Governor Gavin Newsom detailed the revised state budget plan on May 10. (Photo courtest of the Office of Governor Gavin Newsom)

By Natalie Willis, Reporter, Valley Ag Voice

Governor Gavin Newsom’s May Revision of the state budget plan released on May 10, aims to address a “sizable deficit” of roughly $56 billion into 2026. The multi-billion-dollar deficit is in stark contrast to the $97.5 billion budget surplus that Newsom projected in the 2022-23 state budget.

Several budget cuts, amounting to over $30 billion were announced, including a $500 million cut to water storage projects.

These discretionary spending cuts delay certain funding sources for water-storage projects such as the planned Sites Reservoir north of Sacramento. While funding awarded under Proposition 1 — a voter-approved 2014 ballot initiative to support various water projects — will not be affected by the budget crisis, the California Farm Bureau explained in a press release that $500 million in discretionary funding to support the project would be cut.

 “We are grateful that state funding awarded to Sites Reservoir under Proposition 1 remains in place,” Douglass said. “We urge the administration to restore the $500 million as soon as possible to ensure minimal delays on this generational investment in water resilience.”

The Sites Reservoir project aims to collect water during wet seasons to use during dry periods and is projected to store up to 1.5 million acre-feet of water, benefiting 500,000 acres of farmland in the Central Valley.

Despite approving $7.545 billion in funding for Prop 1 initiatives in 2014 — $2.7 billion appointed to water storage projects — the process of building up water infrastructure and storage capabilities has been slow-moving.

Among various factors, the Sites Reservoir project has been delayed by environmental challenges and sticky red tape. According to its website, construction is scheduled to begin in 2026 rather than the initial goal of 2024, and the reservoir is expected to be operational by the end of 2032.

According to a November press release from Governor Newsom’s office, Sites Reservoir is eligible for $875.4 million of Prop. 1 funding, and the total project cost is estimated at $4 billion.

Despite the one-time $500 million reduction for water storage facilities in the 2025-26 fiscal year, the May Revise notes that “significant funding” from Prop 1’s $2.7 billion investment in water storage will remain available.

2014 Water Bond Funding

Graphic by Stanford Woods Institute for the Environment. (Source: 2014 California Assembly Bill 1471 Water Bond)


Notably, the May Revise avoided creating new taxes and plans to reduce reliance on “Rainy Day” reserves this year. However, according to the CFBF, farmers and ranchers are facing a proposed increase in the mill tax levied on pesticides to address the budget deficit within the California Department of Pesticide Regulation.

In a press release, CFBF President Shannon Douglass explained that the proposal to raise the mill tax from 21 mills to 28.6 mills over three years and increases in registration and licensing fees would amount to a $33 million tax increase. A mill is equal to one-tenth of a cent

“We agree with Gov. Newsom that there should be no new tax increases,” Douglass said. “That is why we oppose any move by the Department of Pesticide Regulation to increase the mill tax. This tax increase directly impacts farmers and ranchers who purchase crop protection materials. Raising the mill tax would also increase costs of producing food for Californians and burden families with still higher food prices at the grocery store.”

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