Newsom Vetoes Trio of Priority Nonprofit Bills

Despite passing the California Legislature with near-unanimous, bipartisan support, Assembly Bill 880 (Bennett), Assembly Bill 1039 (Hart), and Senate Bill 1240 (McNerney) were vetoed on Sunday by Governor Newsom. Sponsored by CalNonprofits as part of the California Nonprofit Equity Initiative, these bills offered straightforward, commonsense solutions to fix the deeply inequitable state contracting practices that burden the nonprofit sector.

As part of this initiative, the reforms in the first two bills – which were recommended by the Little Hoover Commission, an independent state oversight agency – targeted immediate operational barriers:

  • AB 880 would have closed a long-standing loophole in the state’s Prompt Payment Act to ensure nonprofits are paid on time for services rendered, while also improving indirect cost coverage. This marks the third consecutive year Governor Newsom has vetoed prompt payment and indirect cost legislation, disregarding the overwhelming support of hundreds of nonprofits statewide. Despite the author and CalNonprofits conducting extensive, good-faith outreach across 15 state agencies to solicit and integrate feedback, the Governor’s Office showed a total lack of willingness to engage.
  • AB 1039 aimed to level the playing field for small and under-resourced nonprofits by mandating access to modest upfront funding for contracts and grant opportunities under $150,000. It also would have established a centralized, statewide framework for advance pay across all agencies to make standards cohesive and efficient. Even after the author made significant amendments to address state agency feedback, the Governor’s Office failed to engage with the author or our coalition to find a workable path forward.

These are practical, low-cost reforms designed to help California’s nonprofits thrive while delivering essential public services. The legislation would have codified best practices and put nonprofits on more equal footing with for-profit businesses and other state contractors and grantees.

Said CalNonprofits CEO Geoff Green:

“Ultimately, we recognized that repeated vetoes and a lack of engagement were symptomatic of a deeper institutional failure: the nonprofit sector requires a permanent voice in state government to champion our work. To break this cycle and overcome the status quo, we proposed a bold new solution this year with SB 1240: the creation of the Office of Nonprofit Empowerment (ONE) – the nation’s first state-level office dedicated to supporting the nonprofit sector.”

Designed to institutionalize, protect, and elevate the public-nonprofit partnership, ONE would have eliminated systemic state inefficiencies, streamlined contracting, increased funding access, and fortified our state’s social safety net.

It is profoundly disappointing that the Governor failed to see the vision shared by hundreds of community and philanthropic leaders who supported SB 1240, passing on a historic legacy opportunity to modernize state governance and uplift the sector during a time of unprecedented threats from the federal administration.

“The vetoes reveal a stark and persistent disconnect: while the Governor’s veto messages have routinely praised nonprofits for executing public duties and supporting vulnerable communities, the Administration’s actions continually fail to back up those words,” continued Green. “Nonprofits cannot continue to reliably answer the state’s call while being hobbled by delayed payments, uncompensated overhead, and administrative indifference. Year after year, the Administration frames fair operational treatment for nonprofits as a budget tradeoff, contrasting sharply with its commitment to championing and streamlining support for private sector businesses.”

The Governor’s Office of Business and Economic Development (GO-Biz) is a dedicated, well-resourced agency within the administration to advance the interests of the for-profit business community. The nonprofit sector – which executes California’s most critical health, housing, and social programs – has no similar advocate. SB 1240 would have corrected this imbalance, as Green outlined in a September op-ed in Capitol Weekly.

Moving forward, California needs a Governor who doesn’t just praise nonprofits in veto messages, but actively and immediately invests in our sector’s operational stability, equity, and collective impact.

Though this outcome is frustrating, CalNonprofits remains undeterred. We are immensely grateful to Assemblymembers Steve Bennett and Gregg Hart and Senator Jerry McNerney for their steadfast leadership on these bills, and to all the legislative leaders who voted for equity. We will continue fighting for these vital reforms by laying the groundwork now to partner with California’s next administration to secure the efficient, fair, and stable contracting system our sector deserves.
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