AB2739 - Water: affordability and system stabilization.

Amended IN Senate August 21, 2026 Amended IN Senate July 02, 2026 Amended IN Senate June 11, 2026 Amended IN Assembly April 06, 2026 Amended IN Assembly March 19, 2026 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 2739 Introduced by Assembly Member Soria (Coauthor: Assembly Member Davies) February 20, 2026 An act to add Part 7.5 (commencing with Section 12965) to Division 6 of the Water Code, relating to water, and making an appropriation therefor. LEGISLATIVE COUNSEL'S DIGEST AB 2739, as amended, Soria. Water: affordability and system stabilization. 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 area’s 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 Legislature’s 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. Digest Key Vote: 2/3 Appropriation: YES Fiscal Committee: YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. Part 7.5 (commencing with Section 12965) is added to Division 6 of the Water Code, to read: PART 7.5. Water Affordability and System Stabilization CHAPTER 1. Water Affordability and System Stabilization Act Article 1. General Provisions 12965. 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 California’s 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 California’s 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 beneficiary’s 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. Article 2. Water Affordability and System Stabilization Trust 12966.5. (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 trust’s 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 Legislature’s 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 Legislature’s first transfer of moneys from the General Fund to the trust fund, the trustee Contro [Text truncated for display. Full text available on Congress.gov.]