Newsom's veto kills California infrastructure bank bill

Bloomberg News

A proposed state infrastructure bank is among the victims of California Gov. Gavin Newsom's veto pen as he nears the end of his final term in the office.

Newsom Sunday vetoed Senate Bill 769, which would have created a Golden State Infrastructure Corp. within the State Treasurer's Office to finance large-scale infrastructure projects.

The veto means California and its next governor must use the state's existing financing tools to fund infrastructure.

The governor also vetoed bills that would have whittled away at the state's modest 2013 pension reforms and reimposed levels of environmental review for housing and infrastructure projects.

For his veto of SB 769, Newsom cited concerns about significant upfront funding needs and overlap with existing infrastructure agencies — for example, the California Infrastructure and Economic Development Bank already exists as part of state government.

"It is unclear whether the GSIC would complement this work or confuse it," Newsom wrote in his veto message.

He emphasized evaluating such proposals through the annual budget process to consider fiscal impacts within the state's financial context, especially amid challenging economic conditions and federal policy pressures, prioritizing disciplined fiscal management and existing tools.

California State Treasurer Fiona Ma and Sen. Anna Caballero, D-Merced, championed the bill, introduced in 2025.

"Long-term economic competitiveness depends on our ability to finance major infrastructure projects efficiently and at scale," Ma, who is running for lieutenant governor after two terms as treasurer, said in an emailed response.

"While SB 769 will not move forward this year, the underlying challenge remains: identifying new financing mechanisms that can leverage public and private capital while protecting taxpayers," Ma said.

She added the state "faces an infrastructure financing gap measured in the hundreds of billions of dollars, and we must continue exploring innovative ways to attract capital for transportation, water, energy, housing, and other critical projects."

Ma said she looks forward to continuing that work in partnership with policymakers and the investment community.

She had said when the bill was introduced last year that the state's "current financing authorities serve an important purpose, but they are not equipped to support the size, speed, and scale of the projects we need — especially when it comes to infrastructure."

She saw the Infrastructure Fund as changing that by "creating a process that the state can use to invest in our future by tripling our state dollars to complete projects and making both debt and equity investments into vital in-state infrastructure projects."

The bill had cleared the legislature by wide margins in both houses.

Pension reforms preserved

Another significant veto announced over the weekend was Newsom's veto of Assembly Bill 1383, sponsored by Assemblymember Tina McKinnor, D-Inglewood.

The union-backed measure sought to undo key components of former Gov. Jerry Brown's landmark 2012 legislation, the California Public Employees' Pension Reform Act.

PEPRA took effect in 2013 after local government leaders across California warned that surging mandatory contributions to the California Public Employees' Retirement System were threatening vital municipal services and driving cities toward insolvency. 

Brown's reform preserved existing benefits for current workers and retirees while lowering benefit formulas for future hires and requiring public employees to contribute a larger share toward their retirement costs.

Assembly Bill 1383 passed the legislature with nearly unanimous support. It aimed to enhance retirement benefits and reduce the minimum retirement age for public safety workers from 57 to 55. Newsom cited severe long-term financial consequences for state and local budgets.

"I still recall — before PEPRA's passage in 2012 — the alarming forecasts, the fierce criticism of public employees, and the growing pressure to eliminate defined benefit plans all together," he wrote in his veto message. This is an era of California history I do not wish to repeat."

In a joint statement, leaders from the California State Association of Counties, League of California Cities, California Special Districts Association, Rural County Representatives of California, and Urban Counties of California praised the governor's fiscal restraint:

 "At a time of severe fiscal uncertainty and growing demand for services, it is more important than ever for state leaders to help control costs," the statement said. "The pension reforms established just over a decade ago through PEPRA have been instrumental in stabilizing budgets for local agencies: cities, counties, schools, and special districts. This bill would have undone some of those vital reforms, adding billions in new costs and liabilities statewide over the next few decades."

The PEPRA previsions have largely withstood years of litigation seeking to undo them.

Newsom also drew line-in-the-sand boundaries with state public sector unions by vetoing Assembly Bill 1729, a measure designed to make remote work a default entitlement for state employees.

CEQA Veto

Another Newsom veto targeted Senate Bill 954, a measure pushed by environmental organizations seeking to roll back recent statutory modifications to the California Environmental Quality Act.

In 2025, state lawmakers passed and Newsom signed reforms to streamline CEQA review to accelerate housing, industrial development, and infrastructure construction across California.

SB 954 sought to reinstate regulatory hurdles that had been eliminated during that reform package, with environmental groups arguing that the 2025 changes had eroded critical ecological protections.

Newsom rejected the rollback, framing the 2025 legislation as essential to overcoming California's chronic housing and infrastructure bottlenecks. In his veto message, the governor described the previous year's legislative package as "a long-overdue overhaul to get California building again," adding, "If implementation reveals problems, they should be addressed through targeted, evidence-based changes — not by preemptively rolling back our progress."

The veto was lauded by business and manufacturing coalitions, including the California Manufacturers & Technology Association. Environmental advocates opposed the decision. 

While California's constitution allows lawmakers to override vetoes with two-thirds supermajority votes, political custom means they are all but certain not to try. The last override was in 1979.

Term limits mean Newsom will leave office at the end of the year. Democrat Xavier Becerra, former California attorney general, U.S. senator and U.S. health secretary, is favored to replace him.

Speculation that he plans to run for president in 2028 has not been reduced by his high-profile announcement last week that he would not run if former Vice President Kamala Harris chooses to seek the presidential nomination.