Proposition 4 passed. Now what?

The passage of Proposition 4 marks a historic moment for Texas’ water future. Just over 2 million Texans voted to approve the measure dedicating $1 billion per year in state sales tax revenues to the Texas Water Fund for the next 20 years. These dedicated revenues will be used to pay for the water infrastructure Texas needs, including water supplies, infrastructure upgrades, and flood protection projects.

Texas now has a reliable, consistent financial strategy for charting our water future. And the outcome of this month’s election sends a bright, Lone Star-strength signal about the investments the state is prepared to make to protect and advance the Texas economic miracle.

In another historic achievement, more Texans voted for this critical water infrastructure measure than ever before. Proposition 4 passed with a robust margin of 70.42% of the vote, according to Texas Secretary of State data. A total of 2,077,449 Texans voted in favor of the measure. This was greater than the total number who voted for the 2023 proposition creating the Texas Water Fund (1,966,508) and the 2013 referendum establishing the State Water Implementation Fund for Texas (839,369).

Clearly, Texans recognize the importance of reliable water infrastructure to their survival and prosperity in a drought-prone and growing state.

Now that Proposition 4 has passed, many are asking what comes next.  Here’s what we can expect:

The revenues start to flow in 2027, with funding available in 2029.

Proposition 4 was established by House Joint Resolution 7 passed by the Legislature earlier this year. HJR 7 requires that the dedication of $1 billion in state sales tax revenues to the Texas Water Fund begins in state fiscal year 2028, which starts on Sept. 1, 2027. These revenues will be placed in a special holding account where they may be appropriated by the Legislature during the 2029 legislative session. This means that water infrastructure projects eligible for funding through this new revenue stream could apply for funding in late 2029.

While this dedicated funding will not be available to the Texas Water Fund for several years, the good news is that the Legislature approved over $2.5 billion for water infrastructure funding earlier this year. This interim endowment — the largest one-time appropriation for water infrastructure in Texas history — will help jump-start water infrastructure development before the sales tax revenue dedication authorized by Proposition 4 begins.

Prioritizing water supplies.

In addition to passing HJR 7 creating Proposition 4, the Legislature passed Senate Bill 7 providing for legislative oversight of the Texas Water Development Board’s use of the Texas Water Fund, establishing transparent performance standards, and instructing how these funds shall be used.

SB 7 requires that no less than 50% of the revenues to the Texas Water Fund be used for expanding the state’s water supply portfolio. This means that at least half, and possibly more, of the dedicated revenues from Proposition 4 will be used for water conservation, reuse, desalination, aquifer storage, permitted reservoirs, and infrastructure capacity expansion projects, among others. The remaining amount may be used for fixing aging infrastructure and developing flood protection projects.