Background and FAQs on Safe Drinking Water Trust and Statewide Water Tax Proposals
In 2017, Sen. William Monning (D-Carmel) proposed SB 623 as a two-year bill as an attempt to establish California’s first-ever statewide drinking water tax. Afterward, it was also advanced through a Brown Administration budget trailer bill which was rejected by a Legislative Budget Committee in June 2018.
Last summer, a third attempt on the proposed water tax issue emerged with a new twist. As part of a last-minute effort before the California Legislative Session ended in August 2018, a new bill would have created a statewide “opt-out” charge on drinking water bills paid by California families and businesses. By changing the previously proposed tax to a voluntary contribution, supporters would have needed a simple majority to pass SB 845 (Monning, Vidak). SB 845 was not moved to the floor for a vote, but Assembly Speaker Anthony Rendon stated that the issue would be taken up again by the Legislature in 2019.
SB 623 and SB 845 were hailed by supporters as a way to address a lack of access to safe drinking water for some rural, disadvantaged communities. Supporters of the drinking water tax believe a new tax levied on California homes and businesses is the best way to solve this problem.
However, the Association of California Water Agencies (ACWA) organized a large coalition of business organizations, cities and water agencies which strongly opposed the proposed taxes or charges on Californians’ drinking water. While the coalition agreed with the goal of assisting disadvantaged communities without access to safe drinking water, it proposed a package of funding solutions that would not require a new charge.
This year, ACWA and the California Municipal Utilities Association are sponsoring state legislation to create a Safe Drinking Water Trust. Instead of relying on a proposed statewide water tax, the Trust would be funded with General Fund dollars during one or more state budget surplus years. The net income from the Trust would create a durable funding source that will help community water systems in disadvantaged communities provide access to safe drinking water.
Here are some frequently asked questions on the issue:
Q: Why do some disadvantaged communities lack access to safe drinking water?
A: Most Californians have access to safe drinking water. However, there are some rural disadvantaged communities in California with water sources that have been impaired by contaminants such as nitrates and arsenic. In some areas these contaminants are naturally occurring, whereas in other areas it is a result of water pollution. Nonetheless, for some low-income communities, treatment solutions are financially out of reach. This is a serious public health and social issue that must be addressed.
Q: Why oppose a tax proposal that would add less than a dollar to people’s home water bills?
A: Local public water agencies are committed to providing safe and reliable water and agree with the goal of assisting disadvantaged communities without safe drinking water but oppose state mandates for placing additional charges on drinking water bills for several reasons.
Any tax on water would require thousands of local water agencies and cities to reconfigure their billing systems to add a tax as a separate item, then act as state taxation agencies and forward the funds to Sacramento. While well-intentioned, the administrative costs for thousands of water systems would make water less affordable.
Effective funding solutions already exist for achieving this goal. In 2018, the legislative budget conference committee rejected the statewide water tax and left it out of the state budget, instead setting aside $23.5 million in General Fund revenue to safe drinking water. At the same time, California voters approved Proposition 68 with $250 million for safe drinking water that is prioritized for disadvantaged communities.
Q: Will the funds I pay help my community?
A: It’s possible, however, it is not guaranteed. Most areas of California already have access to safe drinking water and those communities would not receive any benefit from the charge. The money raised would go to Sacramento to a fund to be distributed by the State Water Resources Control Board to communities that are impacted by unsafe drinking water conditions.
Q: How do California residents feel about the previously proposed drinking water tax?
A: In January 2018, Tulchin Research conducted a statewide poll showing that 73% of likely voters oppose a new tax on drinking water, both initially and even after learning how the funds were intended to be spent.
Additionally, 74% would prefer using existing funding sources rather than establishing a new tax on drinking water.
To learn more about the poll, click HERE.
Q: What other solutions are being proposed?
A: ACWA and the California Municipal Utilities Association are sponsoring state legislation to create a Safe Drinking Water Trust. Instead of relying on a proposed statewide water tax, the Trust would be funded with General Fund dollars during one or more state budget surplus years. The net income from the Trust would create a durable funding source that will help community water systems in disadvantaged communities provide access to safe drinking water. Details and benefits of the Trust proposal include:
- The Trust’s principal would be initially financed with a one-time infusion of General Fund dollars during one or more budget surplus years
- There is a record budget surplus for the 2019-2020 Fiscal Year, which makes it the perfect time to create and fund the Trust
- The Trust’s principal would be invested, and the net income would be transferred to a Safe Drinking Water Fund, which the State Water Board would administer
- Funding the Trust via the General Fund serves as a progressive source of revenue, as taxpayers with higher income would contribute more, while lower income taxpayers would contribute less