ARTICLE
California lawmakers recently wrapped up the 2025–26 legislative session with a final push on hundreds of bills affecting employers, housing, infrastructure, energy, technology, and local government. The constitutional deadline was August 31st, with the Legislature completing its final business on September 1st. The Governor now has until September 30th to act on legislation that reached his desk. For Santa Cruz businesses, several measures are particularly relevant, including developments affecting transit, flood protection, gift cards, energy and data centers, artificial intelligence in the workplace, retail pricing, and the cost of doing business in California. Wins from our local delegation Senator John Laird: Senator John Laird's SB-1055 was signed into law on August 31st. The law gives the Pajaro Regional Flood Management Agency additional contracting options for flood-control projects, including alternative approaches to project delivery. The goal is to give the agency more flexibility as it advances levee and flood-protection work in the Pajaro Valley. Another Santa Cruz-specific measure, Laird's SB-1078, was signed into law on September 20th. The law provides a transition period for businesses that printed gift cards before California's cash-redemption threshold increased from $10 to $15 in April 2026. Businesses can continue selling qualifying older cards through the end of 2028 if they meet specified notice and recordkeeping requirements. The issue has particular relevance locally because the Santa Cruz Beach Boardwalk had a substantial inventory of gift cards printed under the previous rules. In addition to the bills covered above, Senator Laird, as Senate Budget Chair, helped pass a two-year balanced budget that keeps about $35 billion in reserves. In addition to the budget, local wins include $10.6 million in emergency funding for Watsonville Community Hospital, support for affordable housing and Meals on Wheels in Santa Cruz County, and additional funding for the Santa Cruz Downtown Library Mixed-Use Project. Assemblymember Dawn Addis: One of the most direct wins for local restaurants this year is now law. AB 2731, which Assemblymember Addis developed in partnership with the County of Santa Cruz, was signed and chaptered on September 15. It allows the state to issue up to 12 new full liquor licenses to restaurants in designated Santa Cruz County neighborhoods, with no more than five issued per year. County representatives testified that Santa Cruz County has reached its population-based cap on these licenses, forcing new restaurants to buy them on an expensive secondary market. For restaurant owners hoping to add a full bar, this opens a new path. Assemblymember Gail Pellerin: The Governor signed AB 1919 on August 6th. It allows a sales tax measure for Santa Cruz METRO to reach the ballot through a citizen initiative, not just through the METRO board. Because it was an urgency bill, it took effect immediately. Business owners should be aware this creates an additional route for future local transit tax proposals. A win for small businesses on retail pricing Not every important outcome this session was a bill that became law. One win that matters directly to small businesses was a bill that did not advance. AB-2564 (Ward), which targeted what supporters called surveillance pricing, did not make it to the Governor's desk. Supporters said the bill would stop retailers from setting individual prices based on personal data. However, CalChamber and other business groups warned it could expose local shops to lawsuits over routine discounts and loyalty programs. The bill narrowly cleared the Senate on August 31st, but the Assembly never took the final vote needed to send it to the Governor, which ended it for this session. The Santa Cruz Area Chamber opposed AB-2564 and welcomes this outcome. New rules for California's growing data-center industry One of the most consequential developments for California's technology and energy landscape came after the legislative session. On September 21st, Governor Gavin Newsom signed seven bills establishing new requirements for data centers. The package addresses electricity demand, water use, land use, environmental review, and infrastructure costs. Among other provisions, the new laws require greater disclosure of water and electricity use and establish requirements intended to prevent data centers from shifting certain infrastructure costs onto other electricity customers. The package could become increasingly relevant to communities considering large technology or industrial projects, particularly as questions about grid capacity, water availability and development impacts become part of local economic-development discussions. Bringing this issue closer to home, the Santa Cruz County Board of Supervisors recently considered a proposal that would have directed staff to draft an ordinance and ballot measure for March 2028, requiring majority voter approval before General Plan amendments could allow AI data centers and similar high-intensity computing facilities in unincorporated parts of the county. Ultimately, the Board voted 3-2 to reject the proposal. Supervisor Felipe Hernandez and Supervisor Justin Cummings backed the idea while Chair Monica Martinez and Supervisors Manu Koenig and Kim De Serpa voted no. AI and the workplace Artificial intelligence was another major theme of the 2026 session. SB-947, known as the No Robo Bosses Act, was approved by the Legislature on August 31st and remains before the Governor as of September 22nd. The bill would restrict employers from relying exclusively on automated decision systems for certain termination and disciplinary decisions. It also includes requirements for human review and employee notification when automated systems are used in those decisions. If signed, it takes effect July 1, 2027. Late amendments narrowed the bill, but the version sent to the Governor still contains broad or undefined terms that would be especially hard for small businesses to follow. The Governor vetoed a similar bill, SB-7, last year. For businesses already using AI for recruiting, scheduling, performance management or other workplace functions, the legislation is part of a broader shift toward increased regulation of workplace AI. Employers should watch the Governor's final action and any subsequent guidance closely. California's minimum wage will increase again While not part of a new bill passed in the final days of the session, an important statewide cost consideration is already set for 2027. California's minimum wage will increase from $16.90 to $17.40 per hour on January 1st, 2027. The change also raises the minimum annual salary threshold for employees who qualify for certain overtime exemptions to $72,384. Employers must also comply with any higher local or industry-specific wage requirements that apply to their workers. For small businesses, restaurants, hospitality employers, retailers and other labor-intensive industries, the annual wage adjustment remains an important factor in 2027 budgeting and compensation planning. What this means for Santa Cruz businesses The end of the legislative session does not mean the policy conversation is over. Businesses should be watching three areas closely as we move toward 2027: > Employment: minimum wage changes and potential new requirements around workplace AI. > Development and infrastructure: new rules affecting data centers, energy infrastructure, housing and environmental review. > Local economic conditions: investments in transportation, flood protection, water infrastructure and other public systems that support the regional business environment. The Santa Cruz Area Chamber will continue tracking state policy and regulations that affect the cost of doing business, economic development, workforce, infrastructure and the ability of local businesses to grow. For businesses, the most important next step is to watch the Governor's remaining September decisions and begin planning now for the laws and regulatory changes that will take effect in 2027.
California lawmakers recently wrapped up the 2025–26 legislative session with a final push on hundreds of bills affecting employers, housing, infrastructure, energy, technology, and local government. The constitutional deadline was August 31st, with the Legislature completing its final business on September 1st. The Governor now has until September 30th to act on legislation that reached his desk.
For Santa Cruz businesses, several measures are particularly relevant, including developments affecting transit, flood protection, gift cards, energy and data centers, artificial intelligence in the workplace, retail pricing, and the cost of doing business in California.
Wins from our local delegation
Senator John Laird: Senator John Laird's SB-1055 was signed into law on August 31st. The law gives the Pajaro Regional Flood Management Agency additional contracting options for flood-control projects, including alternative approaches to project delivery. The goal is to give the agency more flexibility as it advances levee and flood-protection work in the Pajaro Valley.
Another Santa Cruz-specific measure, Laird's SB-1078, was signed into law on September 20th. The law provides a transition period for businesses that printed gift cards before California's cash-redemption threshold increased from $10 to $15 in April 2026. Businesses can continue selling qualifying older cards through the end of 2028 if they meet specified notice and recordkeeping requirements. The issue has particular relevance locally because the Santa Cruz Beach Boardwalk had a substantial inventory of gift cards printed under the previous rules.
In addition to the bills covered above, Senator Laird, as Senate Budget Chair, helped pass a two-year balanced budget that keeps about $35 billion in reserves. In addition to the budget, local wins include $10.6 million in emergency funding for Watsonville Community Hospital, support for affordable housing and Meals on Wheels in Santa Cruz County, and additional funding for the Santa Cruz Downtown Library Mixed-Use Project.
Assemblymember Dawn Addis: One of the most direct wins for local restaurants this year is now law. AB 2731, which Assemblymember Addis developed in partnership with the County of Santa Cruz, was signed and chaptered on September 15. It allows the state to issue up to 12 new full liquor licenses to restaurants in designated Santa Cruz County neighborhoods, with no more than five issued per year. County representatives testified that Santa Cruz County has reached its population-based cap on these licenses, forcing new restaurants to buy them on an expensive secondary market. For restaurant owners hoping to add a full bar, this opens a new path.
Assemblymember Gail Pellerin: The Governor signed AB 1919 on August 6th. It allows a sales tax measure for Santa Cruz METRO to reach the ballot through a citizen initiative, not just through the METRO board. Because it was an urgency bill, it took effect immediately. Business owners should be aware this creates an additional route for future local transit tax proposals.
A win for small businesses on retail pricing
Not every important outcome this session was a bill that became law. One win that matters directly to small businesses was a bill that did not advance. AB-2564 (Ward), which targeted what supporters called surveillance pricing, did not make it to the Governor's desk. Supporters said the bill would stop retailers from setting individual prices based on personal data. However, CalChamber and other business groups warned it could expose local shops to lawsuits over routine discounts and loyalty programs. The bill narrowly cleared the Senate on August 31st, but the Assembly never took the final vote needed to send it to the Governor, which ended it for this session. The Santa Cruz Area Chamber opposed AB-2564 and welcomes this outcome.
New rules for California's growing data-center industry
One of the most consequential developments for California's technology and energy landscape came after the legislative session. On September 21st, Governor Gavin Newsom signed seven bills establishing new requirements for data centers. The package addresses electricity demand, water use, land use, environmental review, and infrastructure costs.
Among other provisions, the new laws require greater disclosure of water and electricity use and establish requirements intended to prevent data centers from shifting certain infrastructure costs onto other electricity customers. The package could become increasingly relevant to communities considering large technology or industrial projects, particularly as questions about grid capacity, water availability and development impacts become part of local economic-development discussions.
Bringing this issue closer to home, the Santa Cruz County Board of Supervisors recently considered a proposal that would have directed staff to draft an ordinance and ballot measure for March 2028, requiring majority voter approval before General Plan amendments could allow AI data centers and similar high-intensity computing facilities in unincorporated parts of the county. Ultimately, the Board voted 3-2 to reject the proposal. Supervisor Felipe Hernandez and Supervisor Justin Cummings backed the idea while Chair Monica Martinez and Supervisors Manu Koenig and Kim De Serpa voted no.
AI and the workplace
Artificial intelligence was another major theme of the 2026 session. SB-947, known as the No Robo Bosses Act, was approved by the Legislature on August 31st and remains before the Governor as of September 22nd. The bill would restrict employers from relying exclusively on automated decision systems for certain termination and disciplinary decisions. It also includes requirements for human review and employee notification when automated systems are used in those decisions. If signed, it takes effect July 1, 2027. Late amendments narrowed the bill, but the version sent to the Governor still contains broad or undefined terms that would be especially hard for small businesses to follow. The Governor vetoed a similar bill, SB-7, last year.
For businesses already using AI for recruiting, scheduling, performance management or other workplace functions, the legislation is part of a broader shift toward increased regulation of workplace AI. Employers should watch the Governor's final action and any subsequent guidance closely.
California's minimum wage will increase again
While not part of a new bill passed in the final days of the session, an important statewide cost consideration is already set for 2027. California's minimum wage will increase from $16.90 to $17.40 per hour on January 1st, 2027. The change also raises the minimum annual salary threshold for employees who qualify for certain overtime exemptions to $72,384. Employers must also comply with any higher local or industry-specific wage requirements that apply to their workers.
For small businesses, restaurants, hospitality employers, retailers and other labor-intensive industries, the annual wage adjustment remains an important factor in 2027 budgeting and compensation planning.
What this means for Santa Cruz businesses
The end of the legislative session does not mean the policy conversation is over. Businesses should be watching three areas closely as we move toward 2027:
> Employment: minimum wage changes and potential new requirements around workplace AI. > Development and infrastructure: new rules affecting data centers, energy infrastructure, housing and environmental review. > Local economic conditions: investments in transportation, flood protection, water infrastructure and other public systems that support the regional business environment.
The Santa Cruz Area Chamber will continue tracking state policy and regulations that affect the cost of doing business, economic development, workforce, infrastructure and the ability of local businesses to grow.
For businesses, the most important next step is to watch the Governor's remaining September decisions and begin planning now for the laws and regulatory changes that will take effect in 2027.