Governor Newsom Vetoes Priority Nonprofit Legislation

This past weekend, Governor Gavin Newsom vetoed both Senate Bill 1246 (Limón) and Senate Bill 336 (Umberg), legislation passed unanimously by both chambers of the California legislature. CalNonprofits helped advance these two bills as part of the California Nonprofit Equity Initiative, which aims to ease the unfair and inequitable burdens nonprofits face when contracting with the state.  

If enacted, SB 1246 would have deleted a long-standing exemption in the state’s Prompt Payment Act and require timely payments for services rendered by nonprofits. This is the second year in a row that Gov. Newsom has vetoed legislation to address the prompt payment issue, despite support from hundreds of nonprofits across the state. SB 336 would have streamlined coverage of nonprofits’ indirect costs, consistent with the federal government’s approach. 

These are simple, practical solutions to strengthen the nonprofit sector and ensure the state can deliver on its priorities. To wit, an article in CalMatters released this week titled “Late payments to nonprofits hamper California’s fight against homelessness” opens: “California’s homeless service providers have a problem: They aren’t getting paid on time, and it’s making it even harder for them to get people off the street.” 

CalNonprofits is very disappointed that the Newsom Administration has chosen not to be a willing partner in collaborating on solutions. We remain undeterred in our commitment to securing fairer state contracting practices for California’s nonprofits.

The Governor’s veto messages emphasized cost pressures during a strained budget period for the state; however, these bills cut waste and streamline contracts. It is unfortunate that the Administration frames the bills as a tradeoff between fair treatment of nonprofits and cost savings when in reality the legislation advances both. 

The veto messages also highlight that California relies on nonprofits to provide core services and thereby execute the state’s public responsibilities. While nonprofits dutifully answer the call to support vulnerable Californians, in turn, the Governor  – at the very least – should support policy solutions like SB 336 and SB 1246 so that the sector’s ability to deliver much-needed services and projects is not hobbled by delayed payments or failure to cover relevant costs.

“All of the state’s nonprofit partners deserve to be treated with respect and compensated promptly and fairly for their work. These bills would have simply placed nonprofits on equal footing with the rest of California’s grant and contract partners and kept California in line with federal reforms and standards,” said Geoff Green, CEO of CalNonprofits.

CalNonprofits will continue to develop and advocate for policy solutions – in collaboration with the state’s legislative leaders – that advance greater efficiency, fairness, and stability in nonprofit partnerships with the state of California. We are especially grateful for the visionary leadership of Senator Monique Limón (D-Santa Barbara)  and Senator Thomas J. Umberg (D-Santa Ana) for authoring these bills, and for their focus on strengthening the nonprofit sector. 

We thank our members and supporters who helped us sustain momentum on this legislation so that it advanced all the way to the Governor’s desk. Our Contracting Coalition partners played a central role in moving these bills forward, and we want to recognize the efforts of these organizations: