California is attempting to cope with its worst drought in recorded history, which is threatening its critical agriculture industry, energy production and other industries.
The fund is part of a broader approach to deal with climate change that Obama outlined in his Climate Action Plan in June 2013.
While certain elements of that plan can be carried out through executive action, the fund requires Congressional approval, which makes its future uncertain.
"Given the saliency of the issues in communities across the political spectrum, it seems likely to create some momentum for action in Congress, although obviously that is very hard to say in the current environment," said Billy Pizer, associate professor at the Sanford School of Public Policy at Duke University.
Republicans and some Democrats in coal reliant states have bitterly opposed previous attempts to pass legislation that would put a mandatory limit on carbon emissions. Some have tried to pass legislation that would stop the Environmental Protection Agency from regulating carbon emissions.
The proposal will be formally introduced when Obama unveils his fiscal 2015 budget in March.
It will help communities deal with extreme weather events, such as floods, drought, heat waves, and wildfires, according to the White House. Such disasters include Superstorm Sandy in 2012; the April 2011 tornado outbreak in Southern, Midwestern, and Northeastern United States; and California wildfires in October 2007.
Funds would be used to research how to better prepare for climate change-related effects like rising sea levels and extreme temperatures and encourage local initiatives. Other investments would include "breakthrough technologies and resilient infrastructure" such as building sea walls and more resilient electricity delivery systems to protect vulnerable cities and towns.
The concept of the fund is based on a recommendation made in December 2012 by the think tank Center for American Progress (CAP).
"Every dollar spent on resilience will save federal taxpayers $4 in lower disaster recovery costs," Daniel Weiss, CAP's director of climate strategy, said on Friday, citing a study by the organization. "Now it's up to Congress to make this essential preparedness fund into a reality."
CAP's proposal, called the community resilience fund, would direct the president to appoint a bipartisan panel to design the fund and recommend ways to pay for it.
Nancy Sutley, the director of the White House's Council for Environmental Quality, said on Friday that Obama will use the California drought to highlight the importance of the climate resilience issue.
"This continues to demonstrate the continuing need to focus on resiliency, on reducing risks and vulnerabilities in light of the changing climate," said Sutley, whose last day at the CEQ was Friday. Sutley plans to return to her home state of California this month.