California Roundup: Recap of the 2026 Legislative Session
That’s a wrap on the 2026 legislative session. Although the session was set to end on August 31st, a late-breaking bill seeking to address utility wildfire victim payouts and executive accountability delayed the final votes until September 1st, but the wildfire bill inevitably stalled due to politics. Governor Gavin Newsom now has until September 30th to sign or veto hundreds of other newly passed bills—one of the final major duties of his governorship as he enters his last four months in office.
The Governor must decide whether to approve a litany of policy issues which could impact his future national ambitions. This includes legislation to solidify a tax credit for the film and television industry, adopting new regulations for social media platforms, allowing permit streamlining for new townhome developments, requiring new state studies to determine viability of emerging fusion technology and small nuclear reactors, mandating new controls on artificial intelligence (AI) in health care decisions, requiring water and energy use assessments for proposed data centers, imposing new policies for the residential insurance claims process, and providing new tools for wildfire mitigation.
Below is a recap of key issues and legislative deals that were made at the eleventh hour, and others that failed to make it to the Governor’s desk.
Taxation
AB 2465 (Ortega): prohibits tax breaks for businesses that own, operate, or manage a private detention facility or contracts with a private detention facility or federal agency engaging in immigration enforcement to provide covered services as defined under the law. This was one of a dozen bills pushing back against ICE and was a big priority for the Latino Caucus. Status: Governor's desk.
SB 186 (Laird): provides relief to the film and TV tax credit program from the recently enacted budget that included a $5 million cap on tax credits. The bill is a big priority for Hollywood and it makes improvements to the tax credit program, such as allowing a taxpayer to claim a 95% refund over two years instead of a 90% refund over five years. Status: Governor’s desk.
AI/Tech
The legislature worked to advance targeted AI, youth online-safety, companion-chatbot, and technology-accountability measures while broader automated-decision-system legislation did not complete passage.KP Public Affairs was actively involved in lobbying and negotiating all of these bills on behalf of clients.
AI Safety & Accountability
SB 813 (McNerney): would create a state framework for independent evaluation of advanced AI systems by directing state authorities to develop standards and qualifications for Independent Verification Organizations (IVOs) assessing AI safety, reliability, security, and other significant risks. Status: Signed by Governor.
AB 1709 (Lowenthal): would restrict specified addictive design features for users under 16 without parental authorization, including features such as autoplay, infinite scroll, algorithmic engagement mechanisms, and related design practices. Status: Governor’s desk.
AB 2246 (Wicks): would rework California’s child online-safety framework by establishing requirements concerning protective defaults, children’s data, profiling, manipulative design practices, and mitigation of specified harms in child-accessible digital products and services; attempts to preserve a broad child-safety regime following litigation over the Age-Appropriate Design Code Act. Status: Governor’s desk.
AB 2 (Lowenthal): would create a statutory duty-of-care framework for major online and social-media platforms serving minors, including establishing potential liability when covered operators fail to exercise required care against specified foreseeable harms associated with platform design and recommendation systems. Status: Governor’s desk.
SB 1119 (Padilla): would establish a comprehensive accountability framework and youth-safety requirements for AI companion chatbots by addressing self-harm and crisis-response protocols, harmful or sexually explicit interactions, child-specific safeguards, disclosures, break prompts, audits, and enforcement. Status: Governor’s desk.
AB 2023 (Wicks): would establish comprehensive safety standards and parental controls for minors using companion and conversational AI systems and “chatbots.” Status: Governor’s desk.
Government Subsidies, Surveillance & Administration
AB 2465 (Ortega): would restrict eligibility for specified state financial benefits for companies involved in certain federal surveillance, immigration-enforcement, or detention technology contracts. Status: Governor’s desk.
Technology and Business Decisions
AB 1018 (Bauer-Kahan): would regulate automated systems used in consequential decisions such as employment, housing, health care, education, and financial services by requiring developer/deployer documentation and assessments, notice when an ADS contributes to an adverse decision, information rights, and an opportunity to appeal specified outcomes. Status: Failed.
Housing
AB 1751 (Quirk-Silva): would provide a ministerial approval process for townhome developments, meaning that one of the most attainable homeownership products can be built faster. This is a meaningful step toward California attaining its housing goals because it meets the intersection of a homeownership product that is desirable, financeable, and insurable. Status: Governor's desk.
SB 417 (Limon): places an $11.25 billion general obligation bond on the November 3, 2026, ballot (Proposition 1) to fund affordable housing, permanent supportive housing, and the CalVet Home Loan Program. Status: Signed by Governor.
SB 954 (Blakespear): would address CA Environmental Quality Act (CEQA)-related issues, primarily by adjusting CEQA exemptions and imposing guardrails for specific advanced manufacturing projects. It also narrows or restricts certain CEQA exemptions established under prior legislation (SB 131) that provided CEQA relief for certain future infill and high-density residential projects. Status: Governor’s desk.
SB 996 (Padilla): would bring California’s factory-built and manufactured housing standards in line with federal rules by requiring HCD to adopt regulations allowing factory-built units to be built without a permanent chassis. Status: Governor’s desk.
AB 1815 (Wicks and Quirk-Silva): would establish clearer statewide building standards and limits local jurisdictions from imposing arbitrary, hyper-local design or construction standards that exceed state building codes on factory-built residential units, essentially to prevent cities from blocking factory-built and modular designs via local code variations Status: Governor desk.
Healthcare
AB 2575 (Ortega): defines “clinical decision support systems” as AI systems that provide recommendations for the provision of patient care and would make it easier for workers to file complaints with the Labor Commissioner, if the worker believes their judgment was overridden by an AI tool. Despite amendments to narrow its scope, the bill creates a new definition on how AI-informed uses could be negated and makes actions around those subject to grievance. Status: Governor's desk.
AB 1979 (Bonta): would require health facilities and providers to take reasonable steps to ensure professionals keep the ability to exercise appropriate professional judgment in patient care, if care is informed by AI tools. Status: Governor’s desk.
SB 503 (Weber Pierson): requires developers of AI systems to make reasonable efforts to identify clinical decision support systems for biases and risks. Both of these bills were subject to negotiations from providers, health facilities, and consumers and are in front of the governor. Status: Governor’s desk.
Energy/ Energy Infrastructure
SB 492 (Becker, Petrie-Norris): was introduced as an end-of-session urgency measure, which proposed targeted, incremental reforms to strengthen wildfire prevention and preparedness, enhance utility executive accountability, and establish a "Fast-Pay" program to expedite victim compensation for utility-ignited fires. Assembly Speaker Robert Rivas ultimately killed the bill by declining to call a Floor vote due to strong utility opposition, and instead supported having a broader discussion about Governor Newsom's comprehensive but more controversial proposals to stabilize the state's Wildfire Fund, cap attorney’s fees, and restrict insurance subrogation. The governor has hinted at calling a potential extraordinary special session in the fall to address the broader issues over utility wildfire liability but it’s unclear if the Senate would engage given their opposition to the governor’s initial reform package. Status: Failed on Assembly Floor.
SB 1350 (McNerney): would make hydrogen-to-electricity facilities eligible for renewable portfolio compliance but must meet strict green feedstock sourcing, including a 20% minimum fuel blend and mandatory hourly matching by 2030. Status: Signed by Governor.
SB 925 (McNerney): sponsored by KP client General Atomics, would direct the state’s energy planning agency to develop a comprehensive strategic plan and regulatory roadmap to accelerate the development, licensing, and scaling of fusion energy in the state. Status: Governor’s desk.
AB 2647 (Calderon): would require the California Energy Commission (CEC) to prepare a comprehensive assessment, by July 1, 2027, of the potential role for advanced nuclear technologies in supporting critical infrastructure in California and of the potential for new, in-state nuclear power plants. Status: Governor’s desk.
SB 1425 (Cortese): would authorize the California High-Speed Rail Authority (HSRA) to issue encroachment permits for activities on its operating right-of-way and make any person who damages the high-speed train system or any portion of HSRA’s right-of-way guilty of a misdemeanor. The bill makes exceptions to the encroachment permit for entities (i.e., utilities) performing emergency repairs in the HSRA’s operating right-of-way if they provide immediate post-activity notification. Status: Governor’s desk.
SB 868 (Weiner): would exempt portable, 120-volt plug-in solar devices (balcony solar) from utility interconnection fees and requirements while safeguarding utility notification rights prior to installation. The bill would ban the sale of portable solar generation devices, beginning January 1, 2030, that fail to meet the safety qualifications established by the California Building Standards Commission to prevent electrical fires and ensure compliance with California’s electrical codes. Status: Governor’s desk.
AB 1813 (Ward): would provide an incentive for renters and low-income households to access solar energy by requiring the California Public Utilities Commission (CPUC) and CEC to overhaul rules for community solar and paired energy storage projects, with specific limits placed on the total program capacity (4 gigawatt overall cap), a 5 megawatt (MW) cap for a participating community renewable generator, and a 5 MW cap for energy storage per facility. Status: Governor’s desk.
AB 2163 (Gonzalez): would establish a framework to identify and designate “Strategic Clean Energy and Critical Mineral Development Zones” across California to help develop lithium and build geothermal energy. Status: Governor’s desk.
AB 2493 (Petrie-Norris): seeks to address project delays in interconnecting clean energy and storage generation to the state’s electrical transmission grid by requiring the CPUC to establish an independent transmission development monitor and requires large electrical corporations to submit project-specific construction and interconnection schedules to the CPUC transmission monitor within to assess development progress. Status: Governor’s desk.
SB 905 (Becker): seeks to reduce electric bills and increase performance accountability for California's investor-owned utilities (IOUs), including a requirement that IOUs publish data on electrical distribution grid utilization to optimize existing infrastructure before approving new expansion projects. Status: Governor’s desk.
AB 1156 (Wicks): would help facilitate the development of utility-scale solar energy projects by allowing farmers to convert degraded, water-scarce, or low-productivity agricultural lands, particularly Williamson Act lands, into sites for solar energy generation and battery storage, while still preserving core agricultural protections. Status: Governor’s desk.
Education
AB 126 (Gabriel) and AB 181 (Gabriel): both bills implement significant statutory, funding, and administrative changes governing TK-12 public education, including major changes to charter school and independent study education such as improved auditing practices, news charter school authorization standards, and an overhaul of the state’s Department of Education by allowing the Governor to appoint a new commissioner that will oversee the Department instead of the voter-approved Superintendent of Public Instruction. Status: Signed by Governor.
SB 1067 (Weber-Pierson): seeks to address the state’s math achievement challenges through early identification and intervention by requiring school districts, county offices of education, and charter schools to assess students in kindergarten, first grade, and second grade for math difficulties. Status: Governor’s Desk.
AB 2316 (Hoover): would create funding parity so qualifying charter schools can access hardship waivers or reductions on their 50% local matching share requirements. Status: Governor’s desk.
SB 1128 (Stern): would prohibit school districts, county offices of education, and charter schools from requiring students in kindergarten, including transitional kindergarten, to take home school-issued electronic devices such as tablets or laptops, but allows the parent or guardian to decide on whether their student takes the device home. Status: Governor’s desk.
SB 1083 (Perez): would remove an existing exemption that allows contractor employees working with pupils in independent study programs to be exempt from fingerprinting requirements when the pupil is under the immediate supervision and control of a parent or guardian. Governor’s desk.
Data Centers/Utility Planning
SB 1168 (McNerney): would require the CPUC to assess rate structures and ensure data centers pay a reasonable share of their costs associated with transmission and distribution needs to alleviate cost pressures on residential ratepayers. Status: Governor’s desk.
AB 1577 (Bauer-Kahan): would require the California Energy Commission (CEC) to establish a process for a data center owner (at least 10 MW of electricity consumption) to submit information about their power use, amount of onsite generation, and amount of carbon-free or renewable energy consumed onsite. Local agencies would be allowed to use the information for land use and infrastructure planning. Status: Governor’s desk.
SB 886 (Padilla): would require the CPUC to adopt new tariffs and update electric rules by January 1, 2028, to prevent stranded costs or shifting utility costs from data centers and large power loads to California's electrical grid onto nonparticipating ratepayers in investor-owned utility territories. Status: Governor’s desk.
AB 2383 (Zbur): would prevent potential cost shifts associated with new data center utility procurements or interconnections by requiring the CPUC to establish electrical corporation tariffs by January 1, 2028, for data centers with demand exceeding a minimum threshold (no higher than 25 MW). The bill would also require data centers to pay a reasonable share of distribution-level costs, including wildfire mitigation, wildfire liability, and environmental programs. Status: Governor’s desk.
SB 887 (Padilla): would prohibit development and operation of a data center from being eligible for the categorical ministerial exemption under the California Environmental Quality Act (CEQA) but would allow data centers to be eligible for CEQA expedited judicial review under the Governor’s environmental leadership development program, provided they meet more stringent environmental and labor standards. Status: Governor’s desk.
SB 1011 (McNerney): would have required all utilities that use artificial intelligence (AI) in their electric and natural gas infrastructure to adopt workforce protections that keep experienced human operated professionals in control of critical utility infrastructure, in addition to making sure a covered utility reports if a high-risk automated decision system contributed to or caused certain consequences. Status: Failed on Senate Floor.
Wildfire Funding and Mitigation
Several bills dealing with wildfire mitigation and rebuilding after wildfires were successfully passed by the legislature and are headed to the governor's desk.
AB 1934 (Bennett): would create a home hardening certification program that identifies home hardening measures, including defensible space, that can be voluntarily implemented during renovation or property improvement projects to substantially reduce the risk of loss during a fire. Status: Governor’s desk.
AB 1960 (Bennett): would establish a wildfire mitigation validation program to provide voluntary official recognition to a community that achieves progress toward community-scale wildfire preparedness and mitigations. Status: Governor’s desk.
AB 1964 (Bennett): would require the Office of the State Fire Marshal to develop home hardening standards by January 1, 2028, and compile a report of homes in moderate, high, and very high fire hazard severity zones in state and local responsibility areas. Status: Governor’s desk.
SB 894 (Allen): would establish the California Wildfire Resilience Loan Program to provide financial assistance for projects and activities to reduce wildfire-related risks and losses, including home hardening and defensible space improvements. Status: Governor’s desk.
SB 904 (Seyarto): would require the state to identify state permitting requirements and local procedures that could be suspended or revised to support recovery and rebuilding efforts following a state emergency declared wildfire. Status: Governor’s desk.
SB 1370 (Stern): would require a 60-day CEQA review and decision for any state-level environmental and resource permits, approvals, consultations, and reviews required for certain wildfire mitigation projects. Status: Governor’s desk
Insurance
The insurance industry was faced with several consequential bill introductions during the 2026 legislative session that sought to significantly alter the underwriting guidelines, policy limits, and the claims process in ways that could have led to big cost increases to premiums for policyholders.
AB 1795 (Gipson): would create a rebuttable presumption that if wildfire smoke, ash, soot, char, or combustion byproducts are present in a surviving residential property in the wildfire impact zone after a wildfire, then smoke damage in the property is the result of that wildfire. The bill would also prohibit an insurer from terminating additional living expenses coverage until the property has been restored to pre-loss condition and require the insurer to pay for any necessary testing. Status: Governor’s desk.
AB 2038 (Harabedian): would require an insurer to renew the policy of residential property insurance for at least the next three annual renewal periods from the date of the loss and prohibits an insurer from canceling or refusing to renew a policy of residential property insurance for a property located in a ZIP Code within or adjacent to a fire perimeter for two years after the declaration of a state of emergency. Status: Governor’s desk.
SB 354 (Limon): would revise the Insurance Information and Privacy Protection Act to establish new standards for the processing and sharing of consumers’ personal information by insurance licensees, surplus line insurers, reinsurers, and third-party service providers. Status: Governor’s desk.
SB 876 (Padilla): would require the building code upgrade cost payable to include all costs that would have been incurred if the insured structure had been completely rebuilt at its original location. Also authorizes an insurer to offer a policyholder the option to collect a monthly fair rental value of the dwelling in lieu of reimbursement for itemized expenses and prohibits the issuance or renewal of a policy without offering extended additional living expenses coverage of at least 50% above the policy limit for such expenses. Status: Governor's desk.
SB 877 (Perez): would require an insurer to now provide both preliminary and final copies of claim-related documents to claimants within 15 calendar days of a request in the event of a loss. Status: Governor’s desk.
SB 878 (Perez): would codify existing insurance regulations into law regarding insurance claims handling correspondence, including confirmation of receipt of a claim and initiating review of a claim within 15 days and accepting or denying proof of loss within 40 days. Status: Governor’s desk.
SB 1209 (Allen): would require an insurer to take corrective actions to remediate violations of specified laws and regulations identified in an examination report conducted by the Department of Insurance. The bill would also require a company that fails to adopt the necessary corrective actions to be subject to a penalty. Status: Governor’s desk.
SB 1301 (Allen): would begin in 2028, and increase the number of days that an insurer is required to notify a policyholder of a nonrenewal from 45 days to 90 days before the policy expiration. The bill would require the notice to contain specified information, including all information related to the basis for the nonrenewal. If the insurer fails to deliver a notice of nonrenewal to the named policyholder, the bill would require the existing policy to remain in effect for 90 days from the date the notice of nonrenewal is delivered. Status: Governor’s desk.
Banking/Finance
AB 801 (Bonta): would require the Department of Financial Protection and Innovation (DFPI) to conduct periodic examinations of specified financial institutions for compliance with applicable nondiscrimination laws. The original bill was a California Community Reinvestment Act that would have imposed a state-level obligation on financial institutions. However, Senate amendments stripped out the state CRA and replaced it with a much narrower requirement that the DFPI periodically examine covered financial institutions for compliance with nondiscrimination laws applicable to mortgage lending. Status: Governor's desk.
AB 871 (Stefani): would impose new operational requirements on financial institutions beginning January 1, 2028, concerning suspected financial abuse of elders. The bill requires annual training to be provided to mandated reporters of suspected financial abuse of an elder or dependent adult and requires mandated reporters to report suspected abuse to the Federal Bureau of Investigation. Status: Governor’s desk.
AB 1697 (Kalra): would delay for one year, until January 1, 2027, the effective date of AB 692 (Kalra, Chapter 703, Statutes of 2025), which provides restrictions on employment agreements containing repayment or “stay-or-pay” provisions. The bill expands the exemptions to the existing law, creating an exception for certain affiliation agreements involving securities broker-dealers, insurance producers, and investment advisers and their registered agents or representatives, provided specified conditions are met. The measure is important for financial-services firms that use recruiting bonuses, retention arrangements, training-cost repayment provisions, or affiliation agreements with registered representatives. Status: Governor’s desk.
AB 1842 (Harabedian): would expand disaster-related mortgage relief requirements statewide when a borrower’s property becomes uninhabitable as a direct result of a federally declared disaster. The bill requires a mortgage servicer to offer mortgage forbearance up to a maximum period of 12 months, unless prohibited by the terms of the applicable investor contract or servicing guidelines. Status: Governor's desk.
AB 1847 (Harabedian): would extend the period during which eligible homeowners impacted by the Los Angeles wildfires can request mortgage forbearance through January 2029 and would increase the potential forbearance period from 12 months to 24 months. Forbearance beyond 12 months would be subject to the terms of the applicable investor contract or servicing guidelines, and mortgage servicers would retain flexibility to request supporting documentation regarding the financial hardship affirmed by the borrower, the habitability of the property securing the residential mortgage loan, or the efforts undertaken by the borrower to remedy property damage to restore its habitability. Status: Governor’s desk.
AB 1957 (Pacheco): would make significant changes to California’s post-foreclosure home acquisition process (SB 1079, Skinner, Chapter 202, Statutes of 2020) involving residential properties to more narrowly focus on properties with modest valuations, narrows the definitions of ″eligible property″ and ″eligible buyer,″ strengthens documentary requirements to deter fraud, enhances transparency and oversight, and provides clearer procedures and enforcement mechanisms. Status: Governor’s desk.
AB 2116 (Schiavo): would substantially expand the California Financing Law to regulate commercial financing transactions including factoring and other accounts-receivable purchase transactions, asset-based lending transactions, commercial loans, open-end credit plans, and lease financing. Beginning January 1, 2028, the bill requires commercial financing providers and commercial financing brokers obtain a license from the Department of Financial Protection and Innovation (DFPI). Status: Governor’s desk.
SB 1288 (Laird): would establish new obligations on securities firms under the Uniform Transfer-on-Death (TOD) Security Registration Act to find beneficiaries of transfer on death securities accounts. The bill requires a registering entity that receives information establishing knowledge of death of all owners of a security to initiate a beneficiary notification process. Status: Governor’s desk.
Several key measures impacting financial services failed to advance:
AB 1447 (Gipson): would establish a stringent inactivity standard for securities governed by California’s Unclaimed Property Law (UPL) and require the State to take custody and liquidate securities automatically deemed abandoned due to the securities owner not affirmatively contacting or interacting with their financial institution during the 3-year dormancy period, even if mail, including tax forms and account statements, is still successfully reaching them. Status: Failed in Senate Judiciary.
AB 2031 (Petrie-Norris): would provide clarifying language to existing law by codifying a communications-based standard for determining whether a holder of securities knows the location of an owner for purposes of California’s Unclaimed Property Law (UPL). The bill is intended to protect California investors from the premature transfer and liquidation of their investments, provide certainty for holders, and reduce confusion regarding the proper application of California’s unclaimed property law. Status: Held under submission in the Senate Appropriations Committee.
AB 2145 (Garcia): in the original version of the bill would have allowed borrowers at retirement age to transfer their mortgage interest rate and loan terms to a new primary residence, including retroactively and significantly disrupt the secondary mortgage market, potentially reducing credit availability and increasing borrowing costs. The bill was narrowed to a state study, contingent on budget funds, to assess seniors' ability to downsize their home and evaluate the feasibility of mortgage portability. Status: Held under submission in the Assembly Appropriations Committee.
AB 2243 (Haney): would establish the State Bank Commission and require the commission, by July 1, 2027, to contract with one or more independent entities with appropriate expertise to develop a state bank plan by June 1, 2028. Status: Held under submission in the Assembly Appropriations Committee.
AB 2285 (Valencia): would amend California’s Digital Financial Assets Law to provide a framework for California state-chartered banks and credit unions to conduct digital financial asset business activity. Status: Failed to advance after not receiving a hearing in the Senate Judiciary Committee.
Water
SB 601 (Allen): would have made significant changes to California’s state water quality law, Porter-Cologne, in response to the US Supreme Court’s Sackett decision in 2024. The bill was made a two-year bill in Assembly Appropriations last year due to the significant concerns about the bill’s implementation, including unclear definitions and new legal liability for permittees. Despite a year’s worth of negotiations between stakeholders and interested parties, a deal could not be reached to resolve the concerns surrounding the bill. Status: Died in Assembly Appropriations.
AB 2218 (Kalra): would charge the state’s water resources agencies with addressing historic inequities and wrongs committed against tribal communities when those agencies undertake any decision-making related to water resources. It also creates a mediation process within the Natural Resources Agency’s Office of Tribal Affairs if there is a dispute as to the adequacy of the actions the state takes. This bill could have a significant impact on water infrastructure projects and water management actions. Status: Governor’s desk.
The 2026-2027 budget was also updated in August to disburse $2.6 billion from the 2024 Proposition 4 Water and Climate bond. Of note, this allocation includes $100 million for the state’s SAFER safe drinking water program; $68 million for regional water conveyance projects or repairs, with $30 million expressly designated for subsidence repairs for the State Water Project canals and $75 million for flood management projects, with $30 million specifically set aside for repairs on Delta levees associated with the State Water Project.
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