SACRAMENTO -- The Legislature's fight over water is evolving into a fight over money.
Gov. Schwarzenegger on Tuesday said he will not approve a deal unless it includes a multibillion-dollar bond to pay for dams and other projects.
But his demand, which repeats a pledge he's made for three years, is at odds with the push by Democrats to seek policy changes first.
The divide threatens to derail negotiations on legislation to shore up water supplies and fix the ailing Sacramento-San Joaquin Delta.
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Lawmakers began water hearings Tuesday and hope to reach a compromise before the legislative session ends Sept. 11.
In a letter to Democratic leaders, the governor said: "I cannot sign a comprehensive water package if it fails to include a water infrastructure bond that expands our water storage capacity -- both surface storage and groundwater -- funds habitat restoration, water quality and conservation."
Valley farmers, backed by Republicans, are pushing for a new dam east of Fresno near Millerton Lake. Environmentalists oppose using state money for dams.
Senate leader Darrell Steinberg, D-Sacramento, said he is "open to a bond." But "I want to make sure that we first get the policy right on how to restore the delta and deal with the issue of water supply reliability."
The governor has sought a bond in the range of $10 billion. But Steinberg said that was too expensive given the state's weak fiscal condition.
Democrats are pushing a five-bill package that does not include financing for water projects. Rather, the bills would create a seven-member council to make key decisions on how to restore the delta while assuring more reliable water supplies.
Democrats say the council is needed to bring more order in the delta, which is now overseen by more than 200 agencies. Court rulings have blamed water pumping in the delta's southern end for the decline of several fish species.
The two parties sparred over the bills at the hearing. The debate included a testy exchange between Sen. Lois Wolk, D-Davis, who represents delta residents who oppose a proposed new canal to move water around the delta, and Sen. Dave Cogdill, R-Modesto, whose farming constituents want the canal.
Wolk said even if a bond were approved this year, it would not translate into immediate water supplies because of lengthy construction timelines. "If you put the shovel in the ground tomorrow, you won't have any water available for a generation."
Cogdill shot back: "All we continue to do is talk and meet and submit bills and argue over them and get absolutely nowhere. And the problem is not going away."
Rally held on Capitol steps
Schwarzenegger's letter appeased farming interests who had hoped he would reassert his demand for a water bond, which voters would have to approve.
At a noon rally on the Capitol steps, the governor joined members of the Latino Water Coalition, a valley-based group that is seeking more water for farms.
"I've been with you from the beginning," the governor told the group. "I'm committed to your message, which is 'no water, no work, no life.' "
But at the hearing, the leader of a fishing group said his members also have jobs at stake and cautioned against rushing water fixes without examining consequences. Fishermen fear the proposed canal would take fresh water from the delta, which is a mix of ocean and river water.
"The delta is not a reservoir," said Zeke Grader, of the Pacific Coast Federation of Fishermen's Associations.
"It's a living ecosystem," he added. "For an estuary to work, it needs freshwater inflow."
The Legislature is scheduled to hold more water hearings next week.