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CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION
91
Introduced by Senator McNerney
(Coauthors: Senators Archuleta, Cabaldon, Cortese, Grayson, Hurtado, Ochoa Bogh, Richardson, Stern, and Umberg)
January 6, 2026
An act to amend Section 12986 of, and to add Part 10 (commencing with Section 12996) to Division 6 of, the Water Code, relating to water, and making an appropriation therefor.
Vote: majority Appropriation: yes Fiscal committee: yes Local program: no
LEGISLATIVE COUNSEL’S DIGEST
Existing law, the Sacramento-San Joaquin Delta Reform Act of 2009, declares that the Sacramento-San Joaquin Delta (Delta) is a critically important natural resource for California and the nation and it serves as both the hub of the California water system and the most valuable estuary and wetland ecosystem on the west coast of North and South America. Existing law establishes in the Natural Resources Agency the Department of Water Resources (department). Existing law requires the department and the Department of Fish and Wildlife to determine the principal options for the Delta and requires the department to evaluate and comparatively rate each option for its ability to do specified things, including, among others, to maintain Delta water quality for Delta users, and to preserve, protect, and improve Delta levees. Existing law establishes in the agency the Sacramento-San Joaquin Delta Conservancy. Existing law requires the conservancy to act as a primary state agency to implement ecosystem restoration in the Delta and to support efforts that advance environmental protection and the economic well-being of Delta residents. Existing law provides for the preservation of specified management areas of the Suisun Marsh, pursuant to a protection plan prepared and adopted by the San Francisco Bay Conservation and Development Commission, as provided. Existing law establishes the Delta Stewardship Council, and requires the council to develop, adopt, and implement a comprehensive long-term management plan for the Delta, known as the Delta Plan, as provided.
Existing law requires the department, upon appropriation, to reimburse an eligible local agency for costs incurred for the maintenance or improvement of specified levees, in an amount not to exceed 75% of costs incurred in excess of a set amount per mile, as provided.
This bill would require the department to reimburse 100% of the excess costs if a local agency demonstrates economic hardship and the reimbursement is for a project that addresses a threat to life, property, water supply, or habitat.
This bill would establish the Delta Levees and Canal Subsidence Fund in the State Treasury and, upon appropriation, would make the moneys in the fund available to the Secretary of the Natural Resources Agency for expenditure consistent with the allocations described below. The bill would authorize the secretary to seek out, and the fund to accept, state moneys from, among other sources, any bond funds, the General Fund, or the Greenhouse Gas Reduction Fund. The bill would authorize the fund to accept moneys from nonstate sources, including federal and private moneys, and would continuously appropriate those moneys without regard to fiscal year, for allocation as described below, thereby making an appropriation. The bill would require the secretary to allocate moneys in the fund, as specified, subject to funding availability, as follows: (1) to the department for the purposes of supporting capital improvements to restore the original design water conveyance capacity for state water conveyance systems, as defined, impacted operationally by land subsidence, and (2) to the department for projects in the Delta or Suisun Marsh to improve existing levees, as specified. The bill would require the conservancy to convene a working group with specified representation to develop a list of recommended projects, as provided. The bill would require the conservancy to publish the list on its internet website, allow 45 days for public comment, and hold at least one community meeting before the list is approved by the conservancy’s governing board. The bill would require the department to administer any grants or funding agreements from the list of projects. The bill would require at least 15% of the funds for projects in the Delta or Suisun Marsh, as described in (2) above, to be for Delta levee projects from the list developed by the working group, as provided. The bill would authorize the department to impose additional requirements on projects to meet the conditions of the funding source, as provided. The bill would prohibit these moneys from being expended to pay the costs of the design, construction, operation, mitigation, or maintenance of any additional Delta conveyance facilities, as provided. The bill would require the secretary, no later than January 1, 2032, and by January 1 every 5 years thereafter, to report to the Legislature on expenditures, as provided.
This bill would also require the department to provide a report to the budget committees of the Assembly and Senate no later than May 1, 2027, and biennially thereafter, that contains a 5-year spending plan detailing the engineering and capital improvements necessary to address state water conveyance systems impacted operationally by land subsidence, as provided. The bill would authorize the department to charge the state water supply contractors for the actual and reasonable cost of developing the plan.
The people of the State of California do enact as follows:
SECTION 1.
The Legislature finds and declares all of the following:
(a) Climate change continues to have an immense impact on California’s water systems and changing precipitation patterns, increasing flood and drought risks, sea level rise, and aging infrastructure are all combining to cause significant risks to our ability to protect water quality in the Sacramento-San Joaquin Delta (Delta), protect flood-vulnerable communities, maintain water deliveries, and ensure climate-responsive water operations.
(b) Before passage of the Sustainable Groundwater Management Act (Part 2.74 (commencing with Section 10720) of Division 6 of the Water Code), groundwater pumping and other factors resulted in significant land subsidence in the San Joaquin Valley. According to the State Water Project Adaptation Strategy, this subsidence threatens to reduce the water carrying capacity of the State Water Project by 87 percent by 2040 if not repaired, putting drinking water for 27,000,000 residents and 750,000 acres of farmland in California at risk.
(c) The State Water Project is the single largest energy user in state, using about 3 percent of total statewide consumption, and with subsided canals increasing the energy it takes to move water, if these subsidence impacts to the State Water Project are not addressed, there will be unnecessary increased energy usage and associated costs.
(d) Each public water agency contracted with the Department of Water Resources is obligated to pay the capital and operation and management costs of the State Water Project in order to participate in the State Water Project, and the Department of Water Resources is authorized to issue bonds for the capital costs under the Central Valley Project (Part 3 (commencing with Section 11100) of Division 6 of the Water Code) that each state water contractor repays along with other expenses billed by the Department of Water Resources, including annual operation and maintenance costs.
(e) Damage to the State Water Project due to subsided canals is largely caused by groundwater pumping actions done outside of the public water agencies’ service areas. Obligations to pay the costs of repair of the canals would significantly increase annual costs to public water agencies and their ratepayers.
(f) The Delta supports local communities, businesses, and more than 400,000 acres of farmland, 80 percent of which is considered United States Department of Agriculture prime farmland, and it is also a national heritage site, a site of critical cultural importance to several indigenous tribes, and a thriving ecosystem supporting several native species of plants and animals.
(g) The Delta is also experiencing the impacts of climate change, including, but not limited to, increasing droughts, more extreme precipitation events, earlier snowmelt, and sea level rise that all create concerns for how to manage the dynamic ecosystem in a way that continues to support human life and natural ecosystems.
(h) The Delta is supported by 1,100 miles of levees that provide protection to residences, businesses, agricultural lands, tribal cultural sites, and infrastructure and help ensure fresh drinking water supply to millions of Californians. However, many levees date back to the 19th century and no longer meet the United States Army Corps of Engineers’ standards. If levees are breached, human life and property in the Delta would be at risk, and saltwater intrusion into the fresh water that feeds the state and federal water projects could threaten the drinking water sources for over one-half of the people in the state.
(i) The Sacramento-San Joaquin Delta Reform Act of 2009 required, among other things, that the Delta Stewardship Council establish a plan to reduce flood risk and guide prioritization of state investments in the Delta. The resulting Delta Levees Investment Strategy (DLIS) is a risk-based prioritization for levee investments in the Delta that became law as part of the Delta Plan on January 1, 2024. The goal is to maximize flood protection for people, property, water supply, the delta ecosystem, and infrastructure, for the benefit of all Californians. While the strategy provides a risk-based prioritization of levee repairs in the Delta, it does not currently have funding sources to meet its goals.
(j) The Sacramento-San Joaquin Delta Reform Act of 2009 also established that it is state policy to reduce reliance on the Delta in meeting the state’s future water supply needs by investing in improved water use efficiency, water recycling, advanced water technologies, and other regional water supply projects. These alternative water supplies will continue to be critical to protecting and preserving the overall health of the Delta, and critical to the protection of a diverse clean water supply for the people of California.
SEC. 2.
Section 12986 of the Water Code is amended to read:
12986.
(a) The department, upon appropriation by the Legislature, shall reimburse an eligible local agency pursuant to this part for costs incurred in any year for the maintenance or improvement of project or nonproject levees as follows:
(1) Costs incurred shall not be reimbursed if the entire cost incurred per mile of project or nonproject levee is either of the following:
(A) Two thousand five hundred dollars ($2,500) or less for a project or nonproject levee in an urban area.
(B) One thousand dollars ($1,000) or less for a project or nonproject levee in a rural area.
(2) (A) Not more than 75 percent of any costs incurred in excess of the amount per mile of project or nonproject levee specified in paragraph (1) shall be reimbursed.
(B) Notwithstanding subparagraph (A), the department shall reimburse 100 percent of any costs incurred in excess of the amount per mile of project or nonproject levee specified in paragraph (1) if a local agency demonstrates economic hardship and the reimbursement is for a project that addresses a threat to life, property, water supply, or habitat.
(3) In addition to project plans approved by the board, the department shall require the local agency to provide information to the department that may include, but is not limited to, a detailed engineer’s report prepared pursuant to subdivision (b) of Section 4 of Article XIII D of the California Constitution, audited financial statements, or an assessment commissioners’ report. The information provided to the department shall be the basis for determining the maximum allowable reimbursement eligible under this part. Nothing in this paragraph shall be interpreted to increase the maximum reimbursement allowed under paragraph (2).
(4) Reimbursements made to the local agency in excess of the maximum allowable reimbursement shall be returned to the department.
(5) All final costs allocated or reimbursed under a plan shall be approved by the Central Valley Flood Protection Board for project and nonproject levee work.
(6) Costs incurred pursuant to this part that are eligible for reimbursement include construction costs and associated engineering services, financial or economic analyses, environmental costs, mitigation costs, and habitat improvement costs.
(b) Upon completion of its evaluation pursuant to Sections 139.2 and 139.4, by January 1, 2008, the department shall recommend to the Legislature and the Governor priorities for funding under this section.
(c) Reimbursements made pursuant to this section shall reflect the priorities of, and be consistent with, the Delta Plan established pursuant to Chapter 1 (commencing with Section 85300) of Part 4 of Division 35.
(d) For the purposes of this section, the following definitions apply:
(1) “Rural area” means an area that is not an urban area.
(2) “Urban area” means an area in which 10 percent or more of the land area within the project area is used for residential use.
SEC. 3.
Part 10 (commencing with Section 12996) is added to Division 6 of the Water Code, to read:
Part 10. Delta Levees and Canal Subsidence Fund
Unless the context otherwise requires, the definitions below govern the construction of this part:
(a) “Board” means the governing board of the conservancy, established pursuant to Section 32330 of the Public Resources Code.
(b) “Conservancy” means the Sacramento-San Joaquin Delta Conservancy, established pursuant to Division 22.3 (commencing with Section 32300) of the Public Resources Code.
(c) “Council” means the Delta Stewardship Council, established pursuant to Section 85200.
(d) “Department” means the Department of Water Resources.
(e) “Fund” means the Delta Levees and Canal Subsidence Fund created pursuant to Section 12997.
(f) “Sacramento-San Joaquin Delta” has the same meaning as described in Section 12220 of the Water Code.
(g) “Secretary” means the Secretary of the Natural Resources Agency.
(h) “State water conveyance systems” means the water conveyance facilities owned or maintained by the department.
(i) “State water supply contractor” has the same meaning as the term is used in Section 11975.
(j) “Suisun Marsh” has the same meaning as described in Section 29101 of the Public Resources Code.
(a) The Delta Levees and Canal Subsidence Fund is hereby created in the State Treasury. Upon appropriation by the Legislature, moneys deposited into the fund shall be available to the secretary for expenditure consistent with this part.
(b) (1) The secretary may seek out, and the fund may accept, state moneys, including, but not limited to, from the General Fund, special funds, the Greenhouse Gas Reduction Fund created pursuant to Section 16428.8 of the Government Code, or any bond funds, for purposes of this part.
(2) The fund may accept moneys from nonstate sources, including, but not limited to, federal and private moneys, for purposes of this part.
(3) The secretary may establish accounts within the fund.
(4) Notwithstanding subdivision (a), and Section 13340 of the Government Code, any nonstate funds, including, but not limited to, federal and private funds, in the fund are continuously appropriated without regard to fiscal year to the secretary for expenditure consistent with this part.
(c) The secretary shall allocate moneys in the fund, subject to funding availability, in proportion to need, as determined by the secretary, and based at least in part on seismic risk assessment, for all of the following purposes:
(1) (A) To the department for the purpose of supporting capital improvements to restore the original design water conveyance capacity for state water conveyance systems impacted operationally by land subsidence.
(B) The department shall prioritize projects based on the volume of water capacity they can restore to the state water system, and shall provide priority to projects where the surrounding groundwater basin is implementing best management practices aligned with the goals of the Sustainable Groundwater Management Act (Part 2.74 (commencing with Section 10720)), or the equivalent as determined by the department, to manage land subsidence, as determined by the department.
(C) (i) The department may adopt guidelines to implement this paragraph. The Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) does not apply to the adoption of the guidelines by the department to implement this paragraph. Before adopting or revising the guidelines or other standards, the department shall provide an opportunity for public comment and at least one public workshop.
(ii) For purposes of moneys deposited into the fund, the department may impose additional requirements on projects to meet any conditions of the funding source.
(2) (A) To the department for projects consistent with the Delta Special Flood Control Projects program pursuant to Chapter 2 (commencing with Section 12310) of Part 4.8, the Delta Levee Maintenance Subventions program pursuant to Part 9 (commencing with Section 12980), or other projects in the Sacramento-San Joaquin Delta or Suisun Marsh to improve existing levees, including multibenefit levee projects that protect, enhance, or restore habitat, and improve water quality.
(B) Projects may include, but are not limited to, projects to address subsidence alongside levees and the construction of seepage and stability berms on levees to correct underseepage, through-seepage, or structural instability.
(C) The department shall prioritize projects consistent with the Delta Levees Investment Strategy.
(D) (i) The conservancy shall convene a working group that includes representatives of local governments, landowners, reclamation districts, tribes, environmental groups, and environmental justice organizations to develop a list of recommended projects for any funding made available pursuant to subparagraph (A). The list of projects shall be consistent with the Delta Levees Investment Strategy and shall be approved by the board. The conservancy shall publish the list of projects on its internet website, allow at least 45 days for public comment, and hold at least one community meeting before the list of projects is approved by the board.
(ii) The board may establish an advisory committee to support development of the list of recommended projects for funding.
(E) (i) The department may adopt or revise guidelines to implement this paragraph. The Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) does not apply to the adoption of the guidelines by the conservancy to implement this paragraph. Before adopting or revising the guidelines or other standards, the department shall provide an opportunity for public comment and at least one public workshop.
(ii) For purposes of moneys deposited into the fund, the department may impose additional requirements on projects to meet any conditions of the funding source.
(F) (i) At least 15 percent of the funds made available under subparagraph (A) shall be for levee projects within the Sacramento-San Joaquin Delta recommended by the conservancy pursuant to subparagraph (D) that improve flood risk, protect human health and safety, or protect agricultural interests.
(ii) The department shall administer any grants or funding agreements from the list of projects recommended by the conservancy.
(d) (1) No later than May 1, 2027, and biennially thereafter, the department shall provide a report to the Assembly Committee on Budget and to the Senate Committee on Budget and Fiscal Review that contains a five-year spending plan detailing the engineering and capital improvements necessary to address state water conveyance systems impacted operationally by land subsidence. The initial spending plan shall cover the 2027–28 to 2031–32 fiscal years, inclusive, and shall include the out-years anticipated for completion of any necessary capital improvement that is detailed in the spending plan.
(2) The department may charge the state water supply contractors for the actual and reasonable cost of developing the spending plan required pursuant to paragraph (1).
(e) Moneys provided by this part shall not be expended to pay the costs of the design, construction, operation, mitigation, or maintenance of any additional Sacramento-San Joaquin Delta conveyance facilities. Those costs shall be the responsibility of the water agencies that benefit from the design, construction, operation, mitigation, or maintenance of those facilities.
(f) No later than January 1, 2032, and by January 1 every five years thereafter, the secretary shall report to the Legislature, in accordance with Section 9795 of the Government Code, on its expenditures pursuant to this section and the public benefits received from those expenditures.