Texas asks voters to pour more money into water projects

“With this law, we will secure Texas’ water future for generations to come,” Texas Gov. Greg Abbott said in a statement on his June 18 signing of legislation that if approved by voters, could raise $1 billion annually over 20 years for water-related projects.

Texas Governor’s Office

Texas went big this year in a quest to boost the state’s water supply and infrastructure by placing a constitutional amendment on the Nov. 4 ballot that could generate $1 billion annually over 20 years for projects.

Republican Gov. Greg Abbott praised lawmakers for delivering the “Texas-size” investment he demanded.

“With this law, we will secure Texas’ water future for generations to come,” he said in a statement for his June 18 signing of Senate Bill 7.

Lawmakers also appropriated $2.5 billion for water infrastructure projects and programs.

“This has been the largest shift and change in the state’s financial strategy for tackling its water structure in several generations, and I think that the legislature is paying closer attention to what reliable water infrastructure means to long-term economic growth and development,” said Jeremy Mazur, director of infrastructure and natural resources policy at Texas 2036, a nonprofit, nonpartisan public policy research and advocacy group.

The group has warned that an extended drought without sufficient water supplies could lead to $165 billion in annual economic losses as soon as 2050. It also points to the need for investments of at least $154 billion over the next 50 years to meet Texas’ water infrastructure challenges.

Voters in November 2023 approved a constitutional amendment creating a $1 billion Texas Water Fund administered by the bond-issuing Texas Water Development Board with at least 25% of the money allocated to a New Water Supply for Texas Fund to finance projects leading to 7 million acre feet of additional water supply by the end of 2033.

This November, voters will be asked to place the first $1 billion in state sales tax revenue once annual revenue from the tax exceeds $46.5 billion into the Texas Water Fund starting in fiscal 2027. Sales tax collections totaled $47.35 billion in fiscal 2024.

The additional money would enhance existing state bonding programs for water-related projects.

“If the equity from the $1 billion is leveraged from certain other programs, such as the (State Water Implementation Fund for Texas) or the state revolving funds, which have bonding capacity, then it really opens the door to for the Water Development Board to leverage that equity with existing bond authority to provide even more capital to work for water projects in Texas,” Mazur said.

SB 7, the enabling law for the constitutional amendment, expands the scope of the New Water Supply for Texas Fund by making water and wastewater reuse projects, out-of-state water rights acquisition, reservoirs meeting specific requirements, and water transportation projects eligible for financial assistance.

Water concerns spurred legislation this year in other Southwest states.

Under a bill passed by Arkansas lawmakers, voters in November 2026 will decide on the issuance of up to $500 million of state general obligation bonds to finance water, waste disposal, pollution control, drainage, flood control, and wetlands and aquatic resources, while capping financing for irrigation facilities at $165 million.

If voters authorize the debt, the Arkansas Natural Resources Commission would issue a maximum amount of $60 million of bonds per biennium, ensuring the program’s continuation through 2043.

In Arizona, lawmakers passed Senate Bill 1611, which creates an agriculture-to-urban groundwater voluntary conservation program allowing irrigated land to convert to lower-water-use developments.

“I am proud to have brokered a bipartisan, historic water deal that will save millions of acre-feet of water, help lower the cost of housing, and create jobs,” Gov. Katie Hobbs said when she announced the bill’s enactment on June 30.

Money for the state’s long-term water augmentation fund, which was created in 2022 with the aim of appropriating a total of $1 billion over three years, was not included in Arizona’s fiscal 2026 budget. The spending plan claws back about $84 million from the fund, leaving a balance of around $376 million, according to Ben Alteneder, a spokesman for the Arizona Water Infrastructure Finance Authority.

The authority is plowing ahead with a solicitation process for water importation projects, announcing last week the receipt of six proposals involving ocean water, surface water, wastewater reclamation, or other sources. Money from the augmentation fund can provide financial assistance for debt issuance, credit enhancements, and other forms of indebtedness.

“The receipt of these offers proves that there is capacity and capability to develop new, renewable water supplies for Arizona and that WIFA’s process for ensuring that we approach any investment in generational water infrastructure with a sound, methodical approach is working,” Ted Cooke, the authority’s Long-term Water Augmentation Fund Committee chairman, said in a statement.

The latest U.S. Drought Monitor shows mostly severe to extreme drought conditions in Arizona.

New Mexico Gov. Michelle Lujan Grisham signed legislation in April that she said advances the state’s 50-year Water Action Plan.

“The Strategic Water Supply program unlocks economic opportunities by providing brackish water for manufacturing and clean energy development, while preserving our freshwater for other vital uses,” she said in a statement.

The law, which authorizes state departments to enter into contracts and award grants for projects involving naturally occurring underground brackish water, differs from Lujan Grisham’s original proposal that failed to get through the legislature last year.

That proposal involved an internal debt sale backed by state severance tax revenue that would have raised an initial $250 million to fund state purchases of treated water as a way to incentivize private-sector investment in treatment infrastructure.

Kansas Gov. Laura Kelly, who raised concerns about the state’s dwindling water supply in her January State of the State address, signed a bill creating a water program task force charged with creating a long-term investment program for water with a dedicated revenue source.

“Developing a comprehensive, long-term, and sustainable water program is long overdue and a significant step forward in ensuring Kansas’ water supply is preserved for generations to come,” the Democratic governor said in an April 8 statement.

The task force has until Jan. 31 to submit a preliminary report to the governor and legislature and until Jan. 31, 2027, to produce a final report that includes recommendations on structuring a water program and on a dedicated funding source for the State Water Plan fund.

For fiscal 2026, lawmakers appropriated $41 million from the state’s general fund for the State Water Plan Fund, but rejected Kelly’s proposal to transfer $30 million to the water fund from the budget stabilization fund.

Colorado Gov. Jared Polis signed SB25-040, which directs the department of Natural Resources to conduct a study on severance taxes and water funding and develop recommendations by next July for ways to continue funding water needs in the face of decreasing severance tax revenue.