The Southwest California Legislative Council (SWCLC) met on Monday, January 12, 2026, at the Southwest Riverside County Association of Realtors to review the key political and policy issues that will affect California businesses in the year ahead. With a new Governor to be elected and major policy decisions underway, 2026 is shaping up to be an important year for employers across the state.

A Very Active Election Year Is Ahead

California is expected to see an unusually large number of ballot measures in 2026, issues that voters decide directly at the ballot box. These campaigns are becoming extremely expensive, with total spending expected to exceed $1 billion statewide. Business owners should expect to see more signature gatherers in public places and more issues on the ballot that could affect how businesses operate, including proposals related to voter identification and environmental regulations.

Legislation That Could Impact Employers

Several state bills that affect businesses are still under consideration or may return this year. Of particular concern is a proposal that would roll back recent reforms to California’s Private Attorneys General Act (PAGA). These reforms were intended to reduce costly lawsuits against employers, and efforts to undo them could increase legal risk and expenses for businesses. Other topics being monitored include potential commercial rent control, restrictions on customer loyalty or rewards programs, workplace surveillance rules, and new environmental fees that could increase operating costs. Please view the 2-year bill report that the SWCLC is monitoring.  

Understanding the State Budget

The Governor has proposed a $348.9 billion state budget for 2026–27. While the budget highlights strong funding for education, healthcare, and housing, there is disagreement about how much revenue the state will actually bring in. Some analysts believe the deficit may be much larger than reported, which could result in future cuts or new taxes. Notably, no clear statewide funding or relief programs for small businesses were identified, and the Council will continue to look for opportunities that may benefit employers.

A Hidden Payroll Cost for California Employers

California continues to borrow federal funds to pay unemployment benefits, which directly increases federal unemployment taxes (FUTA) for employers. California businesses have paid higher FUTA taxes for five years in a row, and it is unclear whether federal relief will continue. This issue is not widely discussed but has a direct impact on payroll costs for employers of all sizes. 

More information:

• IRS.gov FUTA Credit Reduction Explained
• California, Virgin Islands Face FUTA Credit Reduction for 2025

Stronger Advocacy and Better Communication

To make legislative information easier to understand and more accessible, SWCLC will return to regular monthly meetings and improve how updates are shared with chambers and business members. Future meetings will include local legislators and their staff to explain proposed laws in plain language. An advocacy trip to Sacramento is also being planned for June 2026, giving business leaders an opportunity to share real-world concerns directly with policymakers.

Why This Matters to You

Many of the policies discussed could affect operating costs, compliance requirements, and long-term planning for businesses. The Chamber remains committed to monitoring these issues, advocating on behalf of employers, and keeping members informed in clear, practical terms so they can focus on running their businesses with confidence.

The next SWCLC meeting will take place on February 9, 2026, at 11:30am at SRCAR. The meeting will include updates directly from legislative offices on proposed laws that could impact the business community. To register to attend, please click here.