Newsom vetoes bills that affect California taxpayers

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(The Center Square) – Gov. Gavin Newsom vetoed several bills in recent days, tackling issues ranging from education to criminal justice, tax breaks and accountability.

Four bills in particular affect taxpayers in California. They would have given tax breaks to those who experienced man-made disasters, instituted accountability measures for community programs, allowed CalGuard and CalFire employees to defer retirement, and required health insurance regulators to include affordability considerations when eyeing health insurance rate increases.

Here are some of the bills Newsom vetoed.

Assembly Bill 760

This bill, authored by Assemblymember Tri Ta, R-Westminster, would have made settlements nontaxable from lawsuits filed by survivors of the chemical link in the Orange County city of Garden Grove. The May 21, 2026 incident was caused by a chemical leak from a tank at GKN Aerospace, a company that manufactures cockpits and airplane windshields. Residents who lived in the area were evacuated from their homes by local officials, according to incident updates on the city of Garden Grove’s website.

Ta said in comments included as part of the bill analysis that many of the 50,000 people evacuated from the area suffered loss of income, interruptions to their businesses and increased transportation costs. Approximately 44 lawsuits were filed because of the chemical leak, Ta wrote, and the settlements from those lawsuits are meant to help those families recover from an incident that disrupted their lives.

“AB 760 will help these victims be fully compensated by following California precedent for previously declared emergencies that made settlements non-taxable,” Ta wrote. “These funds should not be considered income. Taxing these settlements would diminish the relief available to affected residents and reduce the resources available to help them rebuild and move forward.”

Ta was not available for an interview before publication time on Tuesday.

In a veto message, Newsom wrote that while he supported the bill's intent, he could not sign it because he wanted such a bill to be included in the Legislature’s budget process. Not taxing settlements from lawsuits arising from a disaster has implications for the general fund – essentially the state government’s main checking account – and similar bills passed in years past were included in proposed budgets, according to the Democratic governor.

“I strongly encourage the legislature to include this proposal in next year’s budget framework,” Newsom wrote.

Newsom’s office did not comment beyond his veto messages for this story.

Assembly Bill 1039

This bill by Assemblymember Gregg Hart, D-Santa Barbara, would have required California state agencies that award taxpayer-funded grants and contracts to pay up to 25% of the money to nonprofits that win those grants or contracts, according to a bill analysis.

Current state law allows an advance of grant and contract money for taxpayer-funded projects. But many underserved communities across California often don’t apply for those grants or try to compete for contracts because of a lack of uniform policy regulating cash advances on contracts and grants given to nonprofits, Hart said in comments included as part of the bill analysis.

“By ensuring nonprofits can secure a percentage of contracted funds up front for all new funding opportunities, AB 1039 will improve the nonprofit sector's capacity to provide quality services to communities and carry out state-funded priorities,” Hart wrote. “The bill also supports stronger transparency about a funding opportunity's terms, including clearer indication of the available percentage of advance pay.”

Hart did not respond to The Center Square before publication time on Tuesday.

Newsom wrote in his veto message for this bill that state agencies need to maintain discretion about when and how to advance grant and contract money to nonprofit organizations.

“While I appreciate the author’s goal of reducing financial barriers for nonprofits and tribes, imposing a new statewide requirement would severely limit the state’s oversight and protection of public funds,” Newsom wrote.

Assembly Bill 1054

This bill by Assemblymember Mike Gipson, D-Gardena, would have allowed employees of certain state agencies to opt in to a Deferred Retirement Option Program, which would have been available to employees who work for the California Military Department, also known as CalGuard, and the California Department of Forestry and Fire Protection, or CalFire.

Under a deferred retirement option plan, public employees who reach retirement eligibility can choose to continue working while freezing their taxpayer-funded pension calculation. That would allow an employee to continue working, earning an income and contribute to retirement and delay receiving pension payouts until full retirement, according to the bill analysis.

Gipson said he introduced the bill to entice long-standing employees of CalGuard and CalFire with decades of experience and institutional knowledge to continue working at a time when both departments have experienced employee shortages. In comments included in the bill analysis, the legislator said that would allow those agencies time to hire and train new employees while still employing those agencies’ most experienced officers and firefighters.

“This bill seeks to address this shortage by establishing a voluntary [deferred retirement option program] within CalPERS for eligible employees,” Gipson wrote. “This program is intended to retain experienced personnel while supporting long-term recruitment and training efforts.”

Gipson declined to comment for this story.

In his veto message, Newsom wrote that he believed the bill had merit, but that financial considerations kept him from signing the bill.

“A [deferred retirement option program] could create significant long-term fiscal and administrative pressures on departments by altering employee tenures and retirement costs,” Newsom wrote. “Both the design and establishment of a [deferred retirement option program] are more appropriately handled through the collective bargaining process.”

Senate Bill 1037

This bill by Sen. Akilah Weber Pierson, D-San Diego, would have instituted new accountability measures for state regulators who set rates for health insurance plans across California.

Increases in health insurance rates would have to be calculated with considerations of affordability in mind for Californians, according to the bill analysis. Specifically, health insurance regulators would have to look at prior reviews of medical trends and cost-sharing requirements reported by health plans.

“More has to be done in all health care sectors to control health care costs and health insurance premiums,” Weber Pierson wrote in comments included as part of the bill analysis. “This bill will require health insurance regulators to focus their reviews of proposed rate increases with an eye toward affordability for Californians.”

Weber Pierson was not available for an interview before publication time on Tuesday.

Newsom wrote in his veto message regarding this bill that the Office of Health Care Affordability, which is tasked with tracking health care costs and keeping them from becoming too high, has not had enough time to do its work because the agency was established in 2022.

“There has not been sufficient time for enforcement or to determine the impact of the statewide cost targets,” Newsom wrote. “This bill approach is premature, but the intention to address rising health care costs could not be more timely.”