Tamworth mayor Russell Webb told the Leader the region missed out on funding for critical water security and he would have liked more in the bank for Dungowan Dam.

The state has committed $37.8 million in the budget for early works, which will fund construction of the pipeline, but questions have again been raised about the whopping $1.28 billion project's future.

According to the budget papers, the NSW government's commitment to the project is conditional on a guaranteed 50 per cent co-contribution from the federal government.

"We're happy to see that the pipeline has been progressing and that funding is there in the budget to complete that first stage of the Dungowan Dam to Tamworth water treatment plant," Cr Webb said.

"But obviously we'll be looking for more into the future. We need massive support for water security for the region."

But Tamworth MP Kevin Anderson remained optimistic about the dam's future and told the Leader after the budget was handed down on Tuesday that he recently had a "very encouraging discussion" with the federal water minister.

"I'm now waiting to set up a face-to-face meeting with Tamworth Regional Council, because water security continues to be the number one for us when it comes to growing our great city," he said.

"Dungowan Dam budget continues as we work towards delivering the environmental impact statement in the second half of this year."

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The big win in the budget for Tamworth was the $14.6 million commitment to include a second storey dedicated to children and adolescents in the new Banksia Mental Health Unit.

Other spending on health infrastructure included $5.34 million to progress the Gunnedah hospital redevelopment towards the construction phase, $4 million for Moree District Hospital and $7 million for Glen Innes District Hospital.

There's $8.5 million in the bank for the new Glen Innes Ambulance Station, and $6.3 million for the new Tamworth Ambulance Station.

A few of the region's road projects also featured, with $7.693 million to finalise planning and start preconstruction on Goonoo Goonoo Road, as well as an additional $3.6 million for Rangari Road.

But Cr Webb told the Leader the cash on the cards falls short of the $5 million needed to finish the Rangari project, and the state would have to cough up additional money or the road won't get built.

There's $26.6 million for a Tamworth university campus which is "progressing into the technical drawing stage" and $1.4 million to complete a TAFE NSW call centre in Tamworth.

Plans for a new Wee Waa High School are continuing with $20.8 million committed in 2022 to 2023.

Meanwhile the Walcha Skate Park has snagged $866,864 for an upgrade and revitalisation of the surrounding precinct, and the Moree Special Activation Precinct has been allocated $47 million.

A significant water infrastructure project for Armidale, the raising of the Malpas Dam wall, has been given $27 million to "mitigate the impact of future droughts".

And while there was no money in the budget for Tamworth Regional Council's proposed reverse osmosis water treatment plant, Mr Anderson said the project had been "progressing".

"The business case has been submitted to Regional Development NSW, and then they will look at the costing and plans of that particular facility," he said.

"The initial [cost] was $75 million, and it's now going to go up to $100 million, so we'll now have to keep working hard once that detailed work is submitted."

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