NSW will set aside billions of dollars in a special fund for the state's future generations in a world-first that will also help pay for community projects chosen by locals.
The NSW Generations Fund, announced in Tuesday's state budget, will start off with $3 billion and be topped up progressively.
"We owe it to our children to prepare for the challenges they will face in the decades to come, not saddle them with debt," Treasurer Dominic Perrottet said in Sydney.
The sovereign fund will be used to pay down debt as well as for infrastructure, in what Mr Perrottet claims is the first of its kind in the world.
At least half of any interest earned from the fund will be returned to the community via local projects.
NSW residents over the age of 16 will be able to nominate and then vote online for projects worth $20,000 to $200,000.
The money will be distributed evenly across every electorate.
The government will kickstart the "My Community Dividend" with nearly $30 million in 2018/19, to be overseen by an advisory board and external chairman.
"Governments don't always have the best solutions, particularly on smaller projects that make a difference to people's lives," Mr Perrottet said.
The government plans to invest its remaining interest in WestConnex in the fund once it sells off 51 per cent of the company.
Proceeds from the sale are earmarked for the final two stages of the project.
While the fund was broadly welcomed, Labor labelled the move to have projects decided by voters "farcical".
"Governments are meant to be the custodians of the public finances," shadow treasurer Ryan Park told reporters.
"End the gimmicks. This suggestion should be laughed out of court."
The fund will be managed by NSW Treasury Corporation.
The state posted a $3.9 billion surplus in 2017/2018 but that's forecast to fall to $1.4 billion next financial year.