Colorado House lawmakers on Monday approved a bill that they hope would increase funding for the state’s water plan.

The funding is tied to Proposition DD, which voters passed in 2019. The measure directs a portion of sports betting tax revenue to the water plan.

House Bill 1311 removes certain tax incentives that have allowed sports betting organizations to exempt taxes on customer pay-outs, federal excise tax and “free bets.”

That means an effective tax rate of 5.89%, rather than 10%, which was approved in Proposition DD.

The change could mean an extra $5 million in 2025-26 for the state water plan, and as much as $13 million in 2026-27.

In a statement Monday, House Speaker Julie McCluskie, D-Dillon, a co-sponsor of HB 1311, said, “Colorado is losing significant tax revenue that could go to conserving and protecting our water.”

McCluskie said the bill “brings sports betting companies closer to the voter-approved effective tax rate of 10%, which means our state can capture more revenue to fund essential conservation and preservation projects. “

HB 1311 passed on a vote of 52 to 13.

More than 90% of tax revenue ($97 million) from sports betting goes to the Colorado water conservation program, which has helped pay for hundreds of projects in the last several years.

That’s been the most significant tranche of funds for the state water plan, which was set up in 2015 by then-Gov. John Hickenlooper.

Initial estimates called for $20 billion by 2050, with $3 billion expected from state funds and the rest from local and private funding. More recent estimates place the total cost at $40 billion.

According to Water Education Colorado, the water plan’s funding source came largely from appropriations by the General Assembly and severance taxes from oil and gas activities before 2019.

However, severance tax revenue has been unpredictable. Lawmakers are hoping to task the Department of Natural Resources with a study on severance taxes and water funding in the next year. The report, due next January, would develop recommendations for ways to continue funding water needs and energy impact grants in the face of decreasing severance tax revenue.

The study is in a bill currently working its way through the House.