Chappelle C. & Hanak E. (2021) Water Affordability in California, Public Policy Institute of California. https://www.ppic.org/publication/water-affordability/ ↑
Texas Water Foundation, Voters Approve Prop 4 – Dedicating $20B to Water Infrastructure. https://www.texaswater.org/prop-4 ↑
SENATE COMMITTEE ON NATURAL RESOURCES AND WATER
Senator Josh Becker, Chair
2025 - 2026 Regular
Bill No: AB Hearing Date: June 23, 2026
Author: | |||
Version: | Amended | ||
Urgency: | Fiscal: | ||
Consultant: | |||
Subject: Water: affordability and system stabilization
SUMMARY
This bill would establish the Water Affordability and System Stabilization Trust as a charitable trust to generate ongoing funding for the Community Water Affordability Program administered by the Department of Water Resources and the Water Rate Assistance Fund administered by the State Water Resources Control Board.
BACKGROUND AND EXISTING LAW
California residents are served by various types of water utilities or water systems, including publicly owned utilities, investor-owned utilities, and small community water systems. Most of California's residential water customers are served by cities, special districts, and mutual water companies. These utilities are governed by the city council, or other local governing body, which set their own water rates; however, the vast majority of these agencies are subject to Proposition 218 (enacted in 1996) that sets state constitutional and statutory requirements that ensure water rates are directly tied to the cost-of-service. As a result, these water agencies are currently not able to increase rates to fund low-income rate relief programs for customers and oftentimes face challenges relying on rate revenue to fund water conveyance, storage, and treatment infrastructure.
A 2020 State Water Resources Control Board (State Water Board) report to the Legislature required by AB 401 (Dodd), Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance, found that California households “…find it increasingly difficult to satisfy this need as the retail cost of water has risen substantially over the last decade and is expected to rise significantly over the coming years…adjusting for inflation, the average Californian household paid around 45% more per month for drinking water service in 2015 than in 2007.” The 2020 Report also recommends the creation of a statewide water rate assistance program funded through taxes on personal income, business income, and bottled water, as most water systems are not able to fund low-income assistance programs.
The water affordability outlook does not appear to have improved since 2020. According to the State Water Board 2025 Needs Assessment (2025 Assessment), there was a steady increase in drinking water rates across the state from 2020 to 2023. The 2025 Assessment compares drinking water affordability across all 2,815 community water systems and 363 non-transient non-community water systems that serve K-12 schools. Interestingly, the 2025 Assessment found that larger water systems saw the highest increase since 2020, 17% on average, even though smaller systems generally charge more per unit of water than larger systems. Overall, the 2025 Assessment found “Statewide, the average drinking water customer charges have increased by $6.64 (10%) since 2020.” The affordability challenge is even more acute in poorer communities. Of the water systems assessed, 45% are experiencing a low affordability burden, 12% are experiencing a medium affordability burden, and 3% are experiencing a high affordability burden (40% of systems are experiencing no affordability burden).
Existing law:
- Establishes DWR (Water Code (WAT) §120) and grants it broad authority to manage and oversee various aspects of water management in California, including dams (WAT §6000 et seq.), flood control projects (WAT §8300 et seq.), the State Water Project (WAT §11419 et seq.), sustainable groundwater management (WAT§10720 et seq.), and the California Water Plan (WAT §10004 et seq.).
- Declares the responsibility of the state to assist local governments in providing certain essential services and facilities where water resource construction projects financed, in whole or in part, by the state or by the state jointly with the federal government create an undue burden on a local area’s ability to provide these services and facilities (WAT §12950).
- Declares that it is state policy that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes and directs all relevant state agencies to consider this policy when administering programs (WAT §106.3).
- Defines “community water system” as a public water system that serves at least 15 service connections used by yearlong residents or regularly serves at least 25 yearlong residents of the area served by the system (Health and Safety Code § 116275).
PROPOSED LAW
This bill would:
- Enact the Water Affordability and System Stabilization Act (Act).
- Create the Water Affordability and System Stabilization Fund (Trust Fund) for holding the trust property of the Water Affordability and System Stabilization Trust (Trust) and for the purpose of implementing the Act. The primary purpose of the Trust, as a charitable trust, is to provide perpetual source of funding to the Water Rate Assistance Fund (Water Rate Fund) and Community Water Affordability Assistance Fund (Community Water Fund), which would be established by the bill.
- Continuously appropriate all moneys in the Trust Fund to the trustee for expenditure in accordance with the Act.
- Transfer distributions by the trustee from the income of the Trust to the State Water Board and DWR for deposit into, and expenditure from, the Water Rate Fund and the Community Water Fund.
- Prohibit moneys in the Trust Fund from being available for appropriation or being borrowed for use for any purpose not established by the Act.
- Authorize funding of the principal of the Trust and provide that such funding is subject to transfer by the Legislature from the General Fund into the Trust Fund.
- Provide that all future transfers to the Trust Fund are irrevocably transferred from the General Fund during the fiscal year the moneys are transferred to the trustee for deposit into the Trust Fund for distribution and investment.
- Prohibit moneys deposited into the Trust Fund or to fund the trust from being transferred to the General Fund.
- Continuously appropriate all moneys in the Trust Fund to the trustee for expenditure in accordance with the Act.
- Require the trustee to hold the property of the Trust for the primary benefit of the trust’s beneficiary.
- Require the trustee to hold, manage, and invest the principal of the Trust in accordance with existing law with the obligation of providing a growing perpetual source of annual funding to the Water Rate Fund and the Community Water Fund, beginning 25 years after the Legislature transfers funding from the General Fund to the Trust Fund.
- Require the trustee to collect, receive, and monetize the income of the Trust and to distribute the income of the Trust annually as follows:
- During the first 25 years following the Legislature’s first transfer from moneys from the General Fund to the Trust Fund:
- Transfer 45 percent of the total income deposited into the Trust Fund during the prior fiscal year to the Water Rate Fund for the State Water Board to expend in accordance with the Water Rate Assistance Program, which would be established by SB 1125 (Menjivar).
- Transfer 45 percent of the total income deposited into the Trust Fund during the prior fiscal year to the Community Water Fund for DWR to expend in accordance with the Community Water Affordability Program, which would be established by the bill.
- Invest 10 percent of the total income deposited into the Trust Fund during the prior fiscal year as part of the trust principal.
- After the first 25 years:
- Transfer 50 percent of the total income deposited into the Trust Fund during the prior fiscal year to the Water Rate Fund for the State Water Board to expend in accordance with the Water Rate Assistance Program.
- Transfer 50 percent of the total income deposited into the Trust Fund during the prior fiscal year to the Community Water Fund for DWR to expend in accordance with the Community Water Affordability Program.
- During the first 25 years following the Legislature’s first transfer from moneys from the General Fund to the Trust Fund:
- Prohibit the trustee from selling, purchasing, exchanging, or otherwise dealing with or disposing of all or any parts of the principal of the Trust.
- Require the trustee to exercise its administration of the trust as a fiduciary to the beneficiary.
- Require the trustee to abide by the Uniform Prudent Investor Act and vests in the trustee all powers, obligations, and responsibilities described in the Uniform Prudent Investor Act that are not inconsistent with the purposes of the Act.
- Require the trustee to abide by the Uniform Prudent Investor Act and vests in the trustee all powers, obligations, and responsibilities described in the Uniform Prudent Investor Act that are not inconsistent with the purposes of the Act.
- Require the trustee to:
- Have the power to accept donations, which shall be deemed property of the Trust and increase the principal of the Trust. The bill would prohibit donations from being expended or transferred until the Legislature transfers funding from the General Fund to the Trust Fund.
- Use no more than 1 percent of the income of the Trust earned between July 1 and June 30, inclusive, of each fiscal year to pay for necessary and reasonable expenses incident to the administration of the Trust during the same period.
- Require the trustee to provide for appropriate audit, accounting, and fiscal management services, plans, and reports relative to the Trust Fund, as specified.
- Require the trustee to annually provide the State Water Board and DWR with an accounting of the investments of the Trust Fund and a forecast of the projected income to be distributed from the Trust Fund in future fiscal years.
- Require the trustee to hold, manage, and invest the principal of the Trust in accordance with existing law with the obligation of providing a growing perpetual source of annual funding to the Water Rate Fund and the Community Water Fund, beginning 25 years after the Legislature transfers funding from the General Fund to the Trust Fund.
- Require DWR, subject to transfer from moneys into the Community Water Fund, develop and administer the Community Water Affordability Program to provide funding in the form of grants to community water systems for local water infrastructure projects that include, but are not limited to, projects that improve water supplies, resiliency, or quality, and projects that reduce energy costs for a community water system.
- Continuously appropriate moneys in the Community Water Fund to DWR and prohibit moneys in the fund at the end of the fiscal year from reverting to the General Fund.
- Prohibit moneys in the fund from being available for appropriation or borrowed for nay use for any purpose not established by the Act unless the use of the moneys is authorized by statute that receives an affirmative vote two-thirds pf each house of the Legislature.
- Prohibit moneys in the fund from being available for appropriation or borrowed for nay use for any purpose not established by the Act unless the use of the moneys is authorized by statute that receives an affirmative vote two-thirds pf each house of the Legislature.
- Require DWR to develop and adopt program guidelines and project solicitation documents, which would not be subject to the Administrative Procedure Act. Require the program guidelines to:
- Require an applicant for a grant to provide at least 25 percent of the total funding required for the project. DWR may waive or reduce this amount if it would cause extreme financial hardship on the applicant.
- Establish a methodology for evaluating projects for purposes of grant award by consideration of factors that include, but are not limited to, the net present value of the cost avoided on a per account basis over a 25-year period of time, the applicant’s ability to complete the project in a timely manner, the number of households it would benefit, and the benefits the system received in the past year from the Water Rate Assistance Fund averaged across the system’s total residential connections.
- Before adopting program guidelines and project solicitation documents, require DWR to hold at least 3 public workshops throughout the state on draft program guidelines and provide at least 45 days of public comment on the draft.
- Require DWR to annually post a report on the revenues, expenditures, and benefits of the Community Water Fund for the prior fiscal year. The report is required to include the cumulative and fiscal year number of households the Community Water Affordability Program has benefited and the estimated cost the program has caused to be avoided.
- Require DWR to coordinate with the State Water Board for projects that seek to combine funding from the Community Water Affordability Program and the State Water Board.
- Authorize DWR to do the following to implement the Community Water Fund:
- Provide for the deposit of federal contributions; voluntary contributions, gifts, grants, or bequests; or financial participation by a public agency in an activity authorized for funding from the Community Water Fund.
- Enter into agreements for contributions to the Community Water Fund from the federal government, local or state agencies, or private corporations or nonprofit organizations.
- Take additional action as appropriate for administration and operation of the Community Water Fund.
- Authorize DWR to set appropriate requirements as a condition of funding, including, but not limited to, an audit, improvements to reduce costs and increase efficiencies of the infrastructure project funded, and evaluation of alternatives.
- Continuously appropriate moneys in the Community Water Fund to DWR and prohibit moneys in the fund at the end of the fiscal year from reverting to the General Fund.
ARGUMENTS IN SUPPORT
According to the author, “Water affordability and system stability are increasingly interconnected challenges across California. Rising costs associated with infrastructure modernization, climate resilience, regulatory compliance, and energy continue to place pressure on water systems and the communities they serve, which is especially true for households living at or near poverty.
“The California Water Affordability and System Stabilization Act proposes a durable, California-based solution by addressing affordability at the household, system, and community levels. The Act advances a sustainable funding solution to support a statewide Low-Income Rate Assistance (LIRA) program for water while also supporting strategic investments that stabilize water systems and help reduce cost pressures before they are passed on to ratepayers.”
ARGUMENTS IN OPPOSITION
None received
COMMENTS
This bill is double referred. This bill is double referred with the Senate Environmental Quality Committee, with this committee being the committee of first referral. Elements of this bill under the jurisdiction of the Senate Environmental Quality Committee are included here for context and completeness only and will be discussed before that Committee.
Tracking cost avoidance. This bill would create the Community Water Affordability Program to provide grants to community water systems for local water infrastructure projects. The bill would also require DWR to annually post on its website a report on the revenues, expenditures, and benefits of the fund, including the “estimated amount of cost the program has caused to be avoided” (proposed WAT 12968(b)(3)). According to the author’s staff, the intent of program is to help fund projects that would otherwise increase costs for ratepayers if those projects did not receive grant funding. As such, “estimated amount of cost the program has caused to be avoided” refers to the amount of projected cost to ratepayers via rate increases that would have otherwise been necessary to fund the infrastructure project.
The Water Rate Assistance Program and Water Rate Assistance Fund does not exist. The primary purpose of the Water Affordability and System Stabilization Trust, which is created by this bill, is to provide perpetual source of funding each year to the Water Rate Fund and the Community Water Fund and requires that a specified percentage of money in the Trust Fund be transferred into these funds each year. However, the Water Rate Fund does not exist but, rather, is being proposed by a current legislative proposal, Senate Bill 1125 (Menjivar) (SB 1125). SB 1125 is currently pending before the Assembly Environmental Safety and Toxic Materials Committee.
If this bill is enacted, with reference to the Water Rate Fund, and SB 1125 is not, references to the Water Rate Fund will likely cause confusion and it is unclear how the bill will be implemented. According to the author’s staff, there are ongoing conversations with the author of SB 1125 to eventually make the two bills contingent on each other.
Legislative oversight through the budget process. One of the more effective ways the Legislature exercises oversight over executive agencies is through annual appropriations in the budget process. Providing for a continuous appropriation undermines the ability of the Legislature to provide oversight through the budget process.
In view of this, the Committee may wish to remove the continuous appropriation language from the Community Water Fund. See Amendments #1.
Technical amendment to eliminate redundancy. The Act would define “board” and “department” as the State Water Board and DWR, respectively (see proposed WAT §12966(b) and (d), and proposed WAT §12968(a)(1) and (3)). However, Water Code §22 already provides that, for purposes of the Water Code, that “department” means the Department of Water Resources; and Water Code §25 provides that, for purposes of the Water Code, “Board” means the State Water Resources Control Board. Therefore, it is not necessary to additionally define these terms in proposed Water Code §§12966 and 12968.
The Committee may wish to remove these definitions. See Amendments #2 and #3.
Committee amendments will be taken in Senate Environmental Quality Committee. Due to time constraints, if the committee wishes to amend the bill and the bill is passed out of this committee, the amendments will be taken in the Senate Environmental Quality Committee’s hearing on this bill.
Related legislation
SB 1125 (Menjivar) of the current legislative session establishes the Water Rate Assistance Program to provide financial assistance to help low-income customers pay their water and wastewater bills. SB 1125 is pending before the Assembly Environmental Safety and Toxic Materials Committee.
SB 350 (Durazo, 2025) would have established the Water Rate Assistance Program and the Water Rate Assistance Fund to provide financial assistance to help low-income customers pay their water and wastewater bills. SB 350 was held in the Senate Appropriations Committee.
AB 532 (Ransom, 2025) would have authorized public urban retail water suppliers to provide water rate assistance to their ratepayers. AB 532 was held in the Senate Appropriations Committee.
SB 1255 (Durazo, 2024) would have required a retail water supplier that serves over 3,300 residential connections to establish a water rate assistance program to help eligible low-income customers pay their water and wastewater bills. Funding would come from voluntary contributions paid by other customers through charges on water bills. Would have required the State Water Board to conduct a needs assessment for a similar program for low-income customers of smaller water suppliers. SB 1255 was held in the Assembly Appropriations Committee.
SB 222 (Dodd, 2022) would have required the State Water Board to develop and administer a statewide Water Rate Assistance Program to provide rate assistance to low-income residential ratepayers of a community water system or wastewater system. SB 222 was vetoed by the Governor.
SB 200 (Monning, Chapter 120, Statutes of 2019) establishes the Safe and Affordable Drinking Water Fund (SADWF) to help water systems provide an adequate and affordable supply of safe drinking water in both the near and the long term. Beginning in fiscal year 2020-21 and until June 30, 2030, it annually transfers five percent of the proceeds of the Greenhouse Gas Reduction Fund (but no more than $130 million) to SADWF. Further requires the State Water Board to adopt a fund implementation plan and requires expenditures of the fund to be consistent with the plan.
SB 401 (Dodd, Chapter 662, Statutes of 2015) requires the State Water Board, in collaboration with the State Board of Equalization and stakeholders, to develop a plan for the funding and implementation of a new program to provide water rate relief for low-income ratepayers by January 1, 2018, and provide a corresponding report to the Legislature by February 1, 2018.
AB 685 (Eng Chapter 524, Statutes of 2012) enacts the Human Right to Water state policy.
SUGGESTED AMENDMENTS
AMENDMENT 1
Amend proposed Water Code Section 12968 as follows:
12968(e). The Community Water Affordability Assistance Fund is hereby established in the State Treasury. Notwithstanding Section 11340 of the Government Code, all All moneys in the fund are continuously appropriated available to the department, without regard to fiscal year upon appropriation by the Legislature, in accordance with this chapter.
AMENDMENT 2
Amend proposed Water Code §12966 as follows:
(b) “Board” means the State water Resources Control Board.
(c) (b) “Community Water Affordability Assistance Fund” means the Community Water Affordability Assistance Fund established pursuant to Section 12968.
(d) “Department” means the Department of Water Resources.
.
.
. (re-letter as appropriate)
AMENDMENT 3
Amend proposed Section Water Code §12969(a) as follows:
(a) For purposes of this chapter, the following definitions apply:(1) “Board” means the State Water Resources Control Board. (1) “Community water system” has the same meaning as defined in Section 116275 of the Health and Safety Code.
(2)
(3) “Department” means the Department of Water Resources.
(re-number as appropriate)
SUPPORT
Association of California Cities - Orange County
Association of California Water Agencies
California Chamber of Commerce
California Council for Environment and Economic Balance (CEEB)
California Farm Bureau Federation
California Municipal Utilities Association
California Special Districts Association
California State Association of Counties (CSAC)
California Water Association
Calleguas Municipal Water District
City of Sacramento
City of Thousand Oaks
Clean Water Action
Community Water Center
Contra Costa Water District
County of Los Angeles
Crescenta Valley Water District
East Bay Municipal Utility District
Eastern Municipal Water District
El Dorado Irrigation District
El Toro Water District
Elsinore Valley Municipal Water District
Honorable Bryan Osorio, Councilmember, City of Delano
Honorable Gregorio Gomez, Councilmember, City of Farmersville
Honorable Joe Soria, Mayor Pro Tem, City of Lindsey
Honorable Krista Bernasconi, Mayor, City of Roseville
Honorable Jose Sigala, Councilmember, City of Tulare
Irvine Ranch Water District
Leadership Counsel for Justice and Accountability
League of California Cities
Metropolitan Water District of Southern California
Mission Springs Water District
Mountain Counties Water Resources Association
Municipal Water District of Orange County
Orange County Business Council
Rancho California Water District
Regional Water Authority
Rincon Del Diablo Municipal Water District
San Diego County Water Authority
San Joaquin Valley Water Collaborative Action Program
Santa Fe Irrigation District
Santa Margarita Water District
South Coast Water District
South Orange County Economic Coalition
Southern California Water Coalition
Southwest California Legislative Council
Three Valleys Municipal Water District
Upper San Gabriel Valley Municipal Water District
Valley Water
Walnut Valley Water District
West Basin Municipal Water District
Western Municipal Water District
OPPOSITION
None received
-- END --
ASSEMBLY THIRD READING
ATR Bill Id:AB 2739
Author:(Soria)
As Amended Ver:April 6, 2026
2/3 vote
SUMMARY
Establishes the Water Affordability and System Stabilization Trust (Trust Fund) as a charitable trust to generate ongoing funding for the Community Water Affordability Program (Affordability Program) administered by the Department of Water Resources (DWR) and the Water Rate Assistance Fund administered by the State Water Resources Control Board (State Water Board).
Major Provisions
- Establishes the Trust Fund and provides that funding in the Trust Fund shall be continuously appropriated to the State Treasurer, who shall serve as trustee to the Trust Fund, to expend funds to accomplish the goals of this bill.
- Provides that the income generated by the Trust Fund shall be transferred to the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund (Affordability Assistance Fund).
- Provides that the Trust Fund is a charitable trust established to provide a perpetual source of funding for the Water Rate Assistance Fund and the Affordability Assistance Fund.
- Authorizes the Legislature to transfer General Fund moneys to fund the Trust Fund principal. Provides that transfers to the Trust Fund are irrevocably transferred from the General Fund to the Trust Fund to accomplish the purposes of this bill.
- Requires the State Treasurer to hold, manage, and invest the principal of the Trust Fund in accordance with existing law and to generate a growing perpetual source of annual funding for the Water Rate Assistance Fund and the Affordability Assistance Fund. Provides that the State Treasurer shall not invade the principal of the Trust Fund.
- Requires the State Treasurer to annually distribute the funding in the Trust Fund as follows:
- In the first 25 years following the Legislature's first transfer of General Fund dollars to the Trust Fund:
- 45% of the income shall go to the State Water Board for purposes of the Water Rate Assistance Fund;
- 45% of the income shall go to DWR for the purposes of the Affordability Assistance Fund; and
- 10% of the income shall remain in the Trust Fund to increase the Trust Fund's principal.
- 25 years after the Legislature's first transfer of General Fund dollars to the Trust Fund:
- 50% of the income shall go to the State Water Board for purposes of the Water Rate Assistance Fund; and
- 50% of the income shall go to DWR for the purposes of the Affordability Assistance Fund.
- In the first 25 years following the Legislature's first transfer of General Fund dollars to the Trust Fund:
- Establishes the Affordability Program to be administered by DWR to provide grants to community water systems for local water infrastructure projects including, projects that improve water supplies and quality and reduce energy costs for a community water system. The purpose of the grants shall be to reduce the amount of ratepayer funds required for local water infrastructure projects.
- Provides that the guidelines for the Affordability Program shall:
- Require a grantee to provide a 25% match. Allows DWR to waive or reduce this amount if it would cause extreme financial hardship on a grant applicant;
- Establish a methodology to evaluate a project's net present value of the cost avoided on a per account basis over a 25-year time frame, the applicant's ability to complete a project in a timely manner, and the number of households that will benefit from a project; and
- Prohibit DWR from penalizing an applicant that requests a waiver or reduction of the 25% match requirement.
- Establishes the Affordability Assistance Fund in the State Treasury and provides all moneys in the Affordability Assistance Fund are continuously appropriated to DWR for the Affordability Program. Provides monies in the Affordability Assistance Fund shall not revert back to the General Fund and shall not be appropriated or borrowed unless authorized by a 2/3's vote of the Legislature.
COMMENTS
California residents are served by various types of water utilities or water systems, including publicly-owned utilities, investor-owned utilities, and small community water systems. Most of California's residential water customers are served by cities, special districts, and mutual water companies. These utilities are governed by the city council, or other local governing body, which set their own water rates; however, the vast majority of these agencies are subject to Proposition 218 (enacted in 1996) that sets state constitutional and statutory requirements that ensure water rates are directly tied to the cost-of-service. As a result, these water agencies are currently not able to increase rates in order to fund low-income rate relief programs for customers and oftentimes face challenges relying on rate revenue to fund water conveyance, storage, and treatment infrastructure.
A 2020 State Water Board report to the Legislature required by AB 401 (Dodd), Chapter 662, Statutes of 2015 "Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance," found that California households "…find it increasingly difficult to satisfy this need as the retail cost of water has risen substantially over the last decade and is expected to rise significantly over the coming years…adjusting for inflation, the average Californian household paid around 45% more per month for drinking water service in 2015 than in 2007." The 2020 Report also recommends the creation of a statewide water rate assistance program funded through taxes on personal income, business income, and bottled water, as most water systems are not able to fund low-income assistance programs.
The water affordability outlook does not appear to have improved since 2020. According to the State Water Board 2025 Needs Assessment (2025 Assessment), there was a steady increase in drinking water rates across the state from 2020 to 2023. The 2025 Assessment compares drinking water affordability across all 2,815 community water systems and 363 non-transient non-community water systems that serve K-12 schools. Interestingly, the 2025 Assessment found that larger water systems saw the highest increase since 2020, 17% on average, even though smaller systems generally charge more per unit of water than larger systems. Overall, the 2025 Assessment found "Statewide, the average drinking water customer charges have increased by $6.64 (10%) since 2020." The affordability challenge is even more acute in poorer communities. Of the water systems assessed, 45% are experiencing a low affordability burden, 12% are experiencing a medium affordability burden, and 3% are experiencing a high affordability burden (40% of systems are experiencing no affordability burden).
This bill requires that half of the income generated by the Trust Fund be transferred to the Water Rate Assistance Fund, though this fund does not currently exist and is not created by this bill. SB 1125 (Menjivar) of the current legislative session, however, establishes the Water Rate Assistance Fund and associated Water Rate Assistance Program to be administered by the State Water Board that will receive funding from the Trust Fund created by this bill if both bills are enacted.
According to the Author
"Water affordability and system stability are increasingly interconnected challenges across California. Rising costs associated with infrastructure modernization, climate resilience, regulatory compliance, and energy continue to place pressure on water systems and the communities they serve, which is especially true for households living at or near poverty.
Further, the author contends "The California Water Affordability and System Stabilization Act proposes a durable, California-based solution by addressing affordability at the household, system, and community levels. The Act advances a sustainable funding solution to support a statewide Low-Income Rate Assistance program for water while also supporting strategic investments that stabilize water systems and help reduce cost pressures before they are passed on to ratepayers."
Arguments in Support
The Irvine Ranch Water District and Rancho Water (co-sponsors) are co-sponsoring this bill. They note that "water affordability and system stability are increasingly interconnected challenges across California. Rising costs associated with infrastructure modernization, climate resilience, regulatory compliance, and energy continue to place pressure on water systems and the communities they serve, particularly for households living at or near poverty." The co-sponsors assert that this bill proposes a lasting solution that does not include any new taxes or fees and that will help to advance the Human Right to Water: "[This bill's] proposed funding structure provides predictable, long-term resources without placing new burdens on local governments or water ratepayers. This approach strengthens water planning, and enhances statewide resilience while preserving local decision-making."
Arguments in Opposition
None on file.
FISCAL COMMENTS
According to the Assembly Appropriations Committee, this bill has the following fiscal impact:
- General Fund cost pressure of an unknown but significant amount, potentially in the millions of dollars (one-time or annually), to fund the Trust Fund principal, subject to appropriation by the Legislature. The State Treasurer, acting as the trustee, must invest this principal under standard fiduciary rules, theoretically earning the Trust Fund investment income over time. For the first 25 years, the trustee must reinvest 10% of the Trust Fund's annual income to grow the principal and increase future earnings.
- DWR estimates ongoing annual General Fund costs of approximately $600,000 (three staff and contract costs) to develop and administer the [Affordability Program], although the magnitude of the department's workload and associated costs will ultimately depend on the level of funding it receives and is required to administer. This bill allows DWR to expend up to 5% of the annual revenue from the [Affordability Assistance Fund] for reasonable costs associated with the administration of the [Affordability Assistance Fund].
- The State Water Board estimates ongoing annual General Fund costs of approximately $1 million to hire new staff, as well as $500,000 in one-time contracting costs, to implement this bill. Tasks include, among other things, managing and tracking [the Water Rate Assistance Fund] disbursements; providing administrative, fiscal, and information technology support; and updating the board's loans and grants tracking system, which is used to manage financial assistance applications.
- The Appropriations Committee notes that this bill requires that half of the income generated by the Trust Fund be transferred to the Water Rate Assistance Fund, though this fund does not currently exist and is not created by this bill. SB 1125 (Menjivar) of the current legislative session establishes the [the Water Rate Assistance Fund] and the associated Water Rate Assistance Program (to be administered by the State Water Board) that will receive funding from the Trust Fund created by this bill if both bills are enacted. Therefore, it is not clear whether the State Water Board's costs should be attributed to this bill.
- Ongoing annual General Fund costs of an unknown amount, likely in the hundreds of thousands of dollars, for the State Treasurer to serve as the trustee for the Trust Fund and implement the requirements of the bill. This bill allows the trustee to use up to 1% of the income of the trust earned July 1 to June 30, inclusive, of each fiscal year to pay for the necessary and reasonable expenses incident to the administration of the trust during that same period.
The Legislative Analyst's Office recently warned of General Fund structural deficits of around $35 billion per year in the 2027-28 FY and ongoing.
VOTES
ASM WATER, PARKS, AND WILDLIFE: 12-0-1
YES: Papan, Jeff Gonzalez, Alanis, Alvarez, Ávila Farías, Bains, Bennett, Boerner, Caloza, Hart, Muratsuchi, Rogers
ABS, ABST OR NV: Gallagher
ASM APPROPRIATIONS: 15-0-0
YES: Wicks, Hoover, Aguiar-Curry, Calderon, Caloza, Dixon, Fong, Mark González, Krell, Pacheco, Pellerin, Sharp-Collins, Solache, Ta, Tangipa
UPDATED
VERSION: April 6, 2026
CONSULTANT: Pablo Garza / W., P., & W. / (916) 319-2096 FN: 0002723
Date of Hearing: April 29, 2026
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Buffy Wicks, Chair
ABPCA Bill Id:AB 2739
Author:(Soria) – As Amended Ver:April 6, 2026
Policy Committee: | Water, Parks and Wildlife | Vote: | 12 - 0 |
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Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill establishes the Water Affordability and System Stabilization Fund (Trust Fund) as a charitable trust to provide a perpetual source of funding annually to the Water Rate Assistance Fund (WRAF), administered by the State Water Resources Control Board (State Water Board), and the Community Water Affordability Assistance Fund (CWAAF), administered by the Department of Water Resources (DWR).
Specifically, this bill, among many other things:
- Creates the Trust Fund in the State Treasury; authorizes the Legislature to transfer General Fund moneys to fund the Trust Fund principal; provides that all moneys in the Trust Fund are continuously appropriated to the trustee (the State Treasurer) for expenditure in accordance with this bill; and transfers the distributions by the trustee from the income of the trust to the State Water Board and DWR for deposit into, and expenditure from, the WRAF and CWAAF, respectively.
- Requires the trustee to hold, manage, and invest the principal of the trust in accordance with existing law with the obligation of providing a growing perpetual source of annual funding to the WRAF and CWAAF, beginning 25 years after the Legislature transfers funding from the General Fund to the Trust Fund.
- Requires the trustee to collect, receive, and monetize, if prudent and in accordance with existing law, the income of the trust, and distribute the income of the trust annually as follows:
- During the first 25 years following the Legislature’s first transfer of General Fund dollars to the Trust Fund, transfer 45% of the total income deposited into the Trust Fund during the prior fiscal year (FY) to the State Water Board for the WRAF, transfer 45% to DWR for the CWAAF, and invest the remaining 10% as part of the trust principal.
- After the first 25 years, transfer 50% to the State Water Board for the WRAF and 50% to DWR for the CWAAF.
- Specifies numerous requirements and restrictions for the trustee, including requirements related to auditing and accounting of investments, as well as authorization for the trustee to accept donations to increase the principal of the Trust Fund.
- Establishes the CWAAF, provides all moneys in the CWAAF are continuously appropriated to DWR for the Community Water Affordability Program (CWAP), and prohibits moneys in the CWAAF at the close of the FY from reverting to the General Fund or being available for appropriation or borrowed for use for any purpose not established in this bill unless authorized by a two-thirds vote of the Legislature.
- Requires DWR, subject to transfer of moneys into the CWAAF, to develop and administer the CWAP to provide grants to community water systems (CWS) for local water infrastructure projects, including projects that improve water supplies, resiliency, or quality, and projects that reduce energy costs for CWS and states the purpose of the grants is to reduce the amount of ratepayer funding required for the projects and for avoiding costs that would otherwise be paid for by ratepayers.
- Requires DWR, before disbursing grants and after holding public workshops and soliciting public comment and feedback inclusive of CWSs, to develop and adopt program guidelines and project solicitation documents; exempts these guidelines from the Administrative Procedures Act; specifies numerous requirements for the guidelines, including requiring a grantee to provide a 25% match, except as provided; requires DWR to report annually on the CWAAF and CWAP, as specified; authorizes DWR to coordinate with the State Water Board for projects that seek to combine funding from the CWAP and the State Water Board; and authorizes DWR to undertake specified actions to implement the CWAAF.
FISCAL EFFECT:
1) General Fund cost pressure of an unknown but significant amount, potentially in the millions of dollars (one-time or annually), to fund the Water Affordability and System Stabilization Fund principal, subject to appropriation by the Legislature. The State Treasurer, acting as the trustee, must invest this principal under standard fiduciary rules, theoretically earning the Trust Fund investment income over time. For the first 25 years, the trustee must reinvest 10% of the Trust Fund’s annual income to grow the principal and increase future earnings.
2) DWR estimates ongoing annual General Fund costs of approximately $600,000 (three staff and contract costs) to develop and administer the CWAP, although the magnitude of the department’s workload and associated costs will ultimately depend on the level of funding it receives and is required to administer. The bill allows DWR to expend up to 5% of the annual revenue from the CWAAF for reasonable costs associated with the administration of the CWAAF.
3) The State Water Board estimates ongoing annual General Fund costs of approximately $1 million to hire new staff, as well as $500,000 in one-time contracting costs, to implement this bill. Tasks include, among other things, managing and tracking WRAF disbursements; providing administrative, fiscal, and information technology support; and updating the board’s loans and grants tracking system, which is used to manage financial assistance applications.
The committee notes that this bill requires that half of the income generated by the Trust Fund be transferred to the WRAF, though this fund does not currently exist and is not created by this bill. SB 1125 (Menjivar) of the current legislative session establishes the WRAF and the associated Water Rate Assistance Program (to be administered by the State Water Board) that will receive funding from the Trust Fund created by this bill if both bills are enacted. Therefore, it is not clear to the committee whether the State Water Board’s costs should be attributed to this bill.
4) Ongoing annual General Fund costs of an unknown amount, likely in the hundreds of thousands of dollars, for the State Treasurer to serve as the trustee for the Trust Fund and implement the requirements of the bill. The bill allows the trustee to use up to 1% of the income of the trust earned July 1 to June 30, inclusive, of each fiscal year to pay for the necessary and reasonable expenses incident to the administration of the trust during that same period.
The Legislative Analyst’s Office recently warned of General Fund structural deficits of around $35 billion per year in the 2027-28 FY and ongoing.
COMMENTS:
1) Purpose. According to the author:
The California Water Affordability and System Stabilization Act [Act] proposes a durable, California-based solution by addressing affordability at the household, system, and community levels. The Act advances a sustainable funding solution to support a statewide Low-Income Rate Assistance (LIRA) program for water while also supporting strategic investments that stabilize water systems and help reduce cost pressures before they are passed on to ratepayers.
2) Background. California residents are served by various types of water utilities or water systems, including publicly owned utilities, investor-owned utilities, and small community water systems. Most of California's residential water customers are served by cities, special districts, and mutual water companies. These utilities are governed by the city council, or other local governing body, which set their own water rates; however, the majority of these agencies are subject to Proposition 218 (enacted in 1996) that sets state constitutional and statutory requirements that ensure water rates are directly tied to the cost-of-service. As a result, these water agencies are not able to increase rates in order to fund low-income rate relief programs for customers and oftentimes face challenges relying on rate revenue to fund water conveyance, storage, and treatment infrastructure.
A 2020 State Water Board report to the Legislature required by SB 401 (Dodd), Chapter 662, Statutes of 2015, found that, adjusting for inflation, the average California household paid around 45% more per month for drinking water service in 2015 than in 2007. The 2020 report also recommends the creation of a statewide WRAP funded though taxes on personal income, business income, and bottled water, as most water systems are not able to fund low-income assistance programs.
The water affordability outlook does not appear to have improved since 2020. According to the State Water Board’s 2025 Needs Assessment (2025 Assessment), there was a steady increase in drinking water rates across the state from 2020 to 2023, and the affordability challenge is even more acute in poorer communities.
Writing in support of this bill, a coalition of organizations notes that water affordability and system stability are increasingly interconnected challenges across California, and that rising costs associated with infrastructure modernization, climate resilience, regulatory compliance, and energy continue to place pressure on water systems and the communities they serve, particularly for households living at or near poverty. The coalition writes:
The Act’s proposed funding structure provides predictable, long-term resources without placing new burdens on local governments or water ratepayers. This approach strengthens water planning, and enhances statewide resilience while preserving local decision-making. Further, we support the commitment of the sponsors of the Act to create a viable, sustainable funding source that does not include any new taxes or fees.
Analysis Prepared by: Nikita Koraddi / APPR. / (916) 319-2081
Date of Hearing: April 14, 2026
ASSEMBLY COMMITTEE ON WATER, PARKS, AND WILDLIFE
Diane Papan, Chair
ABPCA Bill Id:AB 2739 (
Author:Soria) – As Amended Ver:April 6, 2026
SUBJECT: Water: affordability and system stabilization
SUMMARY: Establishes the Water Affordability and System Stabilization Trust (Trust Fund) as a charitable trust to generate ongoing funding for the Community Water Affordability Program (Affordability Program) administered by the Department of Water Resources (DWR) and the Water Rate Assistance Fund administered by the State Water Resources Control Board (State Water Board). Specifically, this bill:
- Establishes the Trust Fund and provides that funding in the Trust Fund shall be continuously appropriated to the State Treasurer, who shall serve as trustee to the Trust Fund, to expend funds to accomplish the goals of this bill.
- Provides that the income generated by the Trust Fund shall be transferred to the Water Rate Assistance Fund and the Community Water Affordability Assistance Fund (Affordability Assistance Fund).
- Provides that the Trust Fund is a charitable trust established to provide a perpetual source of funding for the Water Rate Assistance Fund and the Affordability Assistance Fund.
- Provides that moneys in the Trust Fund shall not be appropriated nor borrowed for purposes inconsistent with this bill.
- Authorizes the Legislature to transfer General Fund moneys to fund the Trust Fund principal. Provides that transfers to the Trust Fund are irrevocably transferred from the General Fund to the Trust Fund to accomplish the purposes of this bill.
- Provides, notwithstanding any other law, that moneys deposited into the Trust Fund shall not be transferred to the General Fund.
- Requires the State Treasurer to hold, manage, and invest the principal of the Trust Fund in accordance with existing law and to generate a growing perpetual source of annual funding for the Water Rate Assistance Fund and the Affordability Assistance Fund. Provides that the State Treasurer shall not invade the principal of the Trust Fund.
- Requires the State Treasurer to annually distribute the funding in the Trust Fund as follows:
- In the first 25 years following the Legislature’s first transfer of General Fund dollars to the Trust Fund:
- 45% of the income shall go to the State Water Board for purposes of the Water Rate Assistance Fund;
- 45% of the income shall go to DWR for the purposes of the Affordability Assistance Fund; and
- 10% of the income shall remain in the Trust Fund to increase the Trust Fund’s principal.
- 25 years after the Legislature’s first transfer of General Fund dollars to the Trust Fund:
- 50% of the income shall go to the State Water Board for purposes of the Water Rate Assistance Fund; and
- 50% of the income shall go to DWR for the purposes of the Affordability Assistance Fund.
- In the first 25 years following the Legislature’s first transfer of General Fund dollars to the Trust Fund:
- Provides that the State Treasurer, and any employee or agent of the State Treasurer, shall not sell, purchase, exchange, or otherwise deal with or dispose of all or any parts of the principal of the Trust Fund.
- Provides that the State Treasurer shall exercise their administration of the Trust Fund as a fiduciary to the beneficiary and shall abide by the Uniform Prudent Investor Act and provides that the State Treasurer shall have the powers, obligations, and responsibilities of a trustee consistent with existing law.
- Provides that the State Treasurer may accept donations to increase the principal of the Trust Fund but prohibits expenditure of donations until the Legislature transfers General Fund dollars into the Trust Fund.
- Prohibits the State Treasurer from using more than 1% of Trust Fund income for costs associated with administering the Trust Fund.
- Requires the State Treasurer to provide the State Water Board and DWR with an annual accounting of investments in, and an annual forecast of projected income from, the Trust Fund to be distributed in future fiscal years.
- Provides that the Trust Fund shall be a charitable trust subject to supervision of the Attorney General.
- Establishes the Affordability Program to be administered by DWR to provide grants to community water systems for local water infrastructure projects including, projects that improve water supplies and quality and reduce energy costs for a community water system. The purpose of the grants shall be to reduce the amount of ratepayer funds required for local water infrastructure projects.
- Requires DWR to develop and adopt program guidelines for the Affordability Program before providing grants. DWR shall solicit public comment and feedback on guidelines. Adoption of the program guidelines shall be exempt from the Administrative Procedures Act.
- Provides that the guidelines for the Affordability Program shall:
- Require a grantee to provide a 25% match. Allows DWR to waive or reduce this amount if it would cause extreme financial hardship on a grant applicant;
- Establish a methodology to evaluate a project’s net present value of the cost avoided on a per account basis over a 25-year time frame, the applicant’s ability to complete a project in a timely manner, and the number of households that will benefit from a project; and
- Prohibit DWR from penalizing an applicant that requests a waiver or reduction of the 25% match requirement.
- Requires DWR to hold at least three public workshops throughout the state and allow for a 45-day public comment period before adopting program guidelines for the Affordability Program.
- Requires DWR to report annually on the Affordability Program’s expenditures and benefits, including cumulative benefits of and estimated costs avoided by the Affordability Program.
- Authorizes DWR to accept federal, state, local, or private donations to advance the goals of the Affordability Program.
- Authorizes DWR to expend up to 5% of the annual revenue from the Community Water Affordability Fund for administration of the Affordability Program.
- Establishes the Affordability Assistance Fund in the State Treasury and provides all moneys in the Affordability Assistance Fund are continuously appropriated to DWR for the Affordability Program. Provides monies in the Affordability Assistance Fund shall not revert back to the General Fund and shall not be appropriated or borrowed unless authorized by a 2/3’s vote of the Legislature.
- Makes legislative findings and declarations regarding the increasing cost of water service and the need to invest in water system upgrades and a low-income rate assistance program to help Californians afford water service.
- Defines various terms for the purposes of this bill.
EXISTING LAW:
- Establishes DWR (Water Code § 120) and grants it broad authority to manage and oversee various aspects of water management in California, including dams (Water Code § 6000 et seq.), flood control projects (Water Code § 8300 et seq.), the State Water Project (Water Code § 11419 et seq.), sustainable groundwater management (Water Code § 10720 et seq.), and the California Water Plan (Water Code § 10004 et seq.).
- Declares the responsibility of the state to assist local governments in providing certain essential services and facilities where water resource construction projects financed, in whole or in part, by the state or by the state jointly with the federal government create an undue burden on a local area’s ability to provide these services and facilities (Water Code § 12950).
- Declares that it is state policy that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes and directs all relevant state agencies to consider this policy when administering programs (Water Code § 106.3).
- Defines “community water system” as a public water system that serves at least 15 service connections used by yearlong residents or regularly serves at least 25 yearlong residents of the area served by the system (Health and Safety Code § 116275).
FISCAL EFFECT: Unknown. This bill is keyed fiscal.
COMMENTS:
- Purpose of this bill. The goal of this bill is to create a mechanism to provide ongoing and reliable funding for low-income rate assistance programs for low-income customers of local water agencies and to support upgrades and rehabilitation of local water systems to reduce cost pressures on water rates. To accomplish this goal, this bill creates a trust fund that is intended to provide a receptacle for future budget appropriations from the General Fund that provide principal for the trust fund. Once the trust fund is capitalized, the interest will be split between low-income rate assistance and the Affordability Program established by this bill.
According to the author, “Water affordability and system stability are increasingly interconnected challenges across California. Rising costs associated with infrastructure modernization, climate resilience, regulatory compliance, and energy continue to place pressure on water systems and the communities they serve, which is especially true for households living at or near poverty.
Further, the author contends “The California Water Affordability and System Stabilization Act proposes a durable, California-based solution by addressing affordability at the household, system, and community levels. The Act advances a sustainable funding solution to support a statewide Low-Income Rate Assistance (LIRA) program for water while also supporting strategic investments that stabilize water systems and help reduce cost pressures before they are passed on to ratepayers.” - Background. California residents are served by various types of water utilities or water systems, including publicly owned utilities, investor-owned utilities, and small community water systems. Most of California's residential water customers are served by cities, special districts, and mutual water companies. These utilities are governed by the city council, or other local governing body, which set their own water rates; however, the vast majority of these agencies are subject to Proposition 218 (enacted in 1996) that sets state constitutional and statutory requirements that ensure water rates are directly tied to the cost-of-service. As a result, these water agencies are currently not able to increase rates in order to fund low-income rate relief programs for customers and oftentimes face challenges relying on rate revenue to fund water conveyance, storage, and treatment infrastructure.
A 2020 State Water Board report to the Legislature required by AB 401 (Dodd), Recommendations for Implementation of a Statewide Low-Income Water Rate Assistance, found that California households “…find it increasingly difficult to satisfy this need as the retail cost of water has risen substantially over the last decade and is expected to rise significantly over the coming years…adjusting for inflation, the average Californian household paid around 45% more per month for drinking water service in 2015 than in 2007.” The 2020 Report also recommends the creation of a statewide water rate assistance program funded through taxes on personal income, business income, and bottled water, as most water systems are not able to fund low-income assistance programs.
The water affordability outlook does not appear to have improved since 2020. According to the State Water Board 2025 Needs Assessment (2025 Assessment), there was a steady increase in drinking water rates across the state from 2020 to 2023. The 2025 Assessment compares drinking water affordability across all 2,815 community water systems and 363 non-transient non-community water systems that serve K-12 schools. Interestingly, the 2025 Assessment found that larger water systems saw the highest increase since 2020, 17% on average, even though smaller systems generally charge more per unit of water than larger systems. Overall, the 2025 Assessment found “Statewide, the average drinking water customer charges have increased by $6.64 (10%) since 2020.” The affordability challenge is even more acute in poorer communities. Of the water systems assessed, 45% are experiencing a low affordability burden, 12% are experiencing a medium affordability burden, and 3% are experiencing a high affordability burden (40% of systems are experiencing no affordability burden).
Water Rate Assistance Fund. This bill requires that half of the income generated by the Trust Fund be transferred to the Water Rate Assistance Fund, though this fund does not currently exist and is not created by this bill. SB 1125 (Menjivar) of the current legislative session, however, establishes the Water Rate Assistance Fund and associated Water Rate Assistance Program to be administered by the State Water Board that will receive funding from the Trust Fund created by this bill if both bills are enacted. - Arguments in support. Irvine Ranch Water District and Rancho Water (co-sponsors) are co-sponsoring this bill. They note that “water affordability and system stability are increasingly interconnected challenges across California. Rising costs associated with infrastructure modernization, climate resilience, regulatory compliance, and energy continue to place pressure on water systems and the communities they serve, particularly for households living at or near poverty.” The co-sponsors assert that this bill proposes a lasting solution that does not include any new taxes or fees and that will help to advance the Human Right to Water: “[This bill’s] proposed funding structure provides predictable, long-term resources without placing new burdens on local governments or water ratepayers. This approach strengthens water planning, and enhances statewide resilience while preserving local decision-making.”
- Related legislation. SB 1125 (Menjivar) of the current legislative session establishes the Water Rate Assistance Program to provide financial assistance to help low-income customers pay their water and wastewater bills. SB 1125 is set for hearing in the Senate Environmental Quality Committee on April 8, 2025.
SB 350 (Durazo) of 2025 would have established the Water Rate Assistance Program and the Water Rate Assistance Fund to provide financial assistance to help low-income customers pay their water and wastewater bills. SB 350 was held in the Senate Appropriations Committee.
AB 532 (Ransom) of 2025 would have authorized public urban retail water suppliers to provide water rate assistance to their ratepayers. AB 532 was held in the Senate Appropriations Committee.
SB 1255 (Durazo) of 2024 would have required a retail water supplier that serves over 3,300 residential connections to establish a water rate assistance program to help eligible low-income customers pay their water and wastewater bills. Funding would come from voluntary contributions paid by other customers through charges on water bills. Would have required the State Water Board to conduct a needs assessment for a similar program for low-income customers of smaller water suppliers. SB 1255 was held in the Assembly Appropriations Committee.
SB 222 (Dodd) of 2022 would have required the State Water Board to develop and administer a statewide Water Rate Assistance Program to provide rate assistance to low-income residential ratepayers of a community water system or wastewater system. SB 222 was vetoed by the Governor.
SB 200 (Monning), Chapter 120, Statutes of 2019, establishes the Safe and Affordable Drinking Water Fund (SADWF) to help water systems provide an adequate and affordable supply of safe drinking water in both the near and the long term. Beginning in fiscal year 2020-21 and until June 30, 2030, it annually transfers five percent of the proceeds of the Greenhouse Gas Reduction Fund (but no more than $130 million) to SADWF. Further requires the State Water Board to adopt a fund implementation plan and requires expenditures of the fund to be consistent with the plan.
SB 401 (Dodd), Chapter 662, Statutes of 2015, requires the State Water Board, in collaboration with the State Board of Equalization and stakeholders, to develop a plan for the funding and implementation of a new program to provide water rate relief for low-income ratepayers by January 1, 2018, and provide a corresponding report to the Legislature by February 1, 2018.
AB 685 (Eng), Chapter 524, Statutes of 2012, enacts the Human Right to Water state policy.
REGISTERED SUPPORT / OPPOSITION:
Support
Irvine Ranch Water District (co-sponsor)
Rancho California Water District (co-sponsor)
Association of California Cities, Orange County
Association of California Water Agencies
California Chamber of Commerce
California Water Association
City of Roseville
City of Sacramento
Clean Water Action
Eastern Municipal Water District
El Toro Water District
Leadership Counsel for Justice and Accountability
Orange County Business Council
The Honorable Bryan Osorio, Councilmember, City of Delano
The Honorable Gregorio Gomez, Councilmember, City of Farmersville
The Honorable Joe Soria, Mayor Pro Tem, City of Lindsay
The Honorable Jose Sigala, Councilmember, City of Tulare
South Coast Water District
South Orange County Economic Coalition
Southern California Water Coalition
Three Valleys Municipal Water District
Upper San Gabriel Valley Municipal Water District
Western Municipal Water District
Opposition
None on file
Analysis Prepared by: Pablo Garza / W., P., & W. / (916) 319-2096
Discussed in Hearing
1MIN
Assembly Floor
1MIN
Senate Standing Committee on Appropriations
1MIN
Assembly Floor
5MIN
Assembly Standing Committee on Water, Parks, and Wildlife
Bill Author
Bill Co-Author(s):
