2025-26 State Budget Approved

On Friday, June 27, the Legislature passed, and the Governor signed, the 2025 Budget Act along with several related bills (including numerous trailer bills that implement policy changes tied to the budget). The package represented a final agreement among three parties (the Governor and the Democratic leaders of both houses; Republicans are no longer included as their votes are not necessary to enact a budget) for the 2025-26 state budget. The budget deal advances many of the Legislature’s priorities, such as reducing the Governor’s proposed cuts to the Medi-Cal program. It relies more on reserves and internal borrowing than what was proposed in the May Revision. In a notable, and probably unprecedented move, the entire budget deal was made contingent on the Legislature’s approval and the Governor’s signature on SB 131, a budget trailer bill that authorized a new CEQA exemption for infill housing projects and other environmentally-beneficial initiatives, as well as providing an extra $500 million appropriation to local governments through the Homeless Housing and Assistance Program (HHAP) in FY 2026-27.

Despite contentious hearings on a related housing trailer bill, AB 130, and significant opposition from the environmental community to SB 131’s changes to CEQA, the Legislature came together to pass both bills, which Governor Newsom signed on June 30. While all components of the final budget deal have been approved, action will continue on additional trailer bills throughout the rest of the 2025 legislative session, and modifications to the budget are entirely possible given the considerable uncertainty of fiscal policy at the federal level.

What wasn’t widely discussed in the media but was noted by several bloggers was the concessions made to construction unions.

John Fleishman wrote:

“Media outlets around the state are heralding this as a triumph for housing reform, praising streamlined permits, CEQA exemptions, and such. Yet behind this carefully crafted narrative lies a troubling truth: these bills represent yet another extreme expansion of pro-union labor mandates, but you would not know it because it is largely unreported by the media. With a liberal in Governor Newsom who has made no secret of his progressive agenda and a legislature that has received millions in union campaign contributions, such government overreach was predictable. The public gets promises of housing relief while powerful union interests secure unprecedented control over California’s construction industry. It is time to examine what these politicians are delivering to their constituents.

AB 130 strikes at the heart of competitive free enterprise in California. The bill creates new CEQA exemptions for infill housing developments that meet local zoning and planning standards, but the devil lives in the details, which most media outlets ignore. Section 25 of the legislation exempts housing projects from environmental review while imposing minimum wage requirements and prevailing wage rates on developments that were never subject to these costly mandates—a costly mandate in a bill that purports to make it easier to build housing.

Most small-scale residential construction projects are not currently covered by prevailing wage requirements, making this a seismic shift in California’s construction landscape. For San Francisco projects exceeding 50 units, the legislation establishes labor standards that must be enforced by joint labor-management committees—entities dominated by union representation. Section 26 further rigs the system by manipulating prevailing wage calculations to exclude non-union data, guaranteeing that union-negotiated rates become the mandatory standard.

While SB 131’s CEQA exemptions appear less explicit in their union favoritism, they trigger prevailing wage laws that funnel construction work directly into union hands. This represents the government picking winners and losers in the marketplace, not genuine policy reform designed to benefit California families.

CEQA reform has long been a priority for Republicans and business advocates, who recognize that excessive environmental regulations strangle economic growth and housing development. Streamlining environmental review for appropriate projects represents sound policy that could benefit California families struggling with housing costs.

However, Newsom and the Democrats in the legislature have weaponized this reform to serve their union allies. By tying CEQA exemptions exclusively to projects that accept union labor mandates, they have transformed a pro-business reform into a tool for government favoritism. Only developments that surrender to these costly labor requirements receive regulatory relief, while projects seeking to operate competitively face the full burden of environmental bureaucracy.

This represents the worst kind of crony capitalism—government using its regulatory power to favor politically connected interests over fair competition. Rather than consistently applying CEQA reform across all qualifying projects, Sacramento politicians use regulatory relief as a carrot to force compliance with their union agenda.

I note that some Republicans voted for this, and I wonder if they slept soundly last night, knowing they used the coercive power of government this way.”

That’s not to say that Governor Gavin Newsom didn’t TRY to make these CEQA by-pass projects more affordable. An earlier proposal included some new language:

• California Environmental Quality Act (CEQA) exemptions for housing projects of up to 25 units (10 units in San Francisco) without Labor Code prevailing wage/apprenticeship requirements.
• For projects exceeding 25 units (or 10 units in San Francisco), new construction labor standards may be used as an alternative to Labor Code prevailing wage and apprenticeship requirements.
• In Los Angeles, Marin, Monterey, Napa, Orange, Riverside, Sacramento, San Bernardino, San Diego, Santa Barbara, Santa Cruz, Solano, Sonoma, and Ventura counties, state law would require that 60% of the construction workers shall be paid at a wage rate of no less than $36 per hour and 100% at a wage rate of no less than $24 per hour.
• In Alameda, Contra Costa, San Mateo, and Santa Clara counties, and the City and County of San Francisco, 60% of the construction workers shall be paid at a wage rate of no less $40 per hour and 100% of the construction workers shall be paid at a wage rate of no less $27 per hour.
• For all other counties, 60% of the construction workers shall be paid at a wage rate of no less than $28 per hour and 100% of the construction workers shall be paid at a wage rate of no less than $20 per hour. 
• These new wage rates would be reduced by the hourly cost of health benefits.
• These new wage rates would be adjusted annually based on CPI.
• There would be no apprenticeship requirement.

This alternative was hit with a buzzsaw of opposition from Democrats and their union supporters and the language was quickly dropped.

Time will tell if these changes make a difference and increase the availability of new homes, or slow their inflationary increase.

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Litigation Financing Measure Becomes Law, Delivering Win for Ariz. Legal System Arizona Gov. Katie Hobbs on Friday signed legislation establishing new requirements around third-party litigation financing, marking a win for the Arizona business community concerned about the increasing prevalence of outside funders driving up the costs of litigation. The measure, SB 1215, sponsored by Sen. Vince Leach (R-SaddleBrooke), sets the stage for continued reform of lawsuit lending practices. The new law targets a fast-growing industry that funds lawsuits in exchange for a share of potential settlements. While once viewed as a novel tool for legal access, critics argue that the practice has evolved into an opaque, unregulated sector that distorts the legal system and even invites foreign interference in U.S. court cases. Story

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Rule Breakers Labor Secretary Lori Chavez-DeRemer kickstarted an “aggressive deregulatory” effort this week that would slash more than 60 department regulations, including eliminating overtime and minimum wage protections for home health care workers and union organizing rights for migrant farmworkers. The deregulation push comes after Trump’s January executive order mandated “agency leaders to cut 10 existing rules, regulations or guidance documents for every new one created.” Also on the chopping block: “affirmative action requirements for registered apprenticeships”.

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New Supervisor Imperial Beach Mayor Paloma Aguirre coasted to an easy victory in a special election for an open seat on the San Diego County Board of Supervisors. Votes are still being tabulated, but Chula Vista Mayor John McCann, down by about 6 points, conceded the race and said in a statement that he had called Aguirre to congratulate her on her win. Both Aguirre, a Democrat, and McCann, a Republican, issued statements that included pledges to address the sewage from Mexico that contaminates the Tijuana River and befouls south county beaches. That’s undoubtedly one of the most pressing issues in the district, one that has also attracted the attention of the Trump administration. Most of the attention outside the district, however, has been on how the results will break a partisan divide on the powerful Board of Supervisors. Aguirre’s win means the board will again have a 3-2 Democratic majority, which will matter as the county wrestles with changes to Medicaid in the Republican megabill and other looming challenges.

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OBBB Smackdown: Governor Newsom told reporters that Central Valley Rep. David Valadao “might as well resign early and I can call a special election” if he votes for Trump’s megabill, which is awaiting House approval. “If he votes for the bill, he should be voted out, period, full stop,” the governor said, calling the legislation “one of the most calamitous and devastating bills of our lifetime.” Newsom slammed Valadao, one of the state’s more vulnerable Republicans, at a Los Angeles news conference touting new film tax credits in the freshly-signed state budget. The governor said that any vote for the federal OBBB would be "the ultimate betrayal,” noting more than 60 percent of Valadao’s constituents rely on Medi-Cal, the state’s version of the federal Medicaid health insurance that covers the poorest Americans. The legislation could boot millions of Californians off the program to help Republicans fund tax cuts. [SV Sun]

Threat to WECA Apprenticeship Program - AB 889

We are concerned that Assembly Bill 889 by Assembly Member Heather Hadwick (R) from Northeastern California (AD 1) will reduce journey worker contributions to WECA’s apprenticeship program. To date, Hadwick has refused to adopt modest amendments to her bill that we have suggested.

We are keeping a close eye on when AB 889 could be scheduled for a hearing in the Senate Labor, Public Employment and Retirement Committee, but anticipate an early July hearing.

As this proposed legislation continues through the process, we will be reaching out to you to contact your local Senator when the time is right – please keep an eye out for that request in future communications.

Your support will be crucial. 

If you have questions about AB 889 and our efforts, contact Richard Markuson or Rex Hime, richard@pacificadvocacygroup.com or rhime@goweca.com.

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Biden PLA Mandate to Stay, Per Trump Trump’s OMB director Russell Vought said the Trump administration supports the use of PLAs when those agreements are “practicable and cost effective, and blanket deviations prohibiting the use of PLAs are precluded.” The Trump administration has indicated it will not rescind a Biden-era rule mandating the use of project labor agreements on large publicly funded jobs. After months of court cases and federal agencies announcing deviations from Federal Acquisition Regulation rules regarding PLA use, a Thursday Office of Management and Budget memo to federal agencies and department heads sought to unmuddy the waters. (Excuse me while I go vomit)

Michael Bellaman, president and CEO of Associated Builders and Contractors, said the decision “cannot be reconciled with the president’s philosophies of merit, fairness, and nondiscrimination because it inhibits fair and open competition and prioritizes special interests over taxpayers and workers.”

Russell Vought, director of the White House Office of Management and Budget, laid out the Trump administration’s position in a June 12 memo in response to agencies issuing what was termed “overly broad” deviations from Federal Acquisition Regulation provisions related to the labor pacts.

Readers will need to be sitting down as they read this article because it represents the first time DJT said one thing during campaigning, and another thing after.

The move follows Defense Secretary Pete Hegseth saying in February that he was directing the U.S. Defense Dept. to remove language requiring agreement mandates from contracts worth $35 million or more, and the U.S. General Services Administration announcing soon after it was also removing requirements from land port of entry projects.

Curiously, neither the State Building and Construction Trades Council nor the NBTU have said anything about Vought’s memo. I reached out to my contacts in the Trump Administration, but they hadn’t been given the spin document yet.

Bloomberg captured it succinctly: “The White House budget office is pushing federal agencies to use union project labor agreements, an unexpected move that will be a major win for organized labor and continue a Biden-era policy.” Story

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Alarms Sound Over Record State Spending and Growing Deficits Well on his way to his race for President, or arrest, Governor Gavin Newsom is dealing with some big budget mess. Rob Lapsley summed it up as “California is poised to continue with near-record-breaking spending, despite economic uncertainty, especially around federal funding. The Legislature’s plan commits more than $232 billion from the General Fund, nearly $90 billion in special funds, and billions more in bond expenditures, all while the state continues to face a chronic structural deficit of $10 to $20 billion in the General Fund and billions more in special funds.” More

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U.S. Steel Power Grab Should Terrify Every American Jon Fleischman has been tracking the acquisition of U.S. Steel by Nippon Steel, and one detail he believes should make every freedom-loving American very, very worried. Buried in this $14.9 billion deal is what is called a “golden share”—a single piece of preferred stock that hands the federal government veto power over a private company’s most basic decisions. Under this deal, the federal government can now block U.S. Steel’s board appointments, dictate where they build factories, and override countless other business decisions. He argues, “This isn’t capitalism—this is the kind of state control you see in China, where the Communist Party pulls the strings of every major corporation, or in Russia, where Putin’s cronies decide which businesses live or die.” More

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Legislature Approves Budget Without Union-Supported Tax Hikes and Missing Many Key Elements. Both houses of the Legislature approved a placeholder budget (SB 101, Wiener) on June 13 that doesn’t include any of the corporate tax increases sought by progressive lawmakers and public employee labor unions in recent weeks. The legislative plan directs the legislative analyst to “develop tax reform options” by November for consideration in next year’s budget. It includes the governor’s proposal to require financial institutions to use a single sales factor when apportioning income to the state of California. Several lawmakers made it clear during committee hearings that the “budget reforms” they support involve large tax increases targeted at major corporations, especially those with large workforces that do not provide healthcare benefits to all their workers. [Caltax]

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Supervisor Race Enters Home Stretch

In two weeks, South San Diego County voters will determine San Diego’s political future. The race to represent a vacant South County seat on the County Board of Supervisors is down to the wire. The deadline to vote is July 1. Supporters of Imperial Beach Mayor Paloma Aguirre and Chula Vista Mayor John McCann have spent close to $1 million so far, most of it in the past few weeks, according to the latest analysis. Polls indicate a tight race, with neither candidate holding a decisive lead. VOSD South County reporter, Jim Hinch, has followed the election closely. Check out their South County Decides homepage for full coverage (including in-depth Q&As with the candidates) analysis of top issues and the latest on the money race.

Hinch also delved into each candidate’s background, including McCann’s ties to a businesswoman convicted of fraud, questions raised by a real estate promotion and Aguirre’s record of unpaid bills. Last week, responding to questions about Aguirre’s failure to pay a three-year-old $2,600 tax bill on the Imperial Beach condominium she and her husband own, a campaign spokesperson said Aguirre had arranged a payment plan and was caught up on the bill. A copy of that payment plan later sent by Aguirre’s campaign shows Aguirre and her husband arranged the plan three weeks ago, on May 21. The previous day, May 20, conservative commentator Amy Reichert had made the delinquent tax bill a campaign issue by posting a screenshot of it. Asked why Aguirre and her husband waited three years to address the bill, campaign consultant Dan Rottenstreich said the 2022 bill “got lost in the shuffle.”

“After a number of letters [from county tax authorities] over a couple of years, [Aguirre and her husband] called the tax collector and mortgage company. They started dealing with it,” Rottenstreich said. “It takes time.” Rottenstreich pointed out that Aguirre and her husband have paid every other property tax bill on their condo “with the exception of this one supplemental tax bill that was not paid initially and then they lost track of.” Rottenstreich said the timing of Reichert’s screenshot posting was unrelated to Aguirre’s handling of the tax bill. “People misplace bills. It’s $2,600,” Rottenstreich said. “She’s not running to be the County Assessor. She’s running to be County Supervisor.” [Voice of San Diego]

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California Construction Law: Navigating Key Changes and Insights Over the past year, the California Legislature introduced significant additions and amendments to more than 50 statutes, including 14 statutes that directly affect contractor licensing laws and construction practices. These legislative developments reflect the state’s growing emphasis on labor and employment standards, energy sustainability, healthcare infrastructure, affordable housing, and other key issues. This article examines key developments in California construction law, with a particular focus on AB 2293, AB 2235, AB 1034, AB 2579, AB 2696, SB 1162, and AB 3190. Story

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Never Say Never Lawmakers on Capitol Hill are still unveiling major labor legislation despite GOP control of Congress, which may make it hard to advance. [Politico]

PRO Act (registration required for links in this section): Makes it easier for unions to organize and collectively bargain by strengthening the National Labor Relations Act. Reps reintroduced the bill. Bobby Scott (D-Va.) and Brian Fitzpatrick (R-Pa.) in the House, and Sen. Bernie Sanders (I-Vt.) unveiled a companion bill the Senate.

Faster Labor Contracts Act: Prevents employers from slow-walking union negotiations by requiring talks to begin within 10 days after a union is recognized. Sen. Josh Hawley (R-Mo.) introduced the bill in March.

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Were Cuts in Rooftop Solar Payments Legal? California Supreme Court Hears Arguments The California Supreme Court heard arguments recently in a case that could be pivotal to the spread of rooftop solar panels in California. Environmental and consumer advocacy groups are seeking to reverse a 2022 decision by state regulators to slash by around 75% the rates paid to compensate customers with solar installations for the excess energy they generate. The move, intended to shield non-solar customers from unfair cost burdens, sent solar hookups plummeting.

Three environmental groups bringing the case — the Center for Biological Diversity, The Protect our Communities Foundation, and the Environmental Working Group — argue that the California Public Utilities Commission didn’t properly consider benefits to customers and disadvantaged communities when it changed the program. The commission argued the policy strikes a balance between affordability for all customers and encouraging renewable energy choices. The court’s decision is expected within about a month. Story