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This is Part 1 of a multi-part series tracking the progress of Senate Bill 454 through the California Legislature.

Senate Bill 454 passed the Senate Natural Resources and Water Committee on Wednesday, receiving six aye votes, two noes, and one unrecorded vote.  The bill will reduce financial pressure on the Water Rights Fund, which is supported by fees from water rights holders and is currently the primary source of funding for the new Administrative Hearings Office (Hearings Office) within the State Water Resources Control Board (State Water Board).

The purpose of SB 454 is to ensure that parties using the Hearings Office will pay part of the operating costs of the Hearings Office.  Thus, the bill will require filing fees and fines imposed by the Hearings Office to be deposited into a new fund, named the Water Rights Hearings Office Fund (Fund).  The Fund will be available solely to pay for Hearings Office expenditures.  Additionally, SB 454 requires the State Water Board to conduct an annual accounting of the Fund.

Importantly for the water rights community, SB 454 will reduce the financial burden on the existing Water Rights Fund caused by the establishment of the Hearings Office.  As the laws and budget are currently structured, the Water Rights Fund is the primary source of financial support for the Hearings Office.  The Water Rights Fund is supported by fees paid by water rights holders, some of whom might never utilize the Hearings Office.  In order to address this potential inequity, monies deposited into the new Fund will be required to directly reduce the funding received from the Water Rights Fund.  Operating under normal assumptions that the Hearings Office will be utilized and monetary penalties will likely be assessed against some parties, the intended result of SB 454 is that less funding from the Water Rights Fund will be required for Hearings Office costs.

The structure proposed in SB 454 will also help minimize how much the water rights fee payers subsidize hearings for parties that do not contribute to the Water Rights Fund.  The Hearings Office has jurisdiction over several types of administrative proceedings, including cannabis issues, that do not necessarily involve water rights holders.  Therefore, the Hearings Office will likely spend resources on hearings for parties who do not contribute to the Water Rights Fund.  SB 454 will partially correct this problem.  For example, if a party who does not have a water right is subject to an administrative hearing for illegal diversions, a monetary penalty assessed for the illegal diversions will go to the new Fund supporting the Hearings Office.  Thus, even though the party does not pay water rights fees into the Water Rights Fund, it will pay for a portion of the Hearings Office’s resources used on the hearing.

At the Senate Natural Resources and Water Committee hearing, two non-governmental organizations stated opposition to SB 454 on the grounds that their organizations will be required to pay a filing fee in order to participate in a hearing.  The Senate Committee on Appropriations is the next committee that will vote on SB 454.

For additional information please contact Lauren Bernadett at lbernadett@somachlaw.com.

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