AB 1039: State-funded assistance grants and contracts: advance payments.
- Session Year: 2025-2026
- House: Assembly
- Latest Version Date: 2026-09-03
Current Status:
Failed
(2026-09-27: Vetoed by Governor.)
Introduced
In Committee
Awaiting First Chamber Vote
Passed First Chamber
In Committee
Awaiting Second Chamber Vote
Passed Second Chamber
Enacted
What does this bill do?
The bill requires state agencies to offer advance payments to eligible nonprofits and federally recognized tribes for grants or contracts of $150,000 or less, giving a 25% initial payment to recipients with low cash reserves or serving underresourced communities and allowing further installments up to 95% total as spending is documented. Awards over $10,000 must provide supporting documentation and keep funds in insured bank accounts, smaller awards report annually, agencies can opt out for legal or high‑risk reasons, and the state will create a Master Guide with standard forms and reconciliation rules.
The summary is provided by generative AI which can make mistakes. For original language, please view the details in the table below.
Existing law authorizes a state agency administering a grant program or contract to advance a payment to a recipient entity, subject to specified requirements. Existing law defines recipient entity for these purposes to mean a private, nonprofit organization qualified under federal law, or a federally recognized Indian tribe whose territorial boundaries lie wholly or partially within the State of California, as specified. Existing law requires the administering state agency, among other things, to prioritize recipient entities and projects serving disadvantaged, low-income, and underresourced communities, to stipulate an advance payment structure and request process within the grant agreement or contract, and to ensure an advance payment to the recipient entity does not exceed 25% of the total grant or contract amount, except as specified. Existing law requires recipient entities to satisfy specified minimum requirements, including submitting prescribed documentation, providing progress reports on the expenditure of advanced funds no less than on a quarterly basis, and depositing any funds received as an advance payment into a federally insured account, as specified.
This bill would expand the definition of recipient entity to include a private, nonprofit organization qualified under state law and would limit the requirement to prioritize recipient entities and projects to grants and contracts advertised before January 1, 2026. The bill would eliminate the requirement to stipulate an advance payment structure and request process. The bill would limit the above-described documentation and federally insured account requirements to apply only to grants and contracts in excess of $10,000 and, for grants or contracts less than $10,000, would instead require recipient entities to provide the above-described progress reports no less than annually. The bill would revise and recast the above-described authorization for an administering state agency to instead require the agency to advance a payment to an eligible recipient entity in accordance with the above requirements for any grants and contracts advertised on or after January 1, 2027, with a total award value of $150,000 or less, receiving an initial disbursement of 25 percent of the total award that meets one or more of specified criteria. The bill would authorize an administering state agency to distribute advance payments in multiple installments over the course of the grant or contract term and would authorize a recipient entity to request subsequent advance payment installments, as provided.
This bill would authorize an administering state agency to opt out of the default advance payment requirement for a specific funding opportunity if the agency determines it would create an irreconcilable conflict with federal law, bond requirements, or a documented high-risk profile of the specific program. To exercise the opt-out, the bill would require the agency to follow prescribed procedures, including clearly stating in the grant solicitation or request for proposal that advance payment is not available for that specific opportunity.
Existing law requires each state agency to register every grant the state agency administers with the California State Library prior to commencing a solicitation or award process for distribution of the grant, and to provide specified information that assists the California State Library with cataloging the distribution of grants and provides potential applicants with understandable and consistent information about available funding opportunities.
This bill would require a state agency to include within the information submitted to the California State Library, the percentage of the grant funds that may be distributed as an advance payment.
This bill would require, on or before July 1, 2027, the Strategic Growth Council, in consultation with the Department of Finance and the Department of General Services, to develop a Statewide Advance Funds and Reconciliation Guide (Master Guide), as specified. The bill would require the Department of General Services to actively promote the Master Guide across state agencies and would require every state agency to adopt the Master Guide as its standard operating procedure for the disbursement, tracking, and reconciliation of advance payments, as provided.
Existing law authorizes a state agency administering a grant program or contract to advance a payment to a recipient entity, subject to specified requirements. Existing law defines recipient entity for these purposes to mean a private, nonprofit organization qualified under federal law, or a federally recognized Indian tribe whose territorial boundaries lie wholly or partially within the State of California, as specified. Existing law requires the administering state agency, among other things, to prioritize recipient entities and projects serving disadvantaged, low-income, and underresourced communities, to stipulate an advance payment structure and request process within the grant agreement or contract, and to ensure an advance payment to the recipient entity does not exceed 25% of the total grant or contract amount, except as specified. Existing law requires recipient entities to satisfy specified minimum requirements, including submitting prescribed documentation, providing progress reports on the expenditure of advanced funds no less than on a quarterly basis, and depositing any funds received as an advance payment into a federally insured account, as specified.
This bill would expand the definition of recipient entity to include a private, nonprofit organization qualified under state law and would limit the requirement to prioritize recipient entities and projects to grants and contracts advertised before January 1, 2026. The bill would eliminate the requirement to stipulate an advance payment structure and request process. The bill would limit the above-described documentation and federally insured account requirements to apply only to grants and contracts in excess of $10,000 and, for grants or contracts less than $10,000, would instead require recipient entities to provide the above-described progress reports no less than annually. The bill would revise and recast the above-described authorization for an administering state agency to instead require the agency to advance a payment to an eligible recipient entity in accordance with the above requirements for any grants and contracts advertised on or after January 1, 2027, with a total award value of $150,000 or less, receiving an initial disbursement of 25 percent of the total award that meets one or more of specified criteria. The bill would authorize an administering state agency to distribute advance payments in multiple installments over the course of the grant or contract term and would authorize a recipient entity to request subsequent advance payment installments, as provided.
This bill would authorize an administering state agency to opt out of the default advance payment requirement for a specific funding opportunity if the agency determines it would create an irreconcilable conflict with federal law, bond requirements, or a documented high-risk profile of the specific program. To exercise the opt-out, the bill would require the agency to follow prescribed procedures, including clearly stating in the grant solicitation or request for proposal that advance payment is not available for that specific opportunity.
Existing law requires each state agency to register every grant the state agency administers with the California State Library prior to commencing a solicitation or award process for distribution of the grant, and to provide specified information that assists the California State Library with cataloging the distribution of grants and provides potential applicants with understandable and consistent information about available funding opportunities.
This bill would require a state agency to include within the information submitted to the California State Library, the percentage of the grant funds that may be distributed as an advance payment.
This bill would require, on or before July 1, 2027, the Strategic Growth Council, in consultation with the Department of Finance and the Department of General Services, to develop a Statewide Advance Funds and Reconciliation Guide (Master Guide), as specified. The bill would require the Department of General Services to actively promote the Master Guide across state agencies and would require every state agency to adopt the Master Guide as its standard operating procedure for the disbursement, tracking, and reconciliation of advance payments, as provided.
Existing law authorizes a state agency administering a grant program or contract to advance a payment to a recipient entity, subject to specified requirements. Existing law defines recipient entity for these purposes to mean a private, nonprofit organization qualified under federal law, or a federally recognized Indian tribe whose territorial boundaries lie wholly or partially within the State of California, as specified. Existing law requires the administering state agency, among other things, to prioritize recipient entities and projects serving disadvantaged, low-income, and under-resourced underresourced communities, to stipulate an advance payment structure and request process within the grant agreement or contract, and to ensure an advance payment to the recipient entity does not exceed 25% of the total grant or contract amount, except as specified. Existing law requires recipient entities to satisfy specified minimum requirements, including submitting prescribed documentation, providing progress reports on the expenditure of advanced funds no less than on a quarterly basis, and depositing any funds received as an advance payment into a federally insured account, as specified.
This bill would expand the definition of recipient entity to include a private, nonprofit organization qualified under state law and would limit the requirement to prioritize recipient entities and projects to grants and contracts advertised before January 1, 2026. The bill would eliminate the requirement to stipulate an advance payment structure and request process, and, instead, would require the administering agency to consider utilizing specified advance payment best practices and processes. process. The bill would limit the above-described documentation and federally insured account requirement requirements to apply only to grants and contracts in excess of $10,000. $10,000 and, for grants or contracts less than $10,000, would instead require recipient entities to provide the above-described progress reports no less than annually. The bill would require, rather than authorize, revise and recast the above-described authorization for an administering state agency to instead require the agency to advance a payment to a an eligible recipient entity in accordance with the above requirements for all any grants and contracts advertised on or after January 1, 2026. The bill would require the solicitation for the grant or contract to state the percentage of the grant or contract funds that may be distributed as an advance payment. 2027, with a total award value of $150,000 or less, receiving an initial disbursement of 25 percent of the total award that meets one or more of specified criteria. The bill would authorize an administering state agency to distribute advance payments in multiple installments over the course of the grant or contract term and would authorize a recipient entity to request subsequent advance payment installments, as provided.
This bill would authorize an administering state agency to opt out of the default advance payment requirement for a specific funding opportunity if the agency determines it would create an irreconcilable conflict with federal law, bond requirements, or a documented high-risk profile of the specific program. To exercise the opt-out, the bill would require the agency to follow prescribed procedures, including clearly stating in the grant solicitation or request for proposal that advance payment is not available for that specific opportunity.
Existing law requires each state agency to register every grant the state agency administers with the California State Library prior to commencing a solicitation or award process for distribution of the grant, and to provide specified information that assists the California State Library with cataloging the distribution of grants and provides potential applicants with understandable and consistent information about available funding opportunities.
This bill would require a state agency to include within the information submitted to the California State Library, the percentage of the grant funds that may be distributed as an advance payment.
This bill would require, on or before July 1, 2027, the Strategic Growth Council, in consultation with the Department of Finance and the Department of General Services, to develop a Statewide Advance Funds and Reconciliation Guide (Master Guide), as specified. The bill would require the Department of General Services to actively promote the Master Guide across state agencies and would require every state agency to adopt the Master Guide as its standard operating procedure for the disbursement, tracking, and reconciliation of advance payments, as provided.
Existing law authorizes a state agency administering a grant program or contract to advance a payment to a recipient entity, subject to specified requirements. Existing law defines recipient entity for these purposes to mean a private, nonprofit organization qualified under federal law, or a federally recognized Indian tribe whose territorial boundaries lie wholly or partially within the State of California, as specified. Existing law requires the administering state agency, among other things, to prioritize recipient entities and projects serving disadvantaged, low-income, and under-resourced communities, to stipulate an advance payment structure and request process within the grant agreement or contract, and to ensure an advance payment to the recipient entity does not exceed 25% of the total grant or contract amount, except as specified. Existing law requires recipient entities to satisfy specified minimum requirements, including depositing any funds received as an advance payment into a federally insured account, as specified.
This bill would limit the requirement to prioritize recipient entities and projects to grants and contracts advertised before January 1, 2026. The bill would eliminate the requirement to stipulate an advance payment structure and request process, and, instead, would require the administering agency to consider utilizing specified advance payment best practices and processes. The bill would limit the above-described federally insured account requirement to apply only to grants and contracts in excess of $10,000. The bill would require, rather than authorize, an administering state agency to advance a payment to a recipient entity in accordance with the above requirements for all grants and contracts advertised on or after January 1, 2026. The bill would require the solicitation for the grant or contract to state the percentage of the grant or contract funds that may be distributed as an advance payment.
Existing law requires each state agency to register every grant the state agency administers with the California State Library prior to commencing a solicitation or award process for distribution of the grant, and to provide specified information that assists the California State Library with cataloging the distribution of grants and provides potential applicants with understandable and consistent information about available funding opportunities.
This bill would require a state agency to include within the information submitted to the California State Library, the percentage of the grant funds that may be distributed as an advance payment.
Existing law authorizes a state agency administering a grant program or contract to advance a payment to a recipient entity, subject to specified requirements. Existing law defines recipient entity for these purposes to mean a private, nonprofit organization qualified under federal law, or a federally recognized Indian tribe whose territorial boundaries lie wholly or partially within the State of California, as specified. Existing law requires the administering state agency, among other things, to prioritize recipient entities and projects serving disadvantaged, low-income, and under-resourced communities, and to ensure an advance payment to the recipient entity does not exceed 25% of the total grant or contract amount, except as specified.
This bill would limit the requirement to prioritize recipient entities and projects to grants and contracts advertised before January 1, 2026. The bill would require, rather than authorize, an administering state agency to advance a payment to a recipient entity in accordance with the above requirements for all grants and contracts advertised on or after January 1, 2026. The bill would require the solicitation for the grant or contract to state the percentage of the grant or contract funds that may be distributed as an advance payment.
Existing law requires each state agency to register every grant the state agency administers with the California State Library prior to commencing a solicitation or award process for distribution of the grant, and to provide specified information that assists the California State Library with cataloging the distribution of grants and provides potential applicants with understandable and consistent information about available funding opportunities.
This bill would require a state agency to include within the information submitted to the California State Library, the percentage of the grant funds that may be distributed as an advance payment.
(a)(1)On or before July 1, 2020, each state agency shall register every grant the state agency administers with the California State Library prior to commencing a solicitation or award process for distribution of the grant. Each agency shall provide information regarding the grant, that assists the California State Library with cataloging the distribution of grants and provides potential applicants with understandable and consistent information about available funding opportunities, including, but not limited to, all of the following:
(A)The title of the grant opportunity and grant identification number.
(B)The revenue source allocated to fund the grant.
(C)The purpose of the grant.
(D)A brief description of the grant, including, but not limited to, the mechanism used to announce the availability of funding.
(E)Any eligibility requirements, including, but not limited to, any matching funds requirements.
(F)Geographic limitations, if any.
(G)A description of the total available grant funding, the number of awards, and the amounts per award.
(H)The period of time covered by the grant.
(I)The date the grant will be issued.
(J)The deadline for proposals to be submitted.
(K)Internet address for electronic submission of the proposal.
(L)Contact information of a staff member responsible for communicating the grant requirements.
(M)The percentage of the grant funds that may be distributed as an advance payment.
(2)Each state agency shall provide a link to the California State Librarys funding opportunities internet web portal on the state agencys internet website.
(b)On or before July 1, 2020, each state agency shall provide for the acceptance of electronic proposals for any grant administered by the state agency, as appropriate.
(c)Grant as used in this chapter means any mechanism used by a state agency to distribute appropriations that have been allocated for the purpose of financial assistance through a competitive or first-come, first-served award process. The term shall include loans and federal assistance funds that are administered by a state agency. The term shall not include the procurement of goods or services for a state agency nor the acquisition, construction, alteration, improvement, or repair of real property for a state agency.
(d)The Government Operations Agency shall assist the California State Library with state agency compliance and creating streamlined processes, as appropriate.
SEC. 2.Section 11019.3 of the Government Code is amended to read:11019.3.(a)It is the intent of the Legislature to improve and expand the states existing advance payment practices for state grants and contracts with nonprofits and tribes.
(b)For purposes of this section, all of the following definitions apply:
(1)Administering state agency means a state agency that administers a grant program or contract.
(2)Recipient entity means either of the following:
(A)A private, nonprofit organization that qualifies under Section 501(c)(3) of the Internal Revenue Code or is exempt from state income taxation under Section 23701d of the Revenue and Taxation Code.
(B)A federally recognized Indian tribe whose territorial boundaries lie wholly or partially within the State of California, and any agencies, entities, or arms of the tribe, as applicable, either together or separately.
(3)State agency has the same meaning as in Section 11000.
(c)An administering state agency may advance a payment to a recipient entity subject to all of the following requirements:
(1)The administering state agency shall do both of the following:
(A)For grants or contracts advertised before January 1, 2026, prioritize recipient entities and projects serving disadvantaged, low-income, and underresourced communities or organizations with modest reserves and potential cashflow problems.
(B)Ensure the advance payment to the recipient entity does not exceed 25 percent of the total grant amount or contract awarded to that recipient entity. An administering state agency may exceed the 25-percent limit if the administering state agency determines that the project requires a larger advance and the recipient entity provides sufficient justification and documentation for that larger advance to the administering state agency. An administering state agency may also provide advanced payments continuously through the grant or contract term.
(2)(A)Except as provided in clause (iii), the recipient entity shall satisfy the following minimum requirements:
(i)Provide an itemized budget for the eligible costs the advanced payment will fund, indirect or other costs needed to operate, a spending timeline, and a workplan developed in a form and manner specified by the administering state agency.
(ii)For grants or contracts in excess of ten thousand dollars ($10,000), submit documentation, as required by the administering state agency, to support the need for advance payment, which may include, but not be limited to, invoices, contracts, estimates, payroll records, and financial records.
(iii)Demonstrate that it is an organization exempt from taxation under Section 501(c)(3) of the Internal Revenue Code or from state income taxation under Section 23701d of the Revenue and Taxation Code. This clause shall not apply to tribes.
(iv)Obtain insurance in an amount commensurate with the assessed risk, if required by the administering state agency and stipulated within the grant agreement or contract.
(v)For grants or contracts in excess of ten thousand dollars ($10,000), deposit any funds received as an advance payment into a federally insured account of the recipient entity that provides the ability to track interest earned and withdrawals. Any accumulated interest shall be deemed to be grant or contract moneys, subject to federal and state laws and regulations, and the recipient shall report interest earned on the advance payment to the administering state agency. The recipient entitys account shall be in the recipient entitys name, and not in the name of any of its directors or officers.
(vi)Establish procedures to minimize the amount of time that elapses between the transfer of funds and the expenditure of those funds by the recipient or subrecipient. Further advance payments may be made if a grantee or contract recipient is able to demonstrate that a sufficient amount of previously advanced funds has been expended or that a plan is in place to ensure the expenditure of those funds in a timely manner, as determined by the administering state agency.
(vii)Provide progress reports on the expenditure of advanced funds no less than on a quarterly basis, except for grants or contracts under ten thousand dollars ($10,000), for which progress reports shall be provided no less than annually, and as otherwise required by the administering state agency. All unused funding provided as an advance payment, but not expended within the grant or contract timeline, shall be returned to the state.
(viii)Provide a progress report to the administering state agency following the expenditure of an advance payment that includes a summary of work completed, proof of expenditure, and other associated information as determined by the administering state agency.
(B)(i)Recipient entities that receive advance payments pursuant to this section may advance funds from the advance payment to any subrecipients in accordance with their grant program requirements or contract.
(ii)Recipients shall require all entities they subcontract with or award grant moneys to comply with state statutes, regulations, requirements, and the terms and conditions of the state award.
(iii)Regardless of any transfer or assignment of advance payments to subrecipients, recipients shall be liable to the state agency for any failures by subrecipients to ensure the award is used in accordance with state statutes, regulations, requirements, and the terms and conditions of the state award.
(d)(1)Except as provided in subdivision (f), an administering state agency shall advance a payment to an eligible recipient in accordance with the requirements of subdivision (c) for any grant or contract opportunity advertised on or after January 1, 2027, with a total award value of one hundred fifty thousand dollars ($150,000) or less, receiving an initial disbursement of 25 percent of the total award that meets one or both of the following criteria:
(A)The recipient maintains less than 120 days of operating reserves, as demonstrated by a signed affidavit or the organizations most recent financial statement showing operating reserves of less than four months.
(B)The recipient is headquartered in, or can demonstrate that the majority of the grant-funded services will be provided within, an underresourced community. For purposes of this paragraph, underresourced community means a community identified pursuant to Section 39711 of the Health and Safety Code, subdivision (d) of Section 39713 of the Health and Safety Code, or subdivision (g) of Section 75005 of the Public Resources Code.
(2)An administering state agency may distribute advance payments in multiple installments over the course of the grant or contract term, provided that the outstanding advance payment balance held by the recipient entity does not exceed 25 percent of the total grant or contract amount at any single time. As the recipient entity submits documentation justifying the expenditure of previously advanced funds through the agencys invoicing process, the recipient entity may request subsequent advance payment installments. Cumulatively, a recipient entity may receive up to 95 percent of the total grant or contract amount as advance payments over the course of the term.
(3)An administering state agency may allow an eligible recipient entity to request and receive an advance payment that exceeds the 25-percent single-time balance cap described in paragraph (2) if the recipient entity demonstrates, and the agency verifies, that the recipient entity meets all other eligibility requirements, has properly accounted for or spent down prior advances, or satisfies either of the following conditions:
(A)The advance payment is necessary for a large purchase, including, but not limited to, a construction project, land acquisition, or major equipment purchase.
(B)The recipient entity is a small, nonprofit organization or a tribe with low cashflow that requires the expanded advance payment to implement the project without causing negative impacts to the organizations or tribes financial standing.
(e)A recipient shall have the right to decline the advance payment and elect a standard reimbursement-only schedule. The state agency shall provide a simple method of opting out within the agreement to facilitate this choice.
(f)An administering state agency may elect to opt out of the default advance payment requirement for a specific funding opportunity under subdivision (d) only if the agency determines it would create an irreconcilable conflict with federal law, bond requirements, or a documented high-risk profile of the specific program. To exercise the opt-out provision, a state agency shall do all of the following:
(1)Clearly state in the grant solicitation or request for proposal that advance payment is not available for that specific opportunity.
(2)Maintain a written notice of nonparticipation in the program file, signed by the agencys fiscal officer or director, specifying the legal, fiscal, or programmatic reasons why advance payment is not feasible.
(3)Upon request, provide a summary of all such justifications to the Department of General Services and the California State Library to ensure transparency in the use of the opt-out provision.
(g)Advance payments authorized under this section shall be limited to the minimum immediate cash requirements necessary to carry out the purpose of the approved activity, program, or project, as determined by the administering state agency and subject to that administering state agencys approval of the recipient entitys or recipient state agencys workplan and written justification.
(h)(1)On or before July 1, 2027, the Strategic Growth Council, in consultation with the Department of Finance and the Department of General Services, shall develop a Statewide Advance Funds and Reconciliation Guide (Master Guide).
(2)The Department of General Services shall actively promote the Master Guide across all state entities to support widespread agency adoption and successful implementation.
(3)Every state agency subject to this chapter shall adopt the Master Guide as its standard operating procedure for the disbursement, tracking, and reconciliation of advance payments, including any forms and policies of the Master Guide. To ensure governmentwide cost reduction and eliminate duplicative administrative burdens in the development of individual advance pay policies, agencies shall not create independent or additional reconciliation requirements that exceed the standards set forth in the Master Guide, unless the following conditions are satisfied:
(A)The independent or additional reconciliation requirements are required by federal law or specific bond act covenants.
(B)The agency provides a written justification to the Department of General Services documenting exactly why the Master Guide is insufficient for the agencys specific processes and receives written authorization from the department to develop and implement alternative agency-specific policies or procedures.
(4)The Master Guide shall include a Standardized Advance Payment Toolkit for use by all agencies and recipients, including all of the following:
(A)A simplified, one-page form for recipients to request or opt out of advance payments.
(B)A standardized form for organizations to demonstrate priority status based on operating reserves or geographic equity.
(C)A simplified quarterly reconciliation form to be used across all state programs to ensure consistent tracking of advanced funds.
(5)The Strategic Growth Council, in coordination with the Department of General Services, shall provide both of the following:
(A)An annual training webinar for state agency staff to ensure the uniform application of the Master Guide, thereby reducing the administrative workload on individual departments.
(B)Dedicated technical assistance, guidance, and training materials to community organizations and nonprofit entities to clarify application processes, eligibility criteria, and required forms.
(6)The Strategic Growth Council shall biennially review and update the Master Guide to reflect best practices in fiscal transparency and to incorporate feedback from nonprofit stakeholders and state auditors.
(i)This section shall not be construed as limiting, prohibiting, or superseding any existing payment or grantmaking authorizations or powers of state agencies utilizing this section.
(a)(1)On or before July 1, 2020, each state agency shall register every grant the state agency administers with the California State Library prior to commencing a solicitation or award process for distribution of the grant. Each agency shall provide information regarding the grant, that assists the California State Library with cataloging the distribution of grants and provides potential applicants with understandable and consistent information about available funding opportunities, including, but not limited to, all of the following:
(A)The title of the grant opportunity and grant identification number.
(B)The revenue source allocated to fund the grant.
(C)The purpose of the grant.
(D)A brief description of the grant, including, but not limited to, the mechanism used to announce the availability of funding.
(E)Any eligibility requirements, including, but not limited to, any matching funds requirements.
(F)Geographic limitations, if any.
(G)A description of the total available grant funding, the number of awards, and the amounts per award.
(H)The period of time covered by the grant.
(I)The date the grant will be issued.
(J)The deadline for proposals to be submitted.
(K)Internet address for electronic submission of the proposal.
(L)Contact information of a staff member responsible for communicating the grant requirements.
(M)The percentage of the grant funds that may be distributed as an advance payment.
(2)Each state agency shall provide a link to the California State Librarys funding opportunities internet web portal on the state agencys internet website.
(b)On or before July 1, 2020, each state agency shall provide for the acceptance of electronic proposals for any grant administered by the state agency, as appropriate.
(c)Grant as used in this chapter means any mechanism used by a state agency to distribute appropriations that have been allocated for the purpose of financial assistance through a competitive or first-come, first-served award process. The term shall include loans and federal assistance funds that are administered by a state agency. The term shall not include the procurement of goods or services for a state agency nor the acquisition, construction, alteration, improvement, or repair of real property for a state agency.
(d)The Government Operations Agency shall assist the California State Library with state agency compliance and creating streamlined processes, as appropriate.
SEC. 2.Section 11019.3 of the Government Code is amended to read:11019.3.(a)It is the intent of the Legislature to improve and expand the states existing advance payment practices for state grants and contracts with nonprofits and tribes.
(b)For purposes of this section, all of the following definitions apply:
(1)Administering state agency means a state agency that administers a grant program or contract.
(2)Recipient entity means either of the following:
(A)A private, nonprofit organization that qualifies under Section 501(c)(3) of the Internal Revenue Code or is exempt from state income taxation under Section 23701d of the Revenue and Taxation Code.
(B)A federally recognized Indian tribe whose territorial boundaries lie wholly or partially within the State of California, and any agencies, entities, or arms of the tribe, as applicable, either together or separately.
(3)State agency has the same meaning as in Section 11000.
(c)An administering state agency may advance a payment to a recipient entity subject to all of the following requirements:
(1)The administering state agency shall do both of the following:
(A)For grants or contracts advertised before January 1, 2026, prioritize recipient entities and projects serving disadvantaged, low-income, and underresourced communities or organizations with modest reserves and potential cashflow problems.
(B)Ensure the advance payment to the recipient entity does not exceed 25 percent of the total grant amount or contract awarded to that recipient entity. An administering state agency may exceed the 25-percent limit if the administering state agency determines that the project requires a larger advance and the recipient entity provides sufficient justification and documentation for that larger advance to the administering state agency. An administering state agency may also provide advanced payments continuously through the grant or contract term.
(2)(A)Except as provided in clause (iii), the recipient entity shall satisfy the following minimum requirements:
(i)Provide an itemized budget for the eligible costs the advanced payment will fund, indirect or other costs needed to operate, a spending timeline, and a workplan developed in a form and manner specified by the administering state agency.
(ii)For grants or contracts in excess of ten thousand dollars ($10,000), submit documentation, as required by the administering state agency, to support the need for advance payment, which may include, but not be limited to, invoices, contracts, estimates, payroll records, and financial records.
(iii)Demonstrate that it is an organization exempt from taxation under Section 501(c)(3) of the Internal Revenue Code or from state income taxation under Section 23701d of the Revenue and Taxation Code. This clause shall not apply to tribes.
(iv)Obtain insurance in an amount commensurate with the assessed risk, if required by the administering state agency and stipulated within the grant agreement or contract.
(v)For grants or contracts in excess of ten thousand dollars ($10,000), deposit any funds received as an advance payment into a federally insured account of the recipient entity that provides the ability to track interest earned and withdrawals. Any accumulated interest shall be deemed to be grant or contract moneys, subject to federal and state laws and regulations, and the recipient shall report interest earned on the advance payment to the administering state agency. The recipient entitys account shall be in the recipient entitys name, and not in the name of any of its directors or officers.
(vi)Establish procedures to minimize the amount of time that elapses between the transfer of funds and the expenditure of those funds by the recipient or subrecipient. Further advance payments may be made if a grantee or contract recipient is able to demonstrate that a sufficient amount of previously advanced funds has been expended or that a plan is in place to ensure the expenditure of those funds in a timely manner, as determined by the administering state agency.
(vii)Provide progress reports on the expenditure of advanced funds no less than on a quarterly basis, except for grants or contracts under ten thousand dollars ($10,000), for which progress reports shall be provided no less than annually, and as otherwise required by the administering state agency. All unused funding provided as an advance payment, but not expended within the grant or contract timeline, shall be returned to the state.
(viii)Provide a progress report to the administering state agency following the expenditure of an advance payment that includes a summary of work completed, proof of expenditure, and other associated information as determined by the administering state agency.
(B)(i)Recipient entities that receive advance payments pursuant to this section may advance funds from the advance payment to any subrecipients in accordance with their grant program requirements or contract.
(ii)Recipients shall require all entities they subcontract with or award grant moneys to comply with state statutes, regulations, requirements, and the terms and conditions of the state award.
(iii)Regardless of any transfer or assignment of advance payments to subrecipients, recipients shall be liable to the state agency for any failures by subrecipients to ensure the award is used in accordance with state statutes, regulations, requirements, and the terms and conditions of the state award.
(d)(1)Except as provided in subdivision (f), an administering state agency shall advance a payment to an eligible recipient in accordance with the requirements of subdivision (c) for any grant or contract opportunity advertised on or after January 1, 2027, with a total award value of one hundred fifty thousand dollars ($150,000) or less, receiving an initial disbursement of 25 percent of the total award that meets one or both of the following criteria:
(A)The recipient maintains less than 120 days of operating reserves, as demonstrated by a signed affidavit or the organizations most recent financial statement showing operating reserves of less than four months.
(B)The recipient is headquartered in, or can demonstrate that the majority of the grant-funded services will be provided within, an underresourced community. For purposes of this paragraph, underresourced community means a community identified pursuant to Section 39711 of the Health and Safety Code, subdivision (d) of Section 39713 of the Health and Safety Code, or subdivision (g) of Section 75005 of the Public Resources Code.
(2)An administering state agency may distribute advance payments in multiple installments over the course of the grant or contract term, provided that the outstanding advance payment balance held by the recipient entity does not exceed 25 percent of the total grant or contract amount at any single time. As the recipient entity submits documentation justifying the expenditure of previously advanced funds through the agencys invoicing process, the recipient entity may request subsequent advance payment installments. Cumulatively, a recipient entity may receive up to 95 percent of the total grant or contract amount as advance pay payments over the course of the term.
(3)An administering state agency may allow an eligible recipient entity to request and receive an advance payment that exceeds the 25-percent single-time balance cap described in paragraph (2) if the recipient entity demonstrates, and the agency verifies, that the recipient entity meets all other eligibility requirements, has properly accounted for or spent down prior advances, or satisfies either of the following conditions:
(A)The advance payment is necessary for a large purchase, including, but not limited to, a construction project, land acquisition, or major equipment purchase.
(B)The recipient entity is a small, nonprofit organization or a tribe with low cashflow that requires the expanded advance payment to implement the project without causing negative impacts to the organizations or tribes financial standing.
(e)A recipient shall have the right to decline the advance payment and elect a standard reimbursement-only schedule. The state agency shall provide a simple method of opting out within the agreement to facilitate this choice.
(f)An administering state agency may elect to opt out of the default advance payment requirement for a specific funding opportunity under subdivision (d) only if the agency determines it would create an irreconcilable conflict with federal law, bond requirements, or a documented high-risk profile of the specific program. To exercise the opt-out, opt-out provision, a state agency shall do all of the following:
(1)Clearly state in the grant solicitation or request for proposal that advance payment is not available for that specific opportunity.
(2)Maintain a written notice of nonparticipation in the program file, signed by the agencys fiscal officer or director, specifying the legal, fiscal, or programmatic reasons why advance payment is not feasible.
(3)Upon request, provide a summary of all such justifications to the Department of General Services and the California State Library to ensure transparency in the use of the opt-out provision.
(g)Advance payments authorized under this section shall be limited to the minimum immediate cash requirements necessary to carry out the purpose of the approved activity, program, or project, as determined by the administering state agency and subject to that administering state agencys approval of the recipient entitys or recipient state agencys workplan and written justification.
(h)(1)On or before July 1, 2027, the Strategic Growth Council, in consultation with the Department of Finance and the Department of General Services, shall develop a Statewide Advance Funds and Reconciliation Guide (Master Guide).
(2)The Department of General Services shall actively promote the Master Guide across all state entities to support widespread agency adoption and successful implementation.
(3)Every state agency subject to this chapter shall adopt the Master Guide as its standard operating procedure for the disbursement, tracking, and reconciliation of advance payments, including any forms and policies of the Master Guide. To ensure governmentwide cost reduction and eliminate duplicative administrative burdens in the development of individual advance pay policies, agencies shall not create independent or additional reconciliation requirements that exceed the standards set forth in the Master Guide, unless the following conditions are satisfied:
(A)The independent or additional reconciliation requirements are required by federal law or specific bond act covenants.
(B)The agency provides a written justification to the Department of General Services documenting exactly why the Master Guide is insufficient for the agencys specific processes and receives written authorization from the department to develop and implement alternative agency-specific policies or procedures.
(4)The Master Guide shall include a Standardized Advance Payment Toolkit for use by all agencies and recipients, including all of the following:
(A)A simplified, one-page form for recipients to request or opt out of advance payments.
(B)A standardized form for organizations to demonstrate priority status based on operating reserves or geographic equity.
(C)A simplified quarterly reconciliation form to be used across all state programs to ensure consistent tracking of advanced funds.
(5)The Strategic Growth Council, in coordination with the Department of General Services, shall provide both of the following:
(A)An annual training webinar for state agency staff to ensure the uniform application of the Master Guide, thereby reducing the administrative workload on individual departments.
(B)Dedicated technical assistance, guidance, and training materials to community organizations and nonprofit entities to clarify application processes, eligibility criteria, and required forms.
(6)The Strategic Growth Council shall biennially review and update the Master Guide to reflect best practices in fiscal transparency and to incorporate feedback from nonprofit stakeholders and state auditors.
(i)This section shall not be construed as limiting, prohibiting, or superseding any existing payment or grantmaking authorizations or powers of state agencies utilizing this section.
(a)(1)On or before July 1, 2020, each state agency shall register every grant the state agency administers with the California State Library prior to commencing a solicitation or award process for distribution of the grant. Each agency shall provide information regarding the grant, that assists the California State Library with cataloging the distribution of grants and provides potential applicants with understandable and consistent information about available funding opportunities, including, but not limited to, all of the following:
(A)The title of the grant opportunity and grant identification number.
(B)The revenue source allocated to fund the grant.
(C)The purpose of the grant.
(D)A brief description of the grant, including, but not limited to, the mechanism used to announce the availability of funding.
(E)Any eligibility requirements, including, but not limited to, any matching funds requirements.
(F)Geographic limitations, if any.
(G)A description of the total available grant funding, the number of awards, and the amounts per award.
(H)The period of time covered by the grant.
(I)The date the grant will be issued.
(J)The deadline for proposals to be submitted.
(K)Internet address for electronic submission of the proposal.
(L)Contact information of a staff member responsible for communicating the grant requirements.
(M)The percentage of the grant funds that may be distributed as an advance payment.
(2)Each state agency shall provide a link to the California State Librarys funding opportunities internet web portal on the state agencys internet website.
(b)On or before July 1, 2020, each state agency shall provide for the acceptance of electronic proposals for any grant administered by the state agency, as appropriate.
(c)Grant as used in this chapter means any mechanism used by a state agency to distribute appropriations that have been allocated for the purpose of financial assistance through a competitive or first-come, first-served award process. The term shall include loans and federal assistance funds that are administered by a state agency. The term shall not include the procurement of goods or services for a state agency nor the acquisition, construction, alteration, improvement, or repair of real property for a state agency.
(d)The Government Operations Agency shall assist the California State Library with state agency compliance and creating streamlined processes, as appropriate.
SEC. 2.Section 11019.3 of the Government Code is amended to read:11019.3.(a)It is the intent of the Legislature to improve and expand the states existing advance payment practices for state grants and contracts with nonprofits and tribes.
(b)For purposes of this section, all of the following definitions apply:
(1)Administering state agency means a state agency that administers a grant program or contract.
(2)Recipient entity means either of the following:
(A)A private, nonprofit organization that qualifies under Section 501(c)(3) of the Internal Revenue Code or is exempt from state income taxation under Section 23701d of the Revenue and Taxation Code.
(B)A federally recognized Indian tribe whose territorial boundaries lie wholly or partially within the State of California, and any agencies, entities, or arms of the tribe, as applicable, either together or separately.
(3)State agency has the same meaning as in Section 11000.
(c)An administering state agency may advance a payment to a recipient entity subject to all of the following requirements:
(1)The administering state agency shall do all both of the following:
(A)For grants or contracts advertised before January 1, 2026, prioritize recipient entities and projects serving disadvantaged, low-income, and under-resourced underresourced communities or organizations with modest reserves and potential cashflow problems.
(B)Consider utilizing advance payment best practices and processes identified and developed by the Strategic Growth Councils Community Assistance for Climate Equity (CACE) program.(C)(B)Ensure the advance payment to the recipient entity does not exceed 25 percent of the total grant amount or contract awarded to that recipient entity. An administering state agency may exceed the 25-percent limit if the administering state agency determines that the project requires a larger advance and the recipient entity provides sufficient justification and documentation for that larger advance to the administering state agency.
(2)(A)Except as provided in clause (iii), the recipient entity shall satisfy the following minimum requirements:
(i)Provide an itemized budget for the eligible costs the advanced payment will fund, indirect or other costs needed to operate, a spending timeline, and a workplan developed in a form and manner specified by the administering state agency.
(ii)Submit For grants or contracts in excess of ten thousand dollars ($10,000), submit documentation, as required by the administering state agency, to support the need for advance payment, which may include, but is not be limited to, invoices, contracts, estimates, payroll records, and financial records.
(iii)Demonstrate that it is an organization exempt from taxation under Section 501(c)(3) of the Internal Revenue or from state income taxation under Section 23701d of the Revenue and Taxation Code. This clause shall not apply to tribes.
(iv)Obtain insurance in an amount commensurate with the assessed risk, if required by the administering state agency and stipulated within the grant agreement or contract.
(v)For grants or contracts in excess of ten thousand dollars ($10,000), deposit any funds received as an advance payment into a federally insured account of the recipient entity that provides the ability to track interest earned and withdrawals. Any accumulated interest shall be deemed to be grant or contract moneys, subject to federal and state laws and regulations, and the recipient shall report interest earned on the advance payment to the administering state agency. The recipient entitys account shall be in the recipient entitys name, and not in the name of any of its directors or officers.
(vi)Establish procedures to minimize the amount of time that elapses between the transfer of funds and the expenditure of those funds by the recipient or subrecipient. Further advance payments may be made if a grantee or contract recipient is able to demonstrate that a sufficient amount of previously advanced funds has been expended or that a plan is in place to ensure the expenditure of those funds in a timely manner, as determined by the administering state agency.
(vii)Provide progress reports on the expenditure of advanced funds no less than on a quarterly basis basis, except for grants or contracts under ten thousand dollars ($10,000), for which progress reports shall be provided no less than annually, and as otherwise required by the administering state agency. All unused funding provided as an advance payment, but not expended within the grant or contract timeline, shall be returned to the state.
(viii)Provide a progress report to the administering state agency following the expenditure of an advance payment that includes a summary of work completed, proof of expenditure, and other associated information as determined by the administering state agency.
(B)(i)Recipient entities that receive advance payments pursuant to this section may advance funds from the advance payment to any subrecipients in accordance with their grant program requirements or contract.
(ii)Recipients shall require all entities they subcontract with or award grant moneys to comply with state statutes, regulations, requirements, and the terms and conditions of the state award.
(iii)Regardless of any transfer or assignment of advance payments to subrecipients, recipients shall be liable to the state agency for any failures by subrecipients to ensure the award is used in accordance with state statutes, regulations, requirements, and the terms and conditions of the state award.
(d)An (1)Except as provided in subdivision (f), an administering state agency shall advance a payment to a an eligible recipient entity in accordance with the requirements of subdivision (c) for all grants and contracts any grant or contract opportunity advertised on or after January 1, 2026. The solicitation for the grant or contract shall state the percentage of the grant or contract funds that may be distributed as an advance payment. 2027, with a total award value of one hundred fifty thousand dollars ($150,000) or less, receiving an initial disbursement of 25 percent of the total award that meets one or both of the following criteria:
(A)The recipient maintains less than 120 days of operating reserves, as demonstrated by a signed affidavit or the organizations most recent financial statement showing operating reserves of less than four months.
(B)The recipient is headquartered in, or can demonstrate that the majority of the grant-funded services will be provided within, an underresourced community. For purposes of this paragraph, underresourced community means a community identified pursuant to Section 39711 of the Health and Safety Code, subdivision (d) of Section 39713 of the Health and Safety Code, or subdivision (g) of Section 75005 of the Public Resources Code.
(2)An administering state agency may distribute advance payments in multiple installments over the course of the grant or contract term, provided that the outstanding advance payment balance held by the recipient entity does not exceed 25 percent of the total grant or contract amount at any single time. As the recipient entity submits documentation justifying the expenditure of previously advanced funds through the agencys invoicing process, the recipient entity may request subsequent advance payment installments. Cumulatively, a recipient entity may receive up to 95 percent of the total grant or contract amount as advance pay over the course of the term.
(3)An administering state agency may allow an eligible recipient entity to request and receive an advance payment that exceeds the 25-percent single-time balance cap described in paragraph (2) if the recipient entity demonstrates, and the agency verifies, that the recipient entity meets all other eligibility requirements, has properly accounted for or spent down prior advances, or satisfies either of the following conditions:
(A)The advance payment is necessary for a large purchase, including, but not limited to, a construction project, land acquisition, or major equipment purchase.
(B)The recipient entity is a small, nonprofit organization or a tribe with low cashflow that requires the expanded advance payment to implement the project without causing negative impacts to the organizations or tribes financial standing.
(e)A recipient shall have the right to decline the advance payment and elect a standard reimbursement-only schedule. The state agency shall provide a simple method of opting out within the agreement to facilitate this choice.
(f)An administering state agency may elect to opt out of the default advance payment requirement for a specific funding opportunity under subdivision (d) only if the agency determines it would create an irreconcilable conflict with federal law, bond requirements, or a documented high-risk profile of the specific program. To exercise the opt-out, a state agency shall do all of the following:
(1)Clearly state in the grant solicitation or request for proposal that advance payment is not available for that specific opportunity.
(2)Maintain a written notice of nonparticipation in the program file, signed by the agencys fiscal officer or director, specifying the legal, fiscal, or programmatic reasons why advance payment is not feasible.
(3)Upon request, provide a summary of all such justifications to the Department of General Services and the California State Library to ensure transparency in the use of the opt-out provision.
(e)(g)Advance payments authorized under this section shall be limited to the minimum immediate cash requirements necessary to carry out the purpose of the approved activity, program, or project, as determined by the administering state agency and subject to that administering state agencys approval of the recipient entitys or recipient state agencys workplan and written justification.
(f)The Department of Finance or its designee may audit, during or after the conclusion of the term of the grant agreement, any state agency subject to this section or any recipient or subrecipient that received an advance payment under this section. The state agency, recipient, or subrecipient shall cooperate fully with the audit, including, but not limited to, providing access to its staff, books, records, accounts, or other materials, as requested.(h)(1)On or before July 1, 2027, the Strategic Growth Council, in consultation with the Department of Finance and the Department of General Services, shall develop a Statewide Advance Funds and Reconciliation Guide (Master Guide).
(2)The Department of General Services shall actively promote the Master Guide across all state entities to support widespread agency adoption and successful implementation.
(3)Every state agency subject to this chapter shall adopt the Master Guide as its standard operating procedure for the disbursement, tracking, and reconciliation of advance payments, including any forms and policies of the Master Guide. To ensure governmentwide cost reduction and eliminate duplicative administrative burdens in the development of individual advance pay policies, agencies shall not create independent or additional reconciliation requirements that exceed the standards set forth in the Master Guide, unless the following conditions are satisfied:
(A)The independent or additional reconciliation requirements are required by federal law or specific bond act covenants.
(B)The agency provides a written justification to the Department of General Services documenting exactly why the Master Guide is insufficient for the agencys specific processes and receives written authorization from the department to develop and implement alternative agency-specific policies or procedures.
(4)The Master Guide shall include a Standardized Advance Payment Toolkit for use by all agencies and recipients, including all of the following:
(A)A simplified, one-page form for recipients to request or opt out of advance payments.
(B)A standardized form for organizations to demonstrate priority status based on operating reserves or geographic equity.
(C)A simplified quarterly reconciliation form to be used across all state programs to ensure consistent tracking of advanced funds.
(5)The Strategic Growth Council, in coordination with the Department of General Services, shall provide both of the following:
(A)An annual training webinar for state agency staff to ensure the uniform application of the Master Guide, thereby reducing the administrative workload on individual departments.
(B)Dedicated technical assistance, guidance, and training materials to community organizations and nonprofit entities to clarify application processes, eligibility criteria, and required forms.
(6)The Strategic Growth Council shall biennially review and update the Master Guide to reflect best practices in fiscal transparency and to incorporate feedback from nonprofit stakeholders and state auditors.
(g)(i)This section shall not be construed as limiting, prohibiting, or superseding any existing payment or grantmaking authorizations or powers of state agencies utilizing this section.
(a)(1)On or before July 1, 2020, each state agency shall register every grant the state agency administers with the California State Library prior to commencing a solicitation or award process for distribution of the grant. Each agency shall provide information regarding the grant, that assists the California State Library with cataloging the distribution of grants and provides potential applicants with understandable and consistent information about available funding opportunities, including, but not limited to, all of the following:
(A)The title of the grant opportunity and grant identification number.
(B)The revenue source allocated to fund the grant.
(C)The purpose of the grant.
(D)A brief description of the grant, including, but not limited to, the mechanism used to announce the availability of funding.
(E)Any eligibility requirements, including, but not limited to, any matching funds requirements.
(F)Geographic limitations, if any.
(G)A description of the total available grant funding, the number of awards, and the amounts per award.
(H)The period of time covered by the grant.
(I)The date the grant will be issued.
(J)The deadline for proposals to be submitted.
(K)Internet address for electronic submission of the proposal.
(L)Contact information of a staff member responsible for communicating the grant requirements.
(M)The percentage of the grant funds that may be distributed as an advance payment.
(2)Each state agency shall provide a link to the California State Librarys funding opportunities internet web portal on the state agencys internet website.
(b)On or before July 1, 2020, each state agency shall provide for the acceptance of electronic proposals for any grant administered by the state agency, as appropriate.
(c)Grant as used in this chapter means any mechanism used by a state agency to distribute appropriations that have been allocated for the purpose of financial assistance through a competitive or first-come, first-served award process. The term shall include loans and federal assistance funds that are administered by a state agency. The term shall not include the procurement of goods or services for a state agency nor the acquisition, construction, alteration, improvement, or repair of real property for a state agency.
(d)The Government Operations Agency shall assist the California State Library with state agency compliance and creating streamlined processes, as appropriate.
SEC. 2.Section 11019.3 of the Government Code is amended to read:11019.3.(a)It is the intent of the Legislature to improve and expand the states existing advance payment practices for state grants and contract contracts with nonprofits and tribes.
(b)For purposes of this section, all of the following definitions apply:
(1)Administering state agency means a state agency that administers a grant program or contract.
(2)Recipient entity means either of the following:
(A)A private, nonprofit organization that qualifies under Section 501(c)(3) of the Internal Revenue Code.
(B)A federally recognized Indian tribe whose territorial boundaries lie wholly or partially within the State of California, and any agencies, entities, or arms of the tribe, as applicable, either together or separately.
(3)State agency has the same meaning as in Section 11000.
(c)An administering state agency may advance a payment to a recipient entity subject to all of the following requirements:
(1)The administering state agency shall do all of the following:
(A)For grants or contracts advertised before January 1, 2026, prioritize recipient entities and projects serving disadvantaged, low-income, and under-resourced communities or organizations with modest reserves and potential cashflow problems.
(B)Stipulate an advance payment structure and request process within the grant agreement or contract between the administering state agency and the recipient entity. Consider utilizing advance payment best practices and processes identified and developed by the Strategic Growth Councils Community Assistance for Climate Equity (CACE) program.
(C)Ensure the advance payment to the recipient entity does not exceed 25 percent of the total grant amount or contract awarded to that recipient entity. An administering state agency may exceed the 25-percent limit if the administering state agency determines that the project requires a larger advance and the recipient entity provides sufficient justification and documentation for that larger advance to the administering state agency.
(2)(A)Except as provided in clause (iii), the recipient entity shall satisfy the following minimum requirements:
(i)Provide an itemized budget for the eligible costs the advanced payment will fund, indirect or other costs needed to operate, a spending timeline, and a workplan developed in a form and manner specified by the administering state agency.
(ii)Submit documentation, as required by the administering state agency, to support the need for advance payment, which may include, but is not be limited to, invoices, contracts, estimates, payroll records, and financial records.
(iii)Demonstrate its current status in good standing as that it is an organization exempt from taxation under Section 501(c)(3) of the Internal Revenue Code. This clause shall not apply to tribes.
(iv)Obtain insurance in an amount commensurate with the assessed risk, if required by the administering state agency and stipulated within the grant agreement or contract.
(v)Deposit For grants or contracts in excess of ten thousand dollars ($10,000), deposit any funds received as an advance payment into a federally insured account of the recipient entity that provides the ability to track interest earned and withdrawals. Any accumulated interest shall be deemed to be grant or contract moneys, subject to federal and state laws and regulations, and the recipient shall report interest earned on the advance payment to the administering state agency. The recipient entitys account shall be in the recipient entitys name, and not in the name of any of its directors or officers.
(vi)Establish procedures to minimize the amount of time that elapses between the transfer of funds and the expenditure of those funds by the recipient or subrecipient. Further advance payments may be made if a grantee or contract recipient is able to demonstrate that a sufficient amount of previously advanced funds has been expended or that a plan is in place to ensure the expenditure of those funds in a timely manner, as determined by the administering state agency.
(vii)Provide progress reports on the expenditure of advanced funds no less than on a quarterly basis and as otherwise required by the administering state agency. All unused funding provided as an advance payment, but not expended within the grant or contract timeline, shall be returned to the state.
(viii)Provide a progress report to the administering state agency following the expenditure of an advance payment that includes a summary of work completed, proof of expenditure, and other associated information as determined by the administering state agency.
(B)(i)Recipient entities may provide moneys that receive advance payments pursuant to this section may advance funds from the advance payment to any subrecipients in accordance with their grant program requirements or contract.
(ii)Recipients shall require all entities they subcontract with or award grant moneys to comply with state statutes, regulations, requirements requirements, and the terms and conditions of the state award.
(iii)Regardless of any transfer or assignment of advance payments to subrecipients, recipients shall be liable to the state agency for any failures by subrecipients to ensure the award is used in accordance with state statutes, regulations, requirements, and the terms and conditions of the state award.
(d)An administering state agency shall advance a payment to a recipient entity in accordance with the requirements of subdivision (c) for all grants and contracts advertised on or after January 1, 2026. The solicitation for the grant or contract shall state the percentage of the grant or contract funds that may be distributed as an advance payment.
(e)Advance payments authorized under this section shall be limited to the minimum immediate cash requirements necessary to carry out the purpose of the approved activity, program, or project, as determined by the administering state agency and subject to that administering state agencys approval of the recipient entitys or recipient state agencys workplan and written justification.
(f)The Department of Finance or its designee may audit, during or after the conclusion of the term of the grant agreement, any state agency subject to this section or any recipient or subrecipient that received an advance payment under this section. The state agency, recipient, or subrecipient shall cooperate fully with the audit, including, but not limited to, providing access to its staff, books, records, accounts, or other materials, as requested.(g)This section shall not be construed as limiting, prohibiting, or superseding any existing payment or grantmaking authorizations or powers of state agencies utilizing this section.
(a)(1)On or before July 1, 2020, each state agency shall register every grant the state agency administers with the California State Library prior to commencing a solicitation or award process for distribution of the grant. Each agency shall provide information regarding the grant, that assists the California State Library with cataloging the distribution of grants and provides potential applicants with understandable and consistent information about available funding opportunities, including, but not limited to, all of the following:
(A)The title of the grant opportunity and grant identification number.
(B)The revenue source allocated to fund the grant.
(C)The purpose of the grant.
(D)A brief description of the grant, including, but not limited to, the mechanism used to announce the availability of funding.
(E)Any eligibility requirements, including, but not limited to, any matching funds requirements.
(F)Geographic limitations, if any.
(G)A description of the total available grant funding, the number of awards, and the amounts per award.
(H)The period of time covered by the grant.
(I)The date the grant will be issued.
(J)The deadline for proposals to be submitted.
(K)Internet address for electronic submission of the proposal.
(L)Contact information of a staff member responsible for communicating the grant requirements.
(M)The percentage of the grant funds that may be distributed as an advance payment.
(2)Each state agency shall provide a link to the California State Librarys funding opportunities internet web portal on the state agencys internet website.
(b)On or before July 1, 2020, each state agency shall provide for the acceptance of electronic proposals for any grant administered by the state agency, as appropriate.
(c)Grant as used in this chapter means any mechanism used by a state agency to distribute appropriations that have been allocated for the purpose of financial assistance through a competitive or first-come, first-served award process. The term shall include loans and federal assistance funds that are administered by a state agency. The term shall not include the procurement of goods or services for a state agency nor the acquisition, construction, alteration, improvement, or repair of real property for a state agency.
(d)The Government Operations Agency shall assist the California State Library with state agency compliance and creating streamlined processes, as appropriate.
SEC. 2.Section 11019.3 of the Government Code is amended to read:11019.3.(a)It is the intent of the Legislature to improve and expand the states existing advance payment practices for state grants and contract with nonprofits and tribes.
(b)For purposes of this section, all of the following definitions apply:
(1)Administering state agency means a state agency that administers a grant program or contract.
(2)Recipient entity means either of the following:
(A)A private, nonprofit organization that qualifies under Section 501(c)(3) of the Internal Revenue Code.
(B)A federally recognized Indian tribe whose territorial boundaries lie wholly or partially within the State of California, and any agencies, entities, or arms of the tribe, as applicable, either together or separately.
(3)State agency has the same meaning as in Section 11000.
(c)An administering state agency may advance a payment to a recipient entity subject to all of the following requirements:
(1)The administering state agency shall do all of the following:
(A)Prioritize For grants or contracts advertised before January 1, 2026, prioritize recipient entities and projects serving disadvantaged, low-income, and under-resourced communities or organizations with modest reserves and potential cashflow problems.
(B)Stipulate an advance payment structure and request process within the grant agreement or contract between the administering state agency and the recipient entity.
(C)Ensure the advance payment to the recipient entity does not exceed 25 percent of the total grant amount or contract awarded to that recipient entity. An administering state agency may exceed the 25-percent limit if the administering state agency determines that the project requires a larger advance and the recipient entity provides sufficient justification and documentation for that larger advance to the administering state agency.
(2)(A)Except as provided in clause (iii), the recipient entity shall satisfy the following minimum requirements:
(i)Provide an itemized budget for the eligible costs the advanced payment will fund, indirect or other costs needed to operate, a spending timeline, and a workplan developed in a form and manner specified by the administering state agency.
(ii)Submit documentation, as required by the administering state agency, to support the need for advance payment, which may include, but is not be limited to, invoices, contracts, estimates, payroll records, and financial records.
(iii)Demonstrate its current status in good standing as an organization exempt from taxation under Section 501(c)(3) of the Internal Revenue Code. This clause shall not apply to tribes.
(iv)Obtain insurance in an amount commensurate with the assessed risk, if required by the administering state agency and stipulated within the grant agreement or contract.
(v)Deposit any funds received as an advance payment into a federally insured account of the recipient entity that provides the ability to track interest earned and withdrawals. Any accumulated interest shall be deemed to be grant or contract moneys, subject to federal and state laws and regulations, and the recipient shall report interest earned on the advance payment to the administering state agency. The recipient entitys account shall be in the recipient entitys name, and not in the name of any of its directors or officers.
(vi)Establish procedures to minimize the amount of time that elapses between the transfer of funds and the expenditure of those funds by the recipient or subrecipient. Further advance payments may be made if a grantee or contract recipient is able to demonstrate that a sufficient amount of previously advanced funds has been expended or that a plan is in place to ensure the expenditure of those funds in a timely manner, as determined by the administering state agency.
(vii)Provide progress reports on the expenditure of advanced funds no less than on a quarterly basis and as otherwise required by the administering state agency. All unused funding provided as an advance payment, but not expended within the grant or contract timeline, shall be returned to the state.
(viii)Provide a progress report to the administering state agency following the expenditure of an advance payment that includes a summary of work completed, proof of expenditure, and other associated information as determined by the administering state agency.
(B)(i)Recipient entities may provide moneys from the advance payment to subrecipients in accordance with their grant program requirements or contract.
(ii)Recipients shall require all entities they subcontract with or award grant moneys to comply with state statutes, regulations, requirements and the terms and conditions of the state award.
(iii)Regardless of any transfer or assignment of advance payments to subrecipients, recipients shall be liable to the state agency for any failures by subrecipients to ensure the award is used in accordance with state statutes, regulations, requirements, and the terms and conditions of the state award.
(d)An administering state agency shall advance a payment to a recipient entity in accordance with the requirements of subdivision (c) for all grants and contracts advertised on or after January 1, 2026. The solicitation for the grant or contract shall state the percentage of the grant or contract funds that may be distributed as an advance payment.
(d)(e)Advance payments authorized under this section shall be limited to the minimum immediate cash requirements necessary to carry out the purpose of the approved activity, program, or project, as determined by the administering state agency and subject to that administering state agencys approval of the recipient entitys or recipient state agencys workplan and written justification.
(e)(f)The Department of Finance or its designee may audit, during or after the conclusion of the term of the grant agreement, any state agency subject to this section or any recipient or subrecipient that received an advance payment under this section. The state agency, recipient, or subrecipient shall cooperate fully with the audit, including, but not limited to, providing access to its staff, books, records, accounts, or other materials, as requested.
(f)(g)This section shall not be construed as limiting, prohibiting, or superseding any existing payment or grantmaking authorizations or powers of state agencies utilizing this section.
REVISIONS: HeadingLine 2.|
Date
|
Status
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|---|---|
| Sep 27, 2026 | Vetoed by Governor. |
| Sep 9, 2026 | Enrolled and presented to the Governor at 1 p.m. |
| Aug 30, 2026 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 75. Noes 3.). |
| Aug 30, 2026 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 75. Noes 3. Page 6864.). |
| Aug 30, 2026 | Senate amendments concurred in. To Engrossing and Enrolling. |
| Aug 28, 2026 | In Assembly. Concurrence in Senate amendments pending. |
| Aug 28, 2026 | Read third time. Passed. Ordered to the Assembly. (Ayes 40. Noes 0.). |
| Aug 24, 2026 | Read second time. Ordered to third reading. |
| Aug 21, 2026 | Read third time and amended. Ordered to second reading. |
| Aug 17, 2026 | Read second time. Ordered to third reading. |
| Aug 13, 2026 | Read second time and amended. Ordered returned to second reading. |
| Aug 13, 2026 | From committee: Amend, and do pass as amended. (Ayes 7. Noes 0.) (August 13). |
| Aug 3, 2026 | In committee: Referred to APPR. suspense file. |
| Aug 7, 2025 | In committee: Set, first hearing. Hearing canceled at the request of author. |
| Jul 8, 2025 | From committee: Do pass and re-refer to Com. on APPR. with recommendation: To Consent Calendar. (Ayes 15. Noes 0.) (July 8). Re-referred to Com. on APPR. |
| Jun 18, 2025 | From committee chair, with author's amendments: Amend, and re-refer to committee. Read second time, amended, and re-referred to Com. on G.O. |
| Jun 11, 2025 | Referred to Com. on G.O. |
| Jun 3, 2025 | In Senate. Read first time. To Com. on RLS. for assignment. |
| Jun 2, 2025 | Read third time. Passed. Ordered to the Senate. (Ayes 79. Noes 0. Page 1873.) |
| May 27, 2025 | Read second time. Ordered to third reading. |
| May 23, 2025 | From committee: Do pass. (Ayes 14. Noes 0.) (May 23). |
| May 7, 2025 | In committee: Set, first hearing. Referred to APPR. suspense file. |
| Apr 24, 2025 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 22. Noes 0.) (April 23). Re-referred to Com. on APPR. |
| Apr 24, 2025 | Coauthors revised. |
| Mar 10, 2025 | Referred to Com. on G.O. |
| Feb 21, 2025 | From printer. May be heard in committee March 23. |
| Feb 20, 2025 | Read first time. To print. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Aug 30, 2026 | AB 1039 Hart Concurrence in Senate Amendments | Assembly Floor |
Passed |
|
| Aug 28, 2026 | Assembly 3rd Reading AB1039 Hart et al. By McNerney | Senate Floor |
Passed |
|
| Aug 13, 2026 | Do pass as amended | Senate Standing Committee on Appropriations |
Passed |
|
| Aug 3, 2026 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
|
| Jul 8, 2025 | Do pass, but first be re-referred to the Committee on [Appropriations] with the recommendation: To Consent Calendar | Senate Standing Committee on Governmental Organization |
Passed |
|
| Jun 2, 2025 | AB 1039 Hart Assembly Third Reading | Assembly Floor |
Passed |
|
| May 23, 2025 | Do pass. | Assembly Standing Committee on Appropriations |
Passed |
|
| Apr 23, 2025 | Do pass and be re-referred to the Committee on [Appropriations] | Assembly Standing Committee on Governmental Organization |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| Pasadena Village | ** Support | |
| 211 San Diego | ** Support | |
| A New Beginning | ** Support | |
| A New Beginning FFA | ** Support | |
| AAPI Equity Alliance | ** Support | |
| Abode Services | ** Support | |
| Academy of Leonardo's Apprentice | ** Support | |
| Accelerate Neighborhood Climate Action | ** Support | |
| Access Humboldt | ** Support | |
| Accountingx LLC | ** Support | |
| Advancing Students Forward | ** Support | |
| African American Community Services Agency | ** Support | |
| All for Kids | ** Support | |
| alzheimer's orange county | ** Support | |
| Amigos de Bolsa Chica | ** Support | |
| Apidanh Alliance | ** Support | |
| Arts and Culture El Dorado | ** Support | |
| Arts Orange County | ** Support | |
| ASiAN, Inc. | ** Support | |
| Asociacion De Emprendedor@s | ** Support | |
| ASPIRANET | ** Support | |
| Association For Environmental And Outdoor Education | ** Support | |
| Association of California Community and Energy Services | ** Support | |
| Association of California Goodwills | ** Support | |
| Association of California Symphony Orchestras | ** Support | |
| Autism Society Inland Empire | ** Support | |
| Bay Area Community Resources | ** Support | |
| Becky Foreman Facilitation and Training | ** Support | |
| Benjamin Jones Community Resource Center | ** Support | |
| black women for wellness | ** Support | |
| Black Women For Wellness Action Project | ** Support | |
| Boys & Girls Club -- Laguna Beach | ** Support | |
| Brilliant Corners | ** Support | |
| Building Resilient Communities | ** Support | |
| CA Arts Advocates | ** Support | |
| California Alliance Of Child And Family Services | ** Support | |
| California Behavioral Health Association | ** Support | |
| California Center for Cooperative Development | ** Support | |
| California Community Living Network | ** Support | |
| California Council Of Land Trusts | ** Support | |
| California Language Teachers' Association | ** Support | |
| California Nonprofit Equity Initiative | ** Support | |
| California Partnership To End Domestic Violence | ** Support | |
| California School-Age Consortium | ** Support | |
| Calle 24 Latino Cultural District | ** Support | |
| CalNonprofits | ** Support | |
| Calpride | ** Support | |
| CAMEO Network | ** Support | |
| Camp Ocean Pines, INC | ** Support | |
| Canal Alliance | ** Support | |
| Capacity Impact Builders | ** Support | |
| Catalyst Family INC. | ** Support | |
| Caulder Lamm Alliance for Children, Inc. | ** Support | |
| Cedaw Challenge Team | ** Support | |
| Center For Environmental Health | ** Support | |
| Center for Living and Learning | ** Support | |
| Centinela Youth Services | ** Support | |
| Central American Resource Center of California | ** Support | |
| Central American Resource Center of Northern California | ** Support | |
| Central Valley Immigrant Integration Collaborative | ** Support | |
| Central Valley Opportunity Center | ** Support | |
| Central Valley Opportunity Center (CVOC) | ** Support | |
| Centro Inmigrante, INC. | ** Support | |
| Ceres Community Project | ** Support | |
| Charitable Ventures | ** Support | |
| Child & Family Center | ** Support | |
| Children's Fund | ** Support | |
| CHILDREN'S INSTITUTE | ** Support | |
| Children'S Law Center Of California | ** Support | |
| Children’s Institute | ** Support | |
| Chrysalis | ** Support | |
| Church of Movement | ** Support | |
| City Garage | ** Support | |
| Coastal Kids | ** Support | |
| Comite Civico Del Valle, INC | ** Support | |
| Comite Civico del Valle, Inc. | ** Support | |
| Community Alliance With Family Farmers | ** Support | |
| Community Bridges | ** Support | |
| Community Environmental Council | ** Support | |
| Community Foodbank of San Benito | ** Support | |
| Community Interventions | ** Support | |
| Community Resource Project | ** Support | |
| Community Works | ** Support | |
| Compassion Institute | ** Support | |
| Contra Costa Senior Legal Services | ** Support | |
| Creative Alternatives | ** Support | |
| Crisis Support Services of Alameda County | ** Support | |
| Crop Swap LA | ** Support | |
| Crystal Clear Biz Ops | ** Support | |
| Culture Scholar Corporation | ** Support | |
| Cycle Advisors | ** Support | |
| DeafHope | ** Support | |
| Divine Truth Unity Fellowship Church Dba Rainbow Pride Youth Alliance | ** Support | |
| Dixie Fire Canopy Project | ** Support | |
| Donna Sternberg & Dancers | ** Support | |
| Dreams for Change | ** Support | |
| EconAlliance | ** Support | |
| Eg Speaks | ** Support | |
| Elder Love Usa, INC. | ** Support | |
| Embrace Change Now | ** Support | |
| Equal Justice Society | ** Support | |
| Equality California | ** Support | |
| ERISAT-ERITREAN Satellite Television | ** Support | |
| Every Day Action | ** Support | |
| EXPLORATORIUM, THE | ** Support | |
| Eyeshine | ** Support | |
| Fair Housing Advocates of Northern California | ** Support | |
| Faith In Action | ** Support | |
| Family Paths, Inc. | ** Support | |
| Family Resource Center | ** Support | |
| Family Service Association | ** Support | |
| Fasd Network Of Southern California | ** Support | |
| Fathers and Mothers Who Care | ** Support | |
| First Mayor's House | ** Support | |
| Focused on Growth Academy | ** Support | |
| Folsom Cordova Community Partnership | ** Support | |
| Food Access LA | ** Support | |
| Food Share Ventura County | ** Support | |
| Forces | ** Support | |
| Future Leaders Of America | ** Support | |
| Give for a Smile | ** Support | |
| Giving 365 | ** Support | |
| Global Refugee Awareness Healing Center | ** Support | |
| Grantland L Johnson Institute of Leadership Development | ** Support | |
| Grants and Grassroots | ** Support | |
| Greenlining Institute | ** Support | |
| Guadalupe-Nipomo Dunes Center | ** Support | |
| Guild for Psychological Studies | ** Support | |
| Harc, INC. | ** Support | |
| Heal the Ocean | ** Support | |
| Health Care Integrated Services | ** Support | |
| Healy Senior Center | ** Support | |
| High Desert Community Foundation | ** Support | |
| High Desert New Beginnings, INC. | ** Support | |
| Hispanic Foundation of Silicon Valley | ** Support | |
| Honore's Home of Care | ** Support | |
| Hospice Help Network | ** Support | |
| HSS, Inc. | ** Support | |
| Human Health Project | ** Support | |
| Inland Caregiver Resource Center | ** Support | |
| Inland Empire Community Collaborative | ** Support | |
| Inland Empire Community Foundation | ** Support | |
| Inland Empire Waterkeeper | ** Support | |
| Inland Equity Community Land Trust | ** Support | |
| Inland Equity Community Land Trusts | ** Support | |
| Instituto de Educacion Popular del Sur de California | ** Support | |
| Integrated Learning Institute | ** Support | |
| Integrated Recovery Network | ** Support | |
| Jacob's Heart Children's Support Services | ** Support | |
| Jen Weiss Consulting | ** Support | |
| Jewish Family Service of San Diego | ** Support | |
| Jewish Family Services of Long Beach and Orange County | ** Support | |
| Joslyn Center for Seniors | ** Support | |
| Journey Center | ** Support | |
| Juarez Consulting INC. | ** Support | |
| Juma Ventures | ** Support | |
| Kamali'I Foster Family Agency | ** Support | |
| Kings River Conservancy | ** Support | |
| Kitchens for Good | ** Support | |
| Koinonia Family Services | ** Support | |
| Koreatown Youth + Community Center | ** Support | |
| Koreatown Youth + Community Center | ** Support | |
| Kwmr, INC. | ** Support | |
| la Cooperativa Campesina de California | ** Support | |
| LA N Sync Laity Institute of the Arts | ** Support | |
| La Raza Centro Legal | ** Support | |
| Lake County Community Foundation | ** Support | |
| Lake Family Resource Center | ** Support | |
| Las Fotos Project | ** Support | |
| Latino Service Providers | ** Support | |
| LeadingAge California | ** Support | |
| League Of California Community Foundations | ** Support | |
| Leah's Pantry, INC. | ** Support | |
| Lighthouse Silicon Valley | ** Support | |
| Little Brothers-friends of The Elderly- Bay Area | ** Support | |
| Little Manila Rising | ** Support | |
| Little Seeds Matter | ** Support | |
| Long Term Care Ombudsman Services of San Luis Obispo County | ** Support | |
| Los Angeles Conservation Corps | ** Support | |
| Los Angeles Neighborhood Initiative | ** Support | |
| Los Padres Forest Watch | ** Support | |
| Lumina Alliance | ** Support | |
| Making Hope Happen Foundation | ** Support | |
| Malo | ** Support | |
| Marin Shakespeare Company | ** Support | |
| Maternal and Child Health Access | ** Support | |
| Meals on Wheels Orange County | ** Support | |
| Media Alliance | ** Support | |
| Mendocino Private Industry Council, INC. | ** Support | |
| MicroEnterprise Collaborative of Inland Southern California | ** Support | |
| Mission Hope | ** Support | |
| Mixed Emotion Theatrix | ** Support | |
| Mixteco Indigena Community Organizing Project | ** Support | |
| Moffett Field Historical Society & Museum | ** Support | |
| Moreno Seeds Foundation | ** Support | |
| Mother Lode Rehabilitation Enterprises Inc. | ** Support | |
| Mountain Homeless Coalition | ** Support | |
| Move Santa Barbara County | ** Support | |
| Music Changing Lives | ** Support | |
| National Black Grads | ** Support | |
| National Harm Reduction Coalition | ** Support | |
| Nature For All | ** Support | |
| Nehemiah Charitable Fund | ** Support | |
| Nevada County Media | ** Support | |
| New Horizons: Serving Individuals With Special Needs | ** Support | |
| Newport Beach Public Library Foundation | ** Support | |
| No Drugs America Association, INC | ** Support | |
| Nonprofit Connection Santa Cruz County | ** Support | |
| Northern California Grantmakers | ** Support | |
| Northern Santa Barbara County United Way | ** Support | |
| Open Paths Counseling Center | ** Support | |
| Operation New Hope | ** Support | |
| Orange County Coastkeeper | ** Support | |
| Orcd Global | ** Support | |
| Orcutt Area Seniors in Service, INC. | ** Support | |
| Out of the Ashes Organization | ** Support | |
| Outdoor Outreach | ** Support | |
| Oxnard Performing Arts Center Corporation | ** Support | |
| Pacific Arts Movement | ** Support | |
| Pacific Coast Farmers Market Association | ** Support | |
| Pacific Horizons of California | ** Support | |
| Parkview Legacy Foundation | ** Support | |
| PARTNERSHIP FOR A BETTER SAN DIEGO | ** Support | |
| Pasadena Village | ** Support | |
| PathPoint | ** Support | |
| Peninsula Youth Theatre | ** Support | |
| Plumas Corporation | ** Support | |
| Pro Youth & Families | ** Support | |
| Radiant Health Centers | ** Support | |
| Rainbow Pride Youth Alliance | ** Support | |
| Rebuilding Together Peninsula | ** Support | |
| Rehabilitation and Employment Serve of the East Bay, INC. | ** Support | |
| Repeat Reuse | ** Support | |
| Rescue-a-Life Foundation | ** Support | |
| Richmond Community Foundation | ** Support | |
| Rising Communities (formerly Community Health Councils) | ** Support | |
| Rising Sun Center for Opportunity | ** Support | |
| Riverside County Black Chamber Health and Wellness Foundation INC. | ** Support | |
| Rudolph J. and Daphne A. Munzer Foundation | ** Support | |
| Rural Community Assistance Corporation | ** Support | |
| S & L Foster Family Agency | ** Support | |
| Sacramento Philharmonic & Opera | ** Support | |
| Sage Pathways, INC | ** Support | |
| San Diego Energy District | ** Support | |
| San Dieguito River Valley Land Conservancy | ** Support | |
| Santa Barbara County Food Action Network | ** Support | |
| Santa Barbara County Immigrant Legal Defense Center | ** Support | |
| Santa Barbara Foundation | ** Support | |
| SCCCC Rebuilding Lives FFA | ** Support | |
| Self Help Enterprises | ** Support | |
| Services, Immigrant Rights and Education Network | ** Support | |
| Shangri-La Transitions | ** Support | |
| Sierra Nevada Alliance | ** Support | |
| Sierra Nevada Children's Museum | ** Support | |
| Silicon Valley Council of Nonprofits | ** Support | |
| South Asian Network | ** Support | |
| Southern California Brass Consortium, INC. | ** Support | |
| Southern California Grantmakers | ** Support | |
| Starting Over Inc. | ** Support | |
| Starting Over Strong | ** Support | |
| Streetlights | ** Support | |
| Studio 395 Foundation | ** Support | |
| Tahoe Youth And Family Services | ** Support | |
| Teens 4 Teens Help | ** Support | |
| The Francisco Homes | ** Support | |
| The Good Part Perspective | ** Support | |
| The Green Lining Institute | ** Support | |
| The Heroic Journey Sel and Mental Health | ** Support | |
| The Impact Fund | ** Support | |
| The Joslyn Center | ** Support | |
| The Kinship Fund | ** Support | |
| The Mom & Dad Project | ** Support | |
| The Monterey and Salinas Valley Railroad and Historical Modeling Society | ** Support | |
| The Nonprofit Partnership | ** Support | |
| The School Garden Doctor | ** Support | |
| The Stephan Center | ** Support | |
| Thrive Alliance | ** Support | |
| Tracy Community Connections Center | ** Support | |
| Treepeople | ** Support | |
| True North Housing Alliance, INC. | ** Support | |
| Tuleyome | ** Support | |
| Union Station Homeless Services | ** Support | |
| United Ways Of California | ** Support | |
| Upvalley Family Centers of Napa County | ** Support | |
| Valley Intercommunity Council | ** Support | |
| Ventura Land Trust | ** Support | |
| Ventures | ** Support | |
| Vision y Compromiso | ** Support | |
| Visionality | ** Support | |
| Walden Family Services | ** Support | |
| Watts of Power Foundation | ** Support | |
| World Be Well Organization | ** Support | |
| YMCA of Greater Long Beach | ** Support | |
| Yolo County Children's Alliance | ** Support | |
| You Life Skills and Leadership Educational Foundation | ** Support | |
| Youth Action Project | ** Support |
GOVERNOR′S VETO
GV Bill Id:AB 1039
Author:(Hart)
As Enrolled Ver:September 3, 2026
2/3 vote
SUMMARY
This bill would require, rather than authorize, an administering state agency to advance a payment to a recipient entity, as defined, in accordance with specified requirements for all grants and contracts entered into after January 1, 2027, and requires the solicitation for the grant or contract to state the percentage of funds that may be distributed as an advance payment, as specified.
Senate Amendments
1) Expand the definition of ″recipient entity″ to include a private, nonprofit organization qualified under state law.
2) Require an administering state agency to advance a payment to an eligible recipient in accordance with defined requirements for any grant and contract advertised on or after January 1, 2027, with a total award value of $150,000 or less, receiving an initial disbursement of 25% of the total award, as specified.
3) Limit the requirement that recipient entities deposit funds received as an advance payment into a federally insured account to apply only to grants and contracts in excess of $10,000, as described.
4) Authorize an administering state agency to opt out of the default advance payment requirement for a specific funding opportunity if the agency determines it would create an irreconcilable conflict with federal law, bond requirements, or a documented high-risk profile of the specific program, as specified.
5) Require, on or before July 1, 2027, the Strategic Growth Council (SGC), in consultation with the Department of Finance (DOF) and the Department of General Services (DGS), shall develop a Statewide Advance Funds and Reconciliation Guide (Master Guide), as specified.
6) Require every state agency to adopt the Master Guide as its standard operating procedure for the disbursement, tracking, and reconciliation of advance payments, as specified.
7) Make technical and clarifying changes
Governor′s Veto Message
This bill would require state agencies to provide advance payments for certain grants and contracts awarded to eligible or contracts eligible nonprofit organizations and federally recognized tribes, and establish a statewide framework to administer and reconcile those payments.
While I appreciate the author′s goal of reducing the financial barriers for nonprofits and tribes, imposing a new statewide requirement would severely limit the state′s oversight and protection of public funds. I signed AB 590 in 2023 and AB 3017 in 2024, which provided agencies with authority to process advance payments for these entities. It is important to ensure agencies maintain discretion to evaluate the financial and programmatic risks of each request for advance payments. I encourage the author and stakeholders to continue engaging with administering agencies to help ensure they are utilizing the existing authorization to the fullest extent possible when appropriate.
COMMENTS
Background.
Grants play a vital role in strengthening local communities in California by funding initiatives and programs that address diverse needs. These grants create a ripple effect by uplifting individuals and empowering organizations, ultimately strengthening the fabric of the community as a whole.
The state of California relies heavily on nonprofits to implement critical policies and provide essential services to its communities. These organizations play a pivotal role in addressing homelessness, building affordable housing, responding to climate change impacts, supporting victims of domestic violence, community infrastructure, and improving the lives of vulnerable community members in countless ways. The eligibility criteria can vary depending on the specific grant. Generally, grants are categorized by applicant type, such as nonprofits, individuals, businesses, public agencies, or tribal governments. Each grant listing provides detailed eligibility requirements, which can be found on the California Grants Portal.
Prior to the enactment of AB 590 (Hart), Chapter 535, Statutes of 2023, state law allowed over 20 specified state agencies to provide an advance payment of up to 25% of the annual contract amount to a nonprofit organization contracted for the delivery of services. AB 156 (Committee on Budget), Chapter 569, Statutes of 2022, established, until July 1, 2025, a new pilot program to explore possible improvements to the state′s existing advance payment practices for specified state-funded local assistance grants administered by a small number of state agencies. As part of the pilot program, the DOF must prepare, by January 10, 2025, a report on the number of payments advanced, including by program and geographic location, with a summary of any adverse audit findings.
AB 590 more broadly authorized, in perpetuity, any administering state agency to advance 25% of any total grant or contract payment to a recipient 501(c)(3) non-profit entity meeting certain minimum requirements. AB 590 also authorized DOF to audit an administering state agency or recipient entity receiving an advance payment, with DOF generally estimating a per-audit cost of approximately $200,000, to be reimbursed by the relevant state agency. AB 3017 (Hart), Chapter 664, Statutes of 2024, added certain tribes to the definition of a ″recipient entity″ eligible to receive an advance payment of a state grant or contract.
Advanced Payment Pilot Program Report. The report submitted by the DOF in January evaluated the outcomes of a pilot project designed to improve the state′s ability to issue advance payments for state-funded local assistance grants. The program authorized six state agencies to provide upfront funding to eligible local entities, nonprofits, and other governmental organizations, particularly those serving disadvantaged communities or facing cash flow constraints. Key eligibility criteria included an advance cap of 25% of the total grant amount, unless a higher percentage was specifically justified.
As of November 30, 2024, four of the six authorized agencies – Employment Development Department, Department of Toxic Substances Control, SGC, and the Wildlife Conservation Board – issued a total of 26 advance payments under the pilot program. These payments supported a variety of initiatives, including the Community Economic Resilience Fund, Transformative Climate Communities Program, and ecological restoration efforts.
Action by Assembly and Senate Select Committees. On February 17, 2022, the Assembly and Senate Select Committees on the Nonprofit Sector held a joint hearing featuring panelists and public comment from nonprofit leaders across the state. The hearing, entitled, ″A Blueprint to Ensure Nonprofits are Supported and Thrive during Future Emergencies″ focused on the challenges nonprofits faced in implementing programs during the height of the COVID-19 Pandemic. The committees concluded that government contracting challenges remain a key barrier for nonprofits providing needed services. ″Strong government-nonprofit partnerships are vital to ensure Californians have access to quality services and programs, to support the nonprofit sector as key employers in the state, and to bolster economic recovery, particularly in historically underserved communities.″
According to the Author
According to the author′s office, ″AB 1039 is necessary to address a key barrier that prevents under-resourced communities from applying for and implementing state-funded projects: inconsistent application of the state′s advance pay policy for contracts and grants administered by state agencies across government. By ensuring nonprofits can secure a percentage of contracted funds up front for all new funding opportunities, effective January 1, 2026, AB 1039 will improve the nonprofit sector′s capacity to provide quality services to communities and carry out state-funded priorities. The bill also supports stronger transparency about a funding opportunity′s terms, including clearer indication of the available percentage of advance pay.″
Arguments in Support
CalNonprofits writes that, ″[a]dvanced pay provisions are currently authorized but not mandated under state law via enactment of AB 590 (Hart, Statutes of 2023). By requiring advance pay under AB 1039 for new grant and contract opportunities, the state can continue to address hurdles that dissuade under-resourced communities from applying for and implementing state-funded projects. Many state grants and contracts remain reimbursement-based two years after enactment of AB 590.″
Further, the ″lack of equitable access to advance payments is an unnecessary barrier to the nonprofit sector′s effective partnership with the state at a time when new threats are emerging every day from both the federal government and environmental challenges like devastating wildfires. Now more than ever we must prioritize stronger partnerships between nonprofits and the state. Under this bill, nonprofits that may be best equipped to deliver timely and effective projects (but short on up-front capital) would no longer be forced to pass on numerous grants and contracts to support vulnerable Californians.″
And finally, this bill is ″part of the California Nonprofit Equity Initiative that our organizations, along with more than 500 other nonprofit and community leaders, is supporting to level the playing field for nonprofits. Improving how state government contracts with nonprofits is a question of equity for our most vulnerable communities and for the nonprofits that serve them. AB 1039 will strengthen the essential partnership between the state and nonprofits and our mutual efforts to deliver the highest quality services to the people of California.″
Arguments in Opposition
None on file.
FISCAL COMMENTS
According to the Senate Committee on Appropriations, ″unknown, potentially significant costs for the SGC to develop the Master Guide and to create and implement training for agency staff.
Unknown costs for DGS to promote the Master Guide, incorporate its processes into the State Administrative Manual (SAM) and State Contracting Manual (SCM), and provide guidance to state agencies.
Unknown, potentially significant costs for state agencies to adopt the Master Guide and provide advance payments to recipient entities for grants and contracts. Actual costs will range from absorbable to hundreds of thousands of dollars per agency, depending on the contract type and whether the agency has existing advance payment processes in place in its grant disbursement or contracting practices.
The California State Library anticipates absorbable costs to modify its Grants Portal to track the percentage of grant or contract funds distributed in advance payments.″
VOTES
ASM GOVERNMENTAL ORGANIZATION: 22-0-0
YES: Blanca Rubio, Davies, Alvarez, Berman, Bryan, Carrillo, Dixon, Fong, Gabriel, Gipson, Macedo, McKinnor, Nguyen, Pacheco, Ramos, Michelle Rodriguez, Sanchez, Solache, Soria, Ta, Valencia, Wallis
ASM APPROPRIATIONS: 14-0-1
YES: Wicks, Arambula, Calderon, Caloza, Dixon, Elhawary, Fong, Mark González, Hart, Pacheco, Pellerin, Solache, Ta, Tangipa
ABS, ABST OR NV: Sanchez
ASSEMBLY FLOOR: 79-0-0
YES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Celeste Rodriguez, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
SENATE FLOOR: 40-0-0
YES: Allen, Alvarado-Gil, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Choi, Cortese, Dahle, Durazo, Gonzalez, Grayson, Grove, Hurtado, Jones, Laird, Limón, McGuire, McNerney, Menjivar, Niello, Ochoa Bogh, Padilla, Pérez, Reyes, Richardson, Rubio, Seyarto, Smallwood-Cuevas, Stern, Strickland, Umberg, Valladares, Wahab, Weber Pierson, Wiener
ASSEMBLY FLOOR: 75-3-1
YES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Celeste Rodriguez, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
NO: Macedo, Sanchez, Tangipa
ABS, ABST OR NV: Lackey
UPDATED
VERSION: September 3, 2026
CONSULTANT: Eric Johnson / G.O. / (916) 319-2531 FN: 0004657
CONCURRENCE IN SENATE AMENDMENTS
CSA1 Bill Id:AB 1039
Author:(Hart)
As Amended Ver:August 21, 2026
Majority vote
SUMMARY
This bill would require, rather than authorize, an administering state agency to advance a payment to a recipient entity, as defined, in accordance with specified requirements for all grants and contracts entered into after January 1, 2027, and requires the solicitation for the grant or contract to state the percentage of funds that may be distributed as an advance payment, as specified.
Senate Amendments
1) Expand the definition of "recipient entity" to include a private, nonprofit organization qualified under state law.
2) Require an administering state agency to advance a payment to an eligible recipient in accordance with defined requirements for any grant and contract advertised on or after January 1, 2027, with a total award value of $150,000 or less, receiving an initial disbursement of 25% of the total award, as specified.
3) Limit the requirement that recipient entities deposit funds received as an advance payment into a federally insured account to apply only to grants and contracts in excess of $10,000, as described.
4) Authorize an administering state agency to opt out of the default advance payment requirement for a specific funding opportunity if the agency determines it would create an irreconcilable conflict with federal law, bond requirements, or a documented high-risk profile of the specific program, as specified.
5) Require, on or before July 1, 2027, the Strategic Growth Council (SGC), in consultation with the Department of Finance (DOF) and the Department of General Services (DGS), shall develop a Statewide Advance Funds and Reconciliation Guide (Master Guide), as specified.
6) Require every state agency to adopt the Master Guide as its standard operating procedure for the disbursement, tracking, and reconciliation of advance payments, as specified.
7) Make technical and clarifying changes.
COMMENTS
Background.
Grants play a vital role in strengthening local communities in California by funding initiatives and programs that address diverse needs. These grants create a ripple effect by uplifting individuals and empowering organizations, ultimately strengthening the fabric of the community as a whole.
The state of California relies heavily on nonprofits to implement critical policies and provide essential services to its communities. These organizations play a pivotal role in addressing homelessness, building affordable housing, responding to climate change impacts, supporting victims of domestic violence, community infrastructure, and improving the lives of vulnerable community members in countless ways. The eligibility criteria can vary depending on the specific grant. Generally, grants are categorized by applicant type, such as nonprofits, individuals, businesses, public agencies, or tribal governments. Each grant listing provides detailed eligibility requirements, which can be found on the California Grants Portal.
Prior to the enactment of AB 590 (Hart), Chapter 535, Statutes of 2023, state law allowed over 20 specified state agencies to provide an advance payment of up to 25% of the annual contract amount to a nonprofit organization contracted for the delivery of services. AB 156 (Committee on Budget), Chapter 569, Statutes of 2022, established, until July 1, 2025, a new pilot program to explore possible improvements to the state's existing advance payment practices for specified state-funded local assistance grants administered by a small number of state agencies. As part of the pilot program, the DOF must prepare, by January 10, 2025, a report on the number of payments advanced, including by program and geographic location, with a summary of any adverse audit findings.
AB 590 more broadly authorized, in perpetuity, any administering state agency to advance 25% of any total grant or contract payment to a recipient 501(c)(3) non-profit entity meeting certain minimum requirements. AB 590 also authorized DOF to audit an administering state agency or recipient entity receiving an advance payment, with DOF generally estimating a per-audit cost of approximately $200,000, to be reimbursed by the relevant state agency. AB 3017 (Hart), Chapter 664, Statutes of 2024, added certain tribes to the definition of a "recipient entity" eligible to receive an advance payment of a state grant or contract.
Advanced Payment Pilot Program Report. The report submitted by the DOF in January evaluated the outcomes of a pilot project designed to improve the state's ability to issue advance payments for state-funded local assistance grants. The program authorized six state agencies to provide upfront funding to eligible local entities, nonprofits, and other governmental organizations, particularly those serving disadvantaged communities or facing cash flow constraints. Key eligibility criteria included an advance cap of 25% of the total grant amount, unless a higher percentage was specifically justified.
As of November 30, 2024, four of the six authorized agencies – Employment Development Department, Department of Toxic Substances Control, SGC, and the Wildlife Conservation Board – issued a total of 26 advance payments under the pilot program. These payments supported a variety of initiatives, including the Community Economic Resilience Fund, Transformative Climate Communities Program, and ecological restoration efforts.
Action by Assembly and Senate Select Committees. On February 17, 2022, the Assembly and Senate Select Committees on the Nonprofit Sector held a joint hearing featuring panelists and public comment from nonprofit leaders across the state. The hearing, entitled, "A Blueprint to Ensure Nonprofits are Supported and Thrive during Future Emergencies" focused on the challenges nonprofits faced in implementing programs during the height of the COVID-19 Pandemic. The committees concluded that government contracting challenges remain a key barrier for nonprofits providing needed services. "Strong government-nonprofit partnerships are vital to ensure Californians have access to quality services and programs, to support the nonprofit sector as key employers in the state, and to bolster economic recovery, particularly in historically underserved communities."
According to the Author
According to the author's office, "AB 1039 is necessary to address a key barrier that prevents under-resourced communities from applying for and implementing state-funded projects: inconsistent application of the state's advance pay policy for contracts and grants administered by state agencies across government. By ensuring nonprofits can secure a percentage of contracted funds up front for all new funding opportunities, effective January 1, 2026, AB 1039 will improve the nonprofit sector's capacity to provide quality services to communities and carry out state-funded priorities. The bill also supports stronger transparency about a funding opportunity's terms, including clearer indication of the available percentage of advance pay."
Arguments in Support
CalNonprofits writes that, "[a]dvanced pay provisions are currently authorized but not mandated under state law via enactment of AB 590 (Hart, Statutes of 2023). By requiring advance pay under AB 1039 for new grant and contract opportunities, the state can continue to address hurdles that dissuade under-resourced communities from applying for and implementing state-funded projects. Many state grants and contracts remain reimbursement-based two years after enactment of AB 590."
Further, the "lack of equitable access to advance payments is an unnecessary barrier to the nonprofit sector's effective partnership with the state at a time when new threats are emerging every day from both the federal government and environmental challenges like devastating wildfires. Now more than ever we must prioritize stronger partnerships between nonprofits and the state. Under this bill, nonprofits that may be best equipped to deliver timely and effective projects (but short on up-front capital) would no longer be forced to pass on numerous grants and contracts to support vulnerable Californians."
And finally, this bill is "part of the California Nonprofit Equity Initiative that our organizations, along with more than 500 other nonprofit and community leaders, is supporting to level the playing field for nonprofits. Improving how state government contracts with nonprofits is a question of equity for our most vulnerable communities and for the nonprofits that serve them. AB 1039 will strengthen the essential partnership between the state and nonprofits and our mutual efforts to deliver the highest quality services to the people of California."
Arguments in Opposition
None on file.
FISCAL COMMENTS
According to the Senate Committee on Appropriations, "unknown, potentially significant costs for the SGC to develop the Master Guide and to create and implement training for agency staff.
Unknown costs for DGS to promote the Master Guide, incorporate its processes into the State Administrative Manual (SAM) and State Contracting Manual (SCM), and provide guidance to state agencies.
Unknown, potentially significant costs for state agencies to adopt the Master Guide and provide advance payments to recipient entities for grants and contracts. Actual costs will range from absorbable to hundreds of thousands of dollars per agency, depending on the contract type and whether the agency has existing advance payment processes in place in its grant disbursement or contracting practices.
The California State Library anticipates absorbable costs to modify its Grants Portal to track the percentage of grant or contract funds distributed in advance payments."
VOTES:
ASM GOVERNMENTAL ORGANIZATION: 22-0-0
YES: Blanca Rubio, Davies, Alvarez, Berman, Bryan, Carrillo, Dixon, Fong, Gabriel, Gipson, Macedo, McKinnor, Nguyen, Pacheco, Ramos, Michelle Rodriguez, Sanchez, Solache, Soria, Ta, Valencia, Wallis
ASM APPROPRIATIONS: 14-0-1
YES: Wicks, Arambula, Calderon, Caloza, Dixon, Elhawary, Fong, Mark González, Hart, Pacheco, Pellerin, Solache, Ta, Tangipa
ABS, ABST OR NV: Sanchez
ASSEMBLY FLOOR: 79-0-0
YES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Celeste Rodriguez, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
UPDATED
VERSION: August 21, 2026
CONSULTANT: Eric Johnson / G.O. / (916) 319-2531 FN: 0004246
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-4171 | AB 1039 |
THIRD READING
Bill No: AB 1039
Author: Hart (D), et al.
Amended: 8/21/26 in Senate
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE: 15-0, 7/8/25
AYES: Padilla, Valladares, Archuleta, Ashby, Blakespear, Cervantes, Dahle, Hurtado, Jones, Ochoa Bogh, Richardson, Rubio, Smallwood-Cuevas, Wahab, Weber Pierson
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/13/26
AYES: Cervantes, Seyarto, Cabaldon, Dahle, Grayson, Richardson, Wahab
ASSEMBLY FLOOR: 79-0, 6/2/25 - See last page for vote
SUBJECT: State-funded assistance grants and contracts: advance payments
SOURCE: California Association of Nonprofits
DIGEST:
This bill requires, rather than authorizes, an administering state agency to advance a payment to a recipient entity, as defined, in accordance with specified requirements for all grants and contracts entered into after January 1, 2026, and requires the solicitation for the grant or contract to state the percentage of funds that may be distributed as an advance payment, as specified.
Senate Floor Amendments of 8/21/26 are technical and clarifying in nature.
ANALYSIS:
Existing law:
- Authorizes a state agency administering a grant program or contract to advance a payment to a recipient entity, subject to specified requirements.
- Requires the administering state agency, among other things, to prioritize recipient entities and projects serving disadvantaged, low-income, and under-resourced communities, to stipulate an advanced payment structure and request process within the grant agreement or contract, and to ensure an advance payment to the recipient entity does not exceed 25% of the total grant or contract amount, except as specified.
This bill:
- Requires, rather than authorizes, an administering state agency to advance a payment to a recipient entity, as specified, for all grants and contracts advertised on or after January 1, 2026. The solicitation of the grant or contract shall state the percentage of the grant or contract funds that may be distributed as an advance payment.
- Limits the existing requirement an administering state agency prioritize recipient entities and projects, as specified, to grants and contracts advertised prior to January 1, 2026.
- Eliminates the requirement to stipulate an advanced payment structure and request process, as specified.
- Limits the requirement that recipient entities deposit funds received as an advance payment into a federally insured account to apply only to grants and contracts in excess of $10,000.
- Provides that recipient entities that receive advanced payments may advance funds from the advance payment to any sub-recipients in accordance with their grant program requirements or contract.
- Requires the Strategic Growth Council (SGC), in consultation with the Department of Finance (DOF) and the Department of General Services (DGS) to develop a Statewide Advance Funds and Reconciliation Guide (Master Guide), as specified.
- Requires every state agency to adopt the Master Guide as its standard operating procedure for the disbursement, tracking, and reconciliation of advance payments, as specified.
- Requires the SGC to provide an annual training webinar for state agency staff to ensure uniform application of the Master Guide and dedicated technical assistance and guidance to community organizations and nonprofit entities.
Background
Author Statement. According to the author’s office, “AB 1039 is necessary to address a key barrier that prevents under-resourced communities from applying for and implementing state-funded projects: inconsistent application of the state’s advance pay policy for contracts and grants administered by state agencies across government. By ensuring nonprofits can secure a percentage of contracted funds up front for all new funding opportunities, effective January 1, 2026, AB 1039 will improve the nonprofit sector’s capacity to provide quality services to communities and carry out state-funded priorities. The bill also supports stronger transparency about a funding opportunity’s terms, including clearer indication of the available percentage of advance pay.”
Nonprofits and the State. The state of California relies heavily on nonprofits to implement critical policies and provide essential services to its communities. These organizations play a pivotal role in addressing homelessness, building affordable housing, responding to climate change impacts, supporting victims of domestic violence, community infrastructure, and improving the lives of vulnerable community members in myriad ways. The eligibility criteria can vary depending on the specific grant. Generally, grants are categorized by applicant type, such as nonprofits, individuals, businesses, public agencies, or tribal governments. Each grant listing provides detailed eligibility requirements, which can be found on the California Grants Portal.
Action by Assembly and Senate Select Committees. On February 17, 2022, the Assembly and Senate Select Committees on the Nonprofit Sector held a joint hearing featuring panelists and public comment from nonprofit leaders across the state. The hearing, entitled, “A Blueprint to Ensure Nonprofits are Supported and Thrive during Future Emergencies,” focused on the challenges nonprofits faced in implementing programs during the height of the COVID-19 Pandemic. The committees concluded that, “government contracting challenges remain a key barrier for nonprofits providing needed services. Strong government-nonprofit partnerships are vital to ensure Californians have access to quality services and programs, to support the nonprofit sector as key employers in the state, and to bolster economic recovery, particularly in historically underserved communities.”
Advanced Payment Pilot. As part of 2022-23 fiscal year (FY) state budget, AB 156 (Chapter 569, Statutes of 2022) authorized, until July 1, 2025, state agencies administering specified programs to advance payments to local agencies, nongovernmental entities, and other state agencies if certain criteria are met, including requiring advance payment recipients to provide an itemized budget, spending timeline, and work plan. The bill limited the advance payment to a local agency or nongovernmental entity to 25% of the total grant amount awarded to that recipient, unless the administering state agency determines that the project requires a larger advance.
The pilot program required the recipient or any sub-recipients to cooperate with audits by the DOF related to the advanced payments. It also required the administering state agency to prioritize local agency or nongovernmental entity recipients and projects serving disadvantaged, low-income, and under-resourced communities or organizations with modest reserves and potential cash flow problems. The program requires the local agency and nongovernmental entity recipients to submit additional documentation and progress reports on the spend-down of funds, and to demonstrate good standing with the federal Internal Revenue Service. Finally, the bill required the DOF, by January 10, 2025, to report to the Legislature on this program.
Advanced Payment Pilot Program Report. The report submitted by DOF in January of this year, evaluated the outcomes of the pilot project’s effort to improve the state’s ability to issue advance payments for state-funded local assistance grants. The program authorized six state agencies to provide upfront funding to eligible local agencies, nonprofit organizations, and other governmental entities, particularly those serving disadvantaged communities or experiencing cash flow constraints. Key criteria for eligibility included a cap on the advance amount (25% of the total grant) unless otherwise justified.
As of November 30, 2024, four of the six authorized agencies – Employment Development Department (EDD), Department of Toxic Substances Control (DTSC), Strategic Growth Council (SGC), and the Wildlife Conservation Board (WCB) – issued a total of 26 advance payments under the pilot program. These payments supported a variety of initiatives, including the Community Economic Resilience Fund, Transformative Climate Communities Program, and ecological restoration efforts.
Prior/Related Legislation
AB 880 (Bennett, 2025) revises the California Prompt Payment Act by requiring state agencies to reimburse a nonprofit grantee’s indirect costs at specified rates and removes the $500,000 cap that previously exempted certain Medi-Cal-related payments from penalty provisions. Additionally, the bill narrows the circumstances under which the state can dispute an invoice and expands the definition of “grant” to include agreements with nonprofit organizations, as specified. (Pending on the Senate Floor)
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
According to the Senate Appropriations Committee, unknown, potentially significant costs for the SGC to develop the Master Guide and to create and implement training for agency staff.
Unknown costs for DGS to promote the Master Guide, incorporate its processes into the State Administrative Manual (SAM) and State Contracting Manual (SCM), and provide guidance to state agencies.
Unknown, potentially significant costs for state agencies to adopt the Master Guide and provide advance payments to recipient entities for grants and contracts. Actual costs will range from absorbable to hundreds of thousands of dollars per agency, depending on the contract type and whether the agency has existing advance payment processes in place in its grant disbursement or contracting practices.
The California State Library anticipates absorbable costs to modify its Grants Portal to track the percentage of grant or contract funds distributed in advance payments.
SUPPORT: (Verified 8/21/26)
California Association of Nonprofits (Source)
211 San Diego
A New Beginning FFA
AAPI Equity Alliance
Abode Services
Academy of Leonardo's Apprentice
Accelerate Neighborhood Climate Action
Access Humboldt
AccountingX LLC
Advancing Students Forward
African American Community Services Agency
All for Kids
Alzheimer's Orange County
Amigos De Bolsa Chica
APIDANH Alliance
Arts and Culture El Dorado
Arts Orange County
ASIAN, INC.
Asociacion De Emprendedor@s
Aspiranet
Association for Environmental and Outdoor Education
Association of California Community and Energy Services
Association of California Goodwills
Association of California Symphony Orchestras
Autism Society Inland Empire
Bay Area Community Resources
Becky Foreman Facilitation and Training
Benjamin Jones Community Resource Center
Black Women for Wellness
Black Women for Wellness Action Project
Boys & Girls Club -- Laguna Beach
Brilliant Corners
Building Resilient Communities
CA Arts Advocates
California Alliance of Child and Family Services
California Association of Nonprofits
California Behavioral Health Association
California Center for Cooperative Development
California Community Living Network
California Council of Land Trusts
California Language Teachers' Association
California Partnership to End Domestic Violence
California School-age Consortium
Calle 24 Latino Cultural District
CalPride
Cameo Network
Camp Ocean Pines, INC
Canal Alliance
Capacity Impact Builders
Catalyst Family INC.
Caulder Lamm Alliance for Children, INC.
CEDAW Challenge Team
Center for Environmental Health
Center for Living and Learning
Centinela Youth Services
Central American Resource Center of California
Central American Resource Center of Northern California
Central Valley Immigrant Integration Collaborative
Central Valley Opportunity Center
Centro Inmigrante, INC.
Ceres Community Project
Charitable Ventures
Child & Family Center
Children's Fund
Children's Institute
Children's Law Center of California
Chrysalis
Church of Movement
City Garage
Coastal Kids
Comite Civico Del Valle, INC
Community Alliance With Family Farmers
Community Bridges
Community Environmental Council
Community Foodbank of San Benito
Community Interventions
Community Resource Project
Community Works
Compassion Institute
Contra Costa Senior Legal Services
Creative Alternatives
Crisis Support Services of Alameda County
Crop Swap LA
Crystal Clear Biz Ops
Culture Scholar Corporation
Cycle Advisors
DeafHope
Divine Truth Unity Fellowship Church Dba Rainbow Pride Youth Alliance
Dixie Fire Canopy Project
Donna Sternberg & Dancers
Dreams for Change
EconAlliance
EG SPEAKS
Elder Love USA, INC.
Embrace Change Now
Equal Justice Society
Equality California
ERISAT-Eritrean Satellite Television
Every Day Action
Exploratorium, the
EYESHINE
Fair Housing Advocates of Northern California
Faith in Action
Family Paths, INC.
Family Resource Center
Family Service Association
FASD Network of Southern California
Fathers and Mothers Who Care
First Mayor's House
Focused on Growth Academy
Folsom Cordova Community Partnership
Food Access LA
Food Share Ventura County
FORCES
Future Leaders of America
Give for a Smile
Giving 365
Global Refugee Awareness Healing Center
Grantland L Johnson Institute of Leadership Development
Grants and Grassroots
Greenlining Institute
Guadalupe-Nipomo Dunes Center
Guild for Psychological Studies
HARC, INC.
Heal the Ocean
Health Care Integrated Services
Healy Senior Center
High Desert Community Foundation
High Desert New Beginnings, INC.
Hispanic Foundation of Silicon Valley
Honore's Home of Care
Hospice Help Network
HSS, Inc.
Human Health Project
Inland Caregiver Resource Center
Inland Empire Community Collaborative
Inland Empire Community Foundation
Inland Empire Waterkeeper
Inland Equity Community Land Trusts
Instituto De Educacion Popular Del Sur De California
Integrated Learning Institute
Integrated Recovery Network
Jacob's Heart Children's Support Services
Jen Weiss Consulting
Jewish Family Service of San Diego
Jewish Family Services of Long Beach and Orange County
Joslyn Center for Seniors
Journey Center
Juarez Consulting INC.
Juma Ventures
Kamali'i Foster Family Agency
Kings River Conservancy
Kitchens for Good
Koinonia Family Services
Koreatown Youth + Community Center
KWMR, INC.
LA Cooperativa Campesina De California
LA N Sync Laity Institute of the Arts
LA Raza Centro Legal
Lake County Community Foundation
Lake Family Resource Center
Las Fotos Project
Latino Service Providers
LeadingAge California
League of California Community Foundations
Leah's Pantry, INC.
Lighthouse Silicon Valley
Little Brothers-friends of the Elderly- Bay Area
Little Manila Rising
Little Seeds Matter
Long Term Care Ombudsman Services of San Luis Obispo County
Los Angeles Conservation Corps
Los Angeles Neighborhood Initiative
Los Padres Forest Watch
Lumina Alliance
Making Hope Happen Foundation
MALO
Marin Shakespeare Company
Maternal and Child Health Access
Meals on Wheels Orange County
Media Alliance
Mendocino Private Industry Council, INC.
Microenterprise Collaborative of Inland Southern California
Mission Hope
Mixed Emotion Theatrix
Mixteco Indigena Community Organizing Project
Moffett Field Historical Society & Museum
Moreno Seeds Foundation
Mother Lode Rehabilitation Enterprises INC.
Mountain Homeless Coalition
Move Santa Barbara County
Music Changing Lives
National Black Grads
National Harm Reduction Coalition
Nature for All
Nehemiah Charitable Fund
Nevada County Media
New Horizons: Serving Individuals With Special Needs
Newport Beach Public Library Foundation
No Drugs America Association, INC
Nonprofit Connection Santa Cruz County
Northern California Grantmakers
Northern Santa Barbara County United Way
Open Paths Counseling Center
Operation New Hope
Orange County Coastkeeper
ORCD Global
Orcutt Area Seniors in Service, INC.
Out of the Ashes Organization
Outdoor Outreach
Oxnard Performing Arts Center Corporation
Pacific Arts Movement
Pacific Coast Farmers Market Association
Pacific Horizons of California
Parkview Legacy Foundation
Partnership for a Better San Diego
Pasadena Village
PathPoint
Peninsula Youth Theatre
Plumas Corporation
Pro Youth & Families
Radiant Health Centers
Rainbow Pride Youth Alliance
Rebuilding Together Peninsula
Rehabilitation and Employment Serve of the East Bay, INC.
Repeat Reuse
Rescue-a-life Foundation
Richmond Community Foundation
Rising Communities (formerly Community Health Councils)
Rising Sun Center for Opportunity
Riverside County Black Chamber Health and Wellness Foundation INC.
Rudolph J. and Daphne A. Munzer Foundation
Rural Community Assistance Corporation
Rural Community Assistance Corporation
S & L Foster Family Agency
Sacramento Philharmonic & Opera
Sage Pathways, INC
San Diego Energy District
San Dieguito River Valley Land Conservancy
Santa Barbara County Food Action Network
Santa Barbara County Immigrant Legal Defense Center
Santa Barbara Foundation
SCCCC Rebuilding Lives FFA
Self Help Enterprises
Services, Immigrant Rights and Education Network
Shangri-La Transitions
Sierra Nevada Alliance
Sierra Nevada Children's Museum
Silicon Valley Council of Nonprofits
South Asian Network
Southern California Brass Consortium, INC.
Southern California Grantmakers
Starting Over INC.
Starting Over Strong
Streetlights
Studio 395 Foundation
Tahoe Youth and Family Services
Teens 4 Teens Help
The Francisco Homes
The Good Part Perspective
The Green Lining Institute
The Heroic Journey SEL and Mental Health
The Impact Fund
The Joslyn Center
The Kinship Fund
The Mom & Dad Project
The Monterey and Salinas Valley Railroad and Historical Modeling Society
The Nonprofit Partnership
The School Garden Doctor
The Stephan Center
Thrive Alliance
Tracy Community Connections Center
TreePeople
True North Housing Alliance, INC.
Tuleyome
Union Station Homeless Services
United Ways of California
UpValley Family Centers of Napa County
Valley Intercommunity Council
Ventura Land Trust
Ventures
Vision Y Compromiso
Visionality
Walden Family Services
Watts of Power Foundation
World Be Well Organization
YMCA of Greater Long Beach
Yolo County Children's Alliance
You Life Skills and Leadership Educational Foundation
Youth Action Project
OPPOSITION: (Verified 8/21/26)
None received
ARGUMENTS IN SUPPORT: In support of this bill, CalNonprofits writes that, “[a]dvanced pay provisions are currently authorized but not mandated under state law via enactment of Assembly Bill 590 (Hart, Chapter 535, Statutes of 2023). By requiring advance pay under AB 1039 for new grant and contract opportunities, the state can continue to address hurdles that dissuade under-resourced communities from applying for and implementing state-funded projects. Many state grants and contracts remain reimbursement-based two years after enactment of AB 590.”
Further, the “lack of equitable access to advance payments is an unnecessary barrier to the nonprofit sector’s effective partnership with the state at a time when new threats are emerging every day from both the federal government and environmental challenges like devastating wildfires. Now more than ever we must prioritize stronger partnerships between nonprofits and the state. Under 1039, nonprofits that may be best equipped to deliver timely and effective projects (but short on up-front capital) would no longer be forced to pass on numerous grants and contracts to support vulnerable Californians.”
And finally, this bill is “part of the California Nonprofit Equity Initiative that our organizations, along with more than 500 other nonprofit and community leaders, is supporting to level the playing field for nonprofits. Improving how state government contracts with nonprofits is a question of equity for our most vulnerable communities and for the nonprofits that serve them. AB 1039 will strengthen the essential partnership between the state and nonprofits and our mutual efforts to deliver the highest quality services to the people of California.”
ASSEMBLY FLOOR: 79-0, 6/2/25
AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Celeste Rodriguez, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
Prepared by: Brian Duke / G.O. / (916) 651-1530
8/24/26 13:36:45
**** END ****
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-4171 | AB 1039 |
THIRD READING
Bill No: AB 1039
Author: Hart (D), et al.
Amended: 8/13/26 in Senate
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE: 15-0, 7/8/25
AYES: Padilla, Valladares, Archuleta, Ashby, Blakespear, Cervantes, Dahle, Hurtado, Jones, Ochoa Bogh, Richardson, Rubio, Smallwood-Cuevas, Wahab, Weber Pierson
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/13/26
AYES: Cervantes, Seyarto, Cabaldon, Dahle, Grayson, Richardson, Wahab
ASSEMBLY FLOOR: 79-0, 6/2/25 - See last page for vote
SUBJECT: State-funded assistance grants and contracts: advance payments
SOURCE: California Association of Nonprofits
DIGEST:
This bill requires, rather than authorizes, an administering state agency to advance a payment to a recipient entity, as defined, in accordance with specified requirements for all grants and contracts entered into after January 1, 2026, and requires the solicitation for the grant or contract to state the percentage of funds that may be distributed as an advance payment, as specified.
ANALYSIS:
Existing law:
- Authorizes a state agency administering a grant program or contract to advance a payment to a recipient entity, subject to specified requirements.
- Requires the administering state agency, among other things, to prioritize recipient entities and projects serving disadvantaged, low-income, and under-resourced communities, to stipulate an advanced payment structure and request process within the grant agreement or contract, and to ensure an advance payment to the recipient entity does not exceed 25% of the total grant or contract amount, except as specified.
This bill:
- Requires, rather than authorizes, an administering state agency to advance a payment to a recipient entity, as specified, for all grants and contracts advertised on or after January 1, 2026. The solicitation of the grant or contract shall state the percentage of the grant or contract funds that may be distributed as an advance payment.
- Limits the existing requirement an administering state agency prioritize recipient entities and projects, as specified, to grants and contracts advertised prior to January 1, 2026.
- Eliminates the requirement to stipulate an advanced payment structure and request process, as specified.
- Limits the requirement that recipient entities deposit funds received as an advance payment into a federally insured account to apply only to grants and contracts in excess of $10,000.
- Provides that recipient entities that receive advanced payments may advance funds from the advance payment to any sub-recipients in accordance with their grant program requirements or contract.
- Requires the Strategic Growth Council (SGC), in consultation with the Department of Finance (DOF) and the Department of General Services (DGS) to develop a Statewide Advance Funds and Reconciliation Guide (Master Guide), as specified.
- Requires every state agency to adopt the Master Guide as its standard operating procedure for the disbursement, tracking, and reconciliation of advance payments, as specified.
- Requires the SGC to provide an annual training webinar for state agency staff to ensure uniform application of the Master Guide and dedicated technical assistance and guidance to community organizations and nonprofit entities.
Background
Author Statement. According to the author’s office, “AB 1039 is necessary to address a key barrier that prevents under-resourced communities from applying for and implementing state-funded projects: inconsistent application of the state’s advance pay policy for contracts and grants administered by state agencies across government. By ensuring nonprofits can secure a percentage of contracted funds up front for all new funding opportunities, effective January 1, 2026, AB 1039 will improve the nonprofit sector’s capacity to provide quality services to communities and carry out state-funded priorities. The bill also supports stronger transparency about a funding opportunity’s terms, including clearer indication of the available percentage of advance pay.”
Nonprofits and the State. The state of California relies heavily on nonprofits to implement critical policies and provide essential services to its communities. These organizations play a pivotal role in addressing homelessness, building affordable housing, responding to climate change impacts, supporting victims of domestic violence, community infrastructure, and improving the lives of vulnerable community members in myriad ways. The eligibility criteria can vary depending on the specific grant. Generally, grants are categorized by applicant type, such as nonprofits, individuals, businesses, public agencies, or tribal governments. Each grant listing provides detailed eligibility requirements, which can be found on the California Grants Portal.
Action by Assembly and Senate Select Committees. On February 17, 2022, the Assembly and Senate Select Committees on the Nonprofit Sector held a joint hearing featuring panelists and public comment from nonprofit leaders across the state. The hearing, entitled, “A Blueprint to Ensure Nonprofits are Supported and Thrive during Future Emergencies,” focused on the challenges nonprofits faced in implementing programs during the height of the COVID-19 Pandemic. The committees concluded that, “government contracting challenges remain a key barrier for nonprofits providing needed services. Strong government-nonprofit partnerships are vital to ensure Californians have access to quality services and programs, to support the nonprofit sector as key employers in the state, and to bolster economic recovery, particularly in historically underserved communities.”
Advanced Payment Pilot. As part of 2022-23 fiscal year (FY) state budget, AB 156 (Chapter 569, Statutes of 2022) authorized, until July 1, 2025, state agencies administering specified programs to advance payments to local agencies, nongovernmental entities, and other state agencies if certain criteria are met, including requiring advance payment recipients to provide an itemized budget, spending timeline, and work plan. The bill limited the advance payment to a local agency or nongovernmental entity to 25% of the total grant amount awarded to that recipient, unless the administering state agency determines that the project requires a larger advance.
The pilot program required the recipient or any sub-recipients to cooperate with audits by the DOF related to the advanced payments. It also required the administering state agency to prioritize local agency or nongovernmental entity recipients and projects serving disadvantaged, low-income, and under-resourced communities or organizations with modest reserves and potential cash flow problems. The program requires the local agency and nongovernmental entity recipients to submit additional documentation and progress reports on the spend-down of funds, and to demonstrate good standing with the federal Internal Revenue Service. Finally, the bill required the DOF, by January 10, 2025, to report to the Legislature on this program.
Advanced Payment Pilot Program Report. The report submitted by DOF in January of this year, evaluated the outcomes of the pilot project’s effort to improve the state’s ability to issue advance payments for state-funded local assistance grants. The program authorized six state agencies to provide upfront funding to eligible local agencies, nonprofit organizations, and other governmental entities, particularly those serving disadvantaged communities or experiencing cash flow constraints. Key criteria for eligibility included a cap on the advance amount (25% of the total grant) unless otherwise justified.
As of November 30, 2024, four of the six authorized agencies – Employment Development Department (EDD), Department of Toxic Substances Control (DTSC), Strategic Growth Council (SGC), and the Wildlife Conservation Board (WCB) – issued a total of 26 advance payments under the pilot program. These payments supported a variety of initiatives, including the Community Economic Resilience Fund, Transformative Climate Communities Program, and ecological restoration efforts.
Prior/Related Legislation
AB 880 (Bennett, 2025) revises the California Prompt Payment Act by requiring state agencies to reimburse a nonprofit grantee’s indirect costs at specified rates and removes the $500,000 cap that previously exempted certain Medi-Cal-related payments from penalty provisions. Additionally, the bill narrows the circumstances under which the state can dispute an invoice and expands the definition of “grant” to include agreements with nonprofit organizations, as specified. (Pending on the Senate Floor)
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
According to the Senate Appropriations Committee, unknown, potentially significant costs for the SGC to develop the Master Guide and to create and implement training for agency staff.
Unknown costs for DGS to promote the Master Guide, incorporate its processes into the State Administrative Manual (SAM) and State Contracting Manual (SCM), and provide guidance to state agencies.
Unknown, potentially significant costs for state agencies to adopt the Master Guide and provide advance payments to recipient entities for grants and contracts. Actual costs will range from absorbable to hundreds of thousands of dollars per agency, depending on the contract type and whether the agency has existing advance payment processes in place in its grant disbursement or contracting practices.
The California State Library anticipates absorbable costs to modify its Grants Portal to track the percentage of grant or contract funds distributed in advance payments.
SUPPORT:
California Association of Nonprofits (Source)
211 San Diego
A New Beginning FFA
AAPI Equity Alliance
Abode Services
Academy of Leonardo's Apprentice
Accelerate Neighborhood Climate Action
Access Humboldt
AccountingX LLC
Advancing Students Forward
African American Community Services Agency
All for Kids
Alzheimer's Orange County
Amigos De Bolsa Chica
APIDANH Alliance
Arts and Culture El Dorado
Arts Orange County
ASIAN, INC.
Asociacion De Emprendedor@s
Aspiranet
Association for Environmental and Outdoor Education
Association of California Community and Energy Services
Association of California Goodwills
Association of California Symphony Orchestras
Autism Society Inland Empire
Bay Area Community Resources
Becky Foreman Facilitation and Training
Benjamin Jones Community Resource Center
Black Women for Wellness
Black Women for Wellness Action Project
Boys & Girls Club -- Laguna Beach
Brilliant Corners
Building Resilient Communities
CA Arts Advocates
California Alliance of Child and Family Services
California Association of Nonprofits
California Behavioral Health Association
California Center for Cooperative Development
California Community Living Network
California Council of Land Trusts
California Language Teachers' Association
California Partnership to End Domestic Violence
California School-age Consortium
Calle 24 Latino Cultural District
CalPride
Cameo Network
Camp Ocean Pines, INC
Canal Alliance
Capacity Impact Builders
Catalyst Family INC.
Caulder Lamm Alliance for Children, INC.
CEDAW Challenge Team
Center for Environmental Health
Center for Living and Learning
Centinela Youth Services
Central American Resource Center of California
Central American Resource Center of Northern California
Central Valley Immigrant Integration Collaborative
Central Valley Opportunity Center (CVOC)
Centro Inmigrante, INC.
Ceres Community Project
Charitable Ventures
Child & Family Center
Children's Fund
Children's Institute
Children's Law Center of California
Chrysalis
Church of Movement
City Garage
Coastal Kids
Comite Civico Del Valle, INC
Community Alliance With Family Farmers
Community Bridges
Community Environmental Council
Community Foodbank of San Benito
Community Interventions
Community Resource Project
Community Works
Compassion Institute
Contra Costa Senior Legal Services
Creative Alternatives
Crisis Support Services of Alameda County
Crop Swap LA
Crystal Clear Biz Ops
Culture Scholar Corporation
Cycle Advisors
DeafHope
Divine Truth Unity Fellowship Church Dba Rainbow Pride Youth Alliance
Dixie Fire Canopy Project
Donna Sternberg & Dancers
Dreams for Change
EconAlliance
EG SPEAKS
Elder Love USA, INC.
Embrace Change Now
Equal Justice Society
Equality California
ERISAT-Eritrean Satellite Television
Every Day Action
Exploratorium, the
EYESHINE
Fair Housing Advocates of Northern California
Faith in Action
Family Paths, INC.
Family Resource Center
Family Service Association
FASD Network of Southern California
Fathers and Mothers Who Care
First Mayor's House
Focused on Growth Academy
Folsom Cordova Community Partnership
Food Access LA
Food Share Ventura County
FORCES
Future Leaders of America
Give for a Smile
Giving 365
Global Refugee Awareness Healing Center
Grantland L Johnson Institute of Leadership Development
Grants and Grassroots
Greenlining Institute
Guadalupe-Nipomo Dunes Center
Guild for Psychological Studies
HARC, INC.
Heal the Ocean
Health Care Integrated Services
Healy Senior Center
High Desert Community Foundation
High Desert New Beginnings, INC.
Hispanic Foundation of Silicon Valley
Honore's Home of Care
Hospice Help Network
HSS, Inc.
Human Health Project
Inland Caregiver Resource Center
Inland Empire Community Collaborative
Inland Empire Community Foundation
Inland Empire Waterkeeper
Inland Equity Community Land Trusts
Instituto De Educacion Popular Del Sur De California
Integrated Learning Institute
Integrated Recovery Network
Jacob's Heart Children's Support Services
Jen Weiss Consulting
Jewish Family Service of San Diego
Jewish Family Services of Long Beach and Orange County
Joslyn Center for Seniors
Journey Center
Juarez Consulting INC.
Juma Ventures
Kamali'i Foster Family Agency
Kings River Conservancy
Kitchens for Good
Koinonia Family Services
Koreatown Youth + Community Center
KWMR, INC.
LA Cooperativa Campesina De California
LA N Sync Laity Institute of the Arts
LA Raza Centro Legal
Lake County Community Foundation
Lake Family Resource Center
Las Fotos Project
Latino Service Providers
LeadingAge California
League of California Community Foundations
Leah's Pantry, INC.
Lighthouse Silicon Valley
Little Brothers-friends of the Elderly- Bay Area
Little Manila Rising
Little Seeds Matter
Long Term Care Ombudsman Services of San Luis Obispo County
Los Angeles Conservation Corps
Los Angeles Neighborhood Initiative
Los Padres Forest Watch
Lumina Alliance
Making Hope Happen Foundation
MALO
Marin Shakespeare Company
Maternal and Child Health Access
Meals on Wheels Orange County
Media Alliance
Mendocino Private Industry Council, INC.
Microenterprise Collaborative of Inland Southern California
Mission Hope
Mixed Emotion Theatrix
Mixteco Indigena Community Organizing Project
Moffett Field Historical Society & Museum
Moreno Seeds Foundation
Mother Lode Rehabilitation Enterprises INC.
Mountain Homeless Coalition
Move Santa Barbara County
Music Changing Lives
National Black Grads
National Harm Reduction Coalition
Nature for All
Nehemiah Charitable Fund
Nevada County Media
New Horizons: Serving Individuals With Special Needs
Newport Beach Public Library Foundation
No Drugs America Association, INC
Nonprofit Connection Santa Cruz County
Northern California Grantmakers
Northern Santa Barbara County United Way
Open Paths Counseling Center
Operation New Hope
Orange County Coastkeeper
ORCD Global
Orcutt Area Seniors in Service, INC.
Out of the Ashes Organization
Outdoor Outreach
Oxnard Performing Arts Center Corporation
Pacific Arts Movement
Pacific Coast Farmers Market Association
Pacific Horizons of California
Parkview Legacy Foundation
Partnership for a Better San Diego
Pasadena Village
PathPoint
Peninsula Youth Theatre
Plumas Corporation
Pro Youth & Families
Radiant Health Centers
Rainbow Pride Youth Alliance
Rebuilding Together Peninsula
Rehabilitation and Employment Serve of the East Bay, INC.
Repeat Reuse
Rescue-a-life Foundation
Richmond Community Foundation
Rising Communities (formerly Community Health Councils)
Rising Sun Center for Opportunity
Riverside County Black Chamber Health and Wellness Foundation INC.
Rudolph J. and Daphne A. Munzer Foundation
Rural Community Assistance Corporation
Rural Community Assistance Corporation
S & L Foster Family Agency
Sacramento Philharmonic & Opera
Sage Pathways, INC
San Diego Energy District
San Dieguito River Valley Land Conservancy
Santa Barbara County Food Action Network
Santa Barbara County Immigrant Legal Defense Center
Santa Barbara Foundation
SCCCC Rebuilding Lives FFA
Self Help Enterprises
Services, Immigrant Rights and Education Network
Shangri-La Transitions
Sierra Nevada Alliance
Sierra Nevada Children's Museum
Silicon Valley Council of Nonprofits
South Asian Network
Southern California Brass Consortium, INC.
Southern California Grantmakers
Starting Over INC.
Starting Over Strong
Streetlights
Studio 395 Foundation
Tahoe Youth and Family Services
Teens 4 Teens Help
The Francisco Homes
The Good Part Perspective
The Green Lining Institute
The Heroic Journey SEL and Mental Health
The Impact Fund
The Joslyn Center
The Kinship Fund
The Mom & Dad Project
The Monterey and Salinas Valley Railroad and Historical Modeling Society
The Nonprofit Partnership
The School Garden Doctor
The Stephan Center
Thrive Alliance
Tracy Community Connections Center
TreePeople
True North Housing Alliance, INC.
Tuleyome
Union Station Homeless Services
United Ways of California
UpValley Family Centers of Napa County
Valley Intercommunity Council
Ventura Land Trust
Ventures
Vision Y Compromiso
Visionality
Walden Family Services
Watts of Power Foundation
World Be Well Organization
YMCA of Greater Long Beach
Yolo County Children's Alliance
You Life Skills and Leadership Educational Foundation
Youth Action Project
OPPOSITION:
None received
ARGUMENTS IN SUPPORT:
In support of this bill, CalNonprofits writes that, “[a]dvanced pay provisions are currently authorized but not mandated under state law via enactment of Assembly Bill 590 (Hart, Chapter 535, Statutes of 2023). By requiring advance pay under AB 1039 for new grant and contract opportunities, the state can continue to address hurdles that dissuade under-resourced communities from applying for and implementing state-funded projects. Many state grants and contracts remain reimbursement-based two years after enactment of AB 590.”
Further, the “lack of equitable access to advance payments is an unnecessary barrier to the nonprofit sector’s effective partnership with the state at a time when new threats are emerging every day from both the federal government and environmental challenges like devastating wildfires. Now more than ever we must prioritize stronger partnerships between nonprofits and the state. Under 1039, nonprofits that may be best equipped to deliver timely and effective projects (but short on up-front capital) would no longer be forced to pass on numerous grants and contracts to support vulnerable Californians.”
And, this bill is “part of the California Nonprofit Equity Initiative that our organizations, along with more than 500 other nonprofit and community leaders, is supporting to level the playing field for nonprofits. Improving how state government contracts with nonprofits is a question of equity for our most vulnerable communities and for the nonprofits that serve them. AB 1039 will strengthen the essential partnership between the state and nonprofits and our mutual efforts to deliver the highest quality services to the people of California.”
ASSEMBLY FLOOR: 79-0, 6/2/25
AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Celeste Rodriguez, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas
Prepared by: Brian Duke / G.O. / (916) 651-1530
8/17/26 10:38:00
**** END ****
SENATE COMMITTEE ON
Senator Sabrina Cervantes, Chair
2025 - 2026 Regular Session
AB 1039 (Hart) - State-funded assistance grants and contracts: advance payments
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: | Consultant: |
Bill Summary:
AB 1039 requires, rather than authorizes, an administering state agency to advance a payment to a recipient entity, as defined, in accordance with specified requirements for all grants and contracts entered into after January 1, 2026, and requires the solicitation for the grant or contract to state the percentage of funds that may be distributed as an advance payment, as specified.
*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********
The following information is revised to reflect amendments
adopted by the committee on August 13, 2026
Fiscal Impact:
- Unknown, potentially significant costs for the Strategic Growth Council (SGC) to develop the Statewide Advance Funds and Reconciliation Guide (Master Guide) and to create and implement training for agency staff.
- Unknown costs for the Department of General Services (DGS) to promote the Master Guide, incorporate its processes into the State Administrative Manual (SAM) and State Contracting Manual (SCM), and provide guidance to state agencies.
- Unknown, potentially significant costs for state agencies to adopt the Master Guide and provide advance payments to recipient entities for grants and contracts. Actual costs will range from absorbable to hundreds of thousands of dollars per agency, depending on the contract type and whether the agency has existing advance payment processes in place in its grant disbursement or contracting practices.
- The California State Library (CSL) anticipates absorbable costs to modify its Grants Portal to track the percentage of grant or contract funds distributed in advance payments.
Author Amendments:
- Remove reference to the SGC’s Community Assistance for Climate Equity program.
- Revise advance payment requirements and eligibility criteria.
- Delete Department of Finance (DOF) audit.
- Require SGC, in consultation with DOF and DGS to develop a Master Guide.
- Establish specified requirements for the Master Guide.
- Require every state agency to adopt the Master Guide as its standard operating procedure for the disbursement, tracking, and reconciliation of advance payments.
- Require SGC to provide an annual training webinar for state agency staff to ensure uniform application of the Master Guide and dedicated technical assistance and guidance to community organization and nonprofit entities.
- Requires DGS to actively promote the Master Guide.
- Requires SGC to biennially review the Master Guide.
- Make other technical changes.
-- END --
SENATE COMMITTEE ON
Senator Sabrina Cervantes, Chair
2025 - 2026 Regular Session
AB 1039 (Hart) - State-funded assistance grants and contracts: advance payments
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: | Consultant: |
Bill Summary:
AB 1039 requires, rather than authorizes, an administering state agency to advance a payment to a recipient entity, as defined, in accordance with specified requirements for all grants and contracts entered into after January 1, 2026, and requires the solicitation for the grant or contract to state the percentage of funds that may be distributed as an advance payment, as specified.
Fiscal Impact:
- The Department of General Services (DGS) notes it may require a permanent, full-time Analyst II to coordinate with the Strategic Growth Council’s Community Assistance for Climate Equity (CACE) program, which currently lacks the capacity to communicate with statewide procurement professionals regarding contract processes. If this position is required, DGS costs would range from the high tens of thousands to the low hundreds of thousands of dollars annually.
- Unknown, potentially significant costs for state agencies to provide advance payments to recipient entities for all grants and contracts. Actual costs will range from absorbable to hundreds of thousands of dollars per agency, depending on the contract type and whether the agency has existing advance payment processes in place in its grant disbursement or contracting practices.
- The California State Library (CSL) anticipates absorbable costs to modify its Grants Portal to track the percentage of grant or contract funds distributed in advance payments.
Background:
As part of 2022-23 fiscal year (FY) state budget, AB 156 (Chapter 569, Statutes of 2022) authorized, until July 1, 2025, state agencies administering specified programs to advance payments to local agencies, nongovernmental entities, and other state agencies if certain criteria are met, including requiring advance payment recipients to provide an itemized budget, spending timeline, and work plan. AB 156 limited the advance payment to a local agency or nongovernmental entity to 25% of the total grant amount awarded to that recipient, unless the administering state agency determines that the project requires a larger advance.
The pilot program required the recipient or any sub-recipients to cooperate with audits by the Department of Finance (DOF) related to the advanced payments. It also required the administering state agency to prioritize local agency or nongovernmental entity recipients and projects serving disadvantaged, low-income, and under-resourced communities or organizations with modest reserves and potential cash flow problems. The program requires the local agency and nongovernmental entity recipients to submit additional documentation and progress reports on the spend-down of funds, and to demonstrate good standing with the federal Internal Revenue Service. Finally, AB 156 required the DOF, by January 10, 2025, to report to the Legislature on this program.
AB 590 (Hart, Chapter 535, Statutes of 2023) created a permanent advanced payment program, and authorized state agencies administering a grant program to provide for advance payments to a recipient 501(c)(3) nonprofit organization, as specified. AB 3017 (Hart, Chapter 664, Statutes of 2024) extended that authorization for state agencies to additionally provide for advance payments to a federally recognized Indian tribe, as specified.
Proposed Law:
- Requires, rather than authorizes, an administering state agency to advance a payment to a recipient entity, as specified, for all grants and contracts advertised on or after January 1, 2026. The solicitation of the grant or contract shall state the percentage of the grant or contract funds that may be distributed as an advance payment.
- Limits the existing requirement that an administering state agency prioritize recipient entities and projects, as specified, to grants and contracts advertised prior to January 1, 2026.
- Eliminates the requirement to stipulate an advance payment structure and request process, and instead, requires an administering state agency making an advance payment to a recipient entity to consider utilizing advance payment best practices and processes identified and developed by the Strategic Growth Council’s CACE program.
- Limits the requirement that recipient entities deposit funds received as an advance payment into a federally insured account to apply only to grants and contracts in excess of $10,000.
- Provides that recipient entities receiving advance payments may advance those funds to any sub-recipients in accordance with their grant program requirements or contract.
- Requires a state agency, when registering a grant with the CSL, to additionally include information about the percentage of the grant funds that may be distributed as an advance payment.
Related Legislation:
AB 880 (Bennett, 2026) revises the California Prompt Payment Act (PPA) eliminating the $500,000 cap that previously exempted certain Medi-Cal payments from penalty provisions. AB 880 also narrows the circumstances under which the state can dispute an invoice and expands the definition of “grant” to include specified agreements with nonprofit organizations. AB 880 is pending in this committee.
Staff Comments:
Costs for impacted agencies will vary according to the contract type and whether the agency already has advance payment processes in place. For comparison:
- The California Air Resources Board estimates total annual costs of $1.2 million (Greenhouse Gas Reduction Fund) to integrate advance payment terms into all its solicitations and contracts.
- The Office of Emergency Services (OES) anticipates costs to be minor and absorbable.
-- END --
ASSEMBLY THIRD READING
ATR Bill Id:AB 1039
Author:(Hart)
As Introduced Ver:February 20, 2025
Majority vote
SUMMARY
This would require, rather than authorize, an administering state agency to advance a payment to a recipient entity (a qualifying private, nonprofit organization under federal law or a federally recognized Indian tribe, as defined) in accordance with specified requirements for all grants and contracts advertised on or after January 1, 2026. The bill would require the solicitation for the grant or contract to state the percentage of the grant or contract funds that may be distributed as an advance payment.
Major Provisions
- Limits the requirement to prioritize recipient entities and projects serving disadvantaged, low-income, and under-resourced communities or organizations with modest reserves and potential cash flow problems to grants or contracts advertised before January 1, 2026.
- Requires, rather than authorizes, an administering state agency to advance a payment to a recipient entity in accordance with defined requirements for all grants and contracts advertised on or after January 1, 2026. The solicitation for the grant or contract shall state the percentage of the grant or contract funds that may be distributed as an advance payment.
- Requires a state agency to include within the information submitted to the California State Library, the percentage of the grant funds that may be distributed as an advance payment.
COMMENTS
Background.
Grants play a vital role in strengthening local communities in California by funding initiatives and programs that address diverse needs. These grants create a ripple effect by uplifting individuals and empowering organizations, ultimately strengthening the fabric of the community as a whole.
The state of California relies heavily on nonprofits to implement critical policies and provide essential services to its communities. These organizations play a pivotal role in addressing homelessness, building affordable housing, responding to climate change impacts, supporting victims of domestic violence, community infrastructure, and improving the lives of vulnerable community members in countless ways. The eligibility criteria can vary depending on the specific grant. Generally, grants are categorized by applicant type, such as nonprofits, individuals, businesses, public agencies, or tribal governments. Each grant listing provides detailed eligibility requirements, which can be found on the California Grants Portal.
Prior to the enactment of AB 590 (Hart), Chapter 535, Statutes of 2023, state law allowed over 20 specified state agencies to provide an advance payment of up to 25% of the annual contract amount to a nonprofit organization contracted for the delivery of services. AB 156 (Committee on Budget), Chapter 569, Statutes of 2022, established, until July 1, 2025, a new pilot program to explore possible improvements to the state's existing advance payment practices for specified state-funded local assistance grants administered by a small number of state agencies. As part of the pilot program, the Department of Finance (DOF) must prepare, by January 10, 2025, a report on the number of payments advanced, including by program and geographic location, with a summary of any adverse audit findings.
AB 590 more broadly authorized, in perpetuity, any administering state agency to advance 25% of any total grant or contract payment to a recipient 501(c)(3) non-profit entity meeting certain minimum requirements. AB 590 also authorized DOF to audit an administering state agency or recipient entity receiving an advance payment, with DOF generally estimating a per-audit cost of approximately $200,000, to be reimbursed by the relevant state agency. AB 3017 (Hart), Chapter 664, Statutes of 2024, added certain tribes to the definition of a "recipient entity" eligible to receive an advance payment of a state grant or contract. This bill now requires, instead of authorizes, a state agency to make an advance payment to recipient entities, following the criteria enacted by AB 590.
Action by Assembly and Senate Select Committees. On February 17, 2022, the Assembly and Senate Select Committees on the Nonprofit Sector held a joint hearing featuring panelists and public comment from nonprofit leaders across the state. The hearing, entitled, "A Blueprint to Ensure Nonprofits are Supported and Thrive during Future Emergencies" focused on the challenges nonprofits faced in implementing programs during the height of the COVID-19 Pandemic. The committees concluded that government contracting challenges remain a key barrier for nonprofits providing needed services. "Strong government-nonprofit partnerships are vital to ensure Californians have access to quality services and programs, to support the nonprofit sector as key employers in the state, and to bolster economic recovery, particularly in historically underserved communities."
Executive Order N-16-22. In September of 2022, Governor Newsom issued Executive Order (EO) N-16-22, which represents a comprehensive effort by the State of California to address disparities in opportunities and outcomes, and to advance equity through the design and delivery of state services and programs. It calls for explicit consideration of equity in policies and practices, improved data analysis tools, and enhanced community engagement strategies. The order underscores the state's commitment to achieving equal opportunity for all Californians and addressing persistent disparities in outcomes.
According to the Author
According to the author, "AB 1039 is necessary to address a key barrier that prevents under-resourced communities from applying for and implementing state-funded projects: inconsistent application of the state's advance pay policy for contracts and grants administered by state agencies across government. By ensuring nonprofits can secure a percentage of contracted funds up front for all new funding opportunities, effective January 1, 2026, this bill will improve the nonprofit sector's capacity to provide quality services to communities and carry out state-funded priorities. AB 1039 also supports stronger transparency about a funding opportunity's terms, including clearer indication of the available percentage of advance pay."
Arguments in Support
This bill is sponsored by the California Association of Nonprofits and supported by a large coalition of nonprofit organizations.
The United Way of California writes, "Advance pay provisions are currently authorized but not mandated under state law. Advance pay is a successful practice that has been authorized by the state for dozens of specific grant and contracting programs over the years but in a piecemeal fashion without consistency for too many funding opportunities. AB 1039 will allow the state to meet the full potential of the state's advance pay policy by requiring universal adoption for new funding opportunities, which will help to address long-standing contracting practices that often make partnership too expensive for many nonprofit organizations. After all, capacity and resource limitations should not be a strain on nonprofits' ability to access resources to serve vulnerable Californians. Providing advance payments strengthens the essential partnership between the state and nonprofits and our mutual efforts to deliver the highest quality services to the people of California."
Arguments in Opposition
None on file
FISCAL COMMENTS
According to the Assembly Committee on Appropriations analysis:
1) Costs of an unknown, but potentially significant, amount to the state by requiring all state agencies administering covered grants or contracts to make advance payments (General Fund, special fund, or bond funds). This bill covers a broad range of grants and contracts and is not limited to those providing services for the public. For example, this bill covers a consulting services contract for research, studies, or reports. When the outcome of a contract is a one-time deliverable, such as a report, advance payments carry additional risks in comparison to contracts providing ongoing deliverables through the duration of the contract.
While some state agencies are already familiar with advance payment practices and would incur minor and absorbable implementation costs, such costs may be significant for agencies unfamiliar with advance payments. Additionally, to the extent an agency is unable to recover unused or misused advanced funds from recipient entities, this bill could result in losses of state monies, potentially in the hundreds of thousands of dollars. It is costly for the state to legally pursue recoupment of payments if the recipient entity fails to perform. And, nonprofits may have no resources to pay what is owed even if the state wins a judgment.
2) Likely minor and absorbable costs to the CSL to modify the California Grants Portal website. However, the CSL notes that termination of federal grant funds that support library staff positions may eventually impact the ability to absorb these costs, necessitating the CSL to seek a contract with costs of approximately $20,000 to make the portal updates.
VOTES
ASM GOVERNMENTAL ORGANIZATION: 22-0-0
YES: Blanca Rubio, Davies, Alvarez, Berman, Bryan, Carrillo, Dixon, Fong, Gabriel, Gipson, Macedo, McKinnor, Nguyen, Pacheco, Ramos, Michelle Rodriguez, Sanchez, Solache, Soria, Ta, Valencia, Wallis
ASM APPROPRIATIONS: 14-0-1
YES: Wicks, Arambula, Calderon, Caloza, Dixon, Elhawary, Fong, Mark González, Hart, Pacheco, Pellerin, Solache, Ta, Tangipa
ABS, ABST OR NV: Sanchez
UPDATED
VERSION: February 20, 2025
CONSULTANT: Eric Johnson / G.O. / (916) 319-2531 FN: 0000699
Date of Hearing: May 7, 2025
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Buffy Wicks, Chair
ABPCA Bill Id:AB 1039
Author:(Hart) – As Introduced Ver:February 20, 2025
Policy Committee: | Governmental Organization | Vote: | 22 - 0 |
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Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill requires, instead of authorizes, a state agency administering a grant program or contract to make an advance payment to certain non-profit organizations and tribes.
Specifically, this bill:
- For a grant or contract advertised on or after January 1, 2026, requires, instead of authorizes, a state agency administering a grant program or contract to advance a payment of up to 25% of the total award to a recipient entity.
- Requires a solicitation for a grant or contract to state the percentage of funds that may be distributed as an advance payment. The percentage must also be included in the information an agency submits for the California State Library’s (CSL’s) California Grants Portal.
FISCAL EFFECT:
- Costs of an unknown, but potentially significant, amount to the state by requiring all state agencies administering covered grants or contracts to make advance payments (General Fund, special fund, or bond funds). This bill covers a broad range of grants and contracts and is not limited to those providing services for the public. For example, this bill covers a consulting services contract for research, studies, or reports. When the outcome of a contract is a one-time deliverable, such as a report, advance payments carry additional risks in comparison to contracts providing ongoing deliverables through the duration of the contract.
While some state agencies are already familiar with advance payment practices and would incur minor and absorbable implementation costs, such costs may be significant for agencies unfamiliar with advance payments. Additionally, to the extent an agency is unable to recover unused or misused advanced funds from recipient entities, this bill could result in losses of state monies, potentially in the hundreds of thousands of dollars. It is costly for the state to legally pursue recoupment of payments if the recipient entity fails to perform. And, nonprofits may have no resources to pay what is owed even if the state wins a judgment.
- Likely minor and absorbable costs to the CSL to modify the California Grants Portal website. However, the CSL notes that termination of federal grant funds that support library staff positions may eventually impact the ability to absorb these costs, necessitating the CSL to seek a contract with costs of approximately $20,000 to make the portal updates.
COMMENTS:
- Purpose. According to the author:
AB 1039 is necessary to address a key barrier that prevents under-resourced communities from applying for and implementing state-funded projects: inconsistent application of the state’s advance pay policy for contracts and grants administered by state agencies across government…The bill also supports stronger transparency about a funding opportunity’s terms, including clearer indication of the available percentage of advance pay.
This bill is sponsored by the California Association of Nonprofits and supported by a large coalition of nonprofit organizations.
- Existing Advance Payment Authorizations. Prior to the enactment of AB 590 (Hart), Chapter 535, Statutes of 2023, state law allowed over 20 specified state agencies to provide an advance payment of up to 25% of the annual contract amount to a nonprofit organization contracted for the delivery of services. AB 156 (Committee on Budget), Chapter 569, Statutes of 2022, established, until July 1, 2025, a new pilot program to explore possible improvements to the state’s existing advance payment practices for specified state-funded local assistance grants administered by a small number of state agencies. As part of the pilot program, the Department of Finance (DOF) must prepare, by January 10, 2025, a report on the number of payments advanced, including by program and geographic location, with a summary of any adverse audit findings.
AB 590 more broadly authorized, in perpetuity, any administering state agency to advance 25% of any total grant or contract payment to a recipient 501(c)(3) non-profit entity meeting certain minimum requirements. AB 590 also authorized DOF to audit an administering state agency or recipient entity receiving an advance payment, with DOF generally estimating a per-audit cost of approximately $200,000, to be reimbursed by the relevant state agency. AB 3017 (Hart), Chapter 664, Statutes of 2024, added certain tribes to the definition of a “recipient entity” eligible to receive an advance payment of a state grant or contract. This bill now requires, instead of authorizes, a state agency to make an advance payment to recipient entities, following the criteria enacted by AB 590.
- Prior Legislation. AB 2322 (Hart), of the 2023-24 Legislative Session, among other provisions, would have required an administrator to distribute, as an advance payment, at least 50% of a grant award upon execution of a small, short-term grant to a non-profit organization. AB 2322 was held on the Senate Appropriations Committee’s suspense file.
Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081
Date of Hearing: April 23, 2025
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Blanca Rubio, Chair
ABPCA Bill Id:AB 1039 (
Author:Hart) – As Introduced Ver:February 20, 2025
SUBJECT: State-funded assistance grants and contracts: advance payments
SUMMARY: This would require, rather than authorize, an administering state agency to advance a payment to a recipient entity (a qualifying private, nonprofit organization under federal law or a federally recognized Indian tribe, as defined) in accordance with specified requirements for all grants and contracts advertised on or after January 1, 2026. The bill would require the solicitation for the grant or contract to state the percentage of the grant or contract funds that may be distributed as an advance payment. Specifically, this bill:
1) Limits the requirement to prioritize recipient entities and projects serving disadvantaged, low-income, and under-resourced communities or organizations with modest reserves and potential cash flow problems to grants or contracts advertised before January 1, 2026.
2) Requires, rather than authorizes, an administering state agency to advance a payment to a recipient entity in accordance with defined requirements for all grants and contracts advertised on or after January 1, 2026. The solicitation for the grant or contract shall state the percentage of the grant or contract funds that may be distributed as an advance payment.
3) Requires a state agency to include within the information submitted to the California State Library, the percentage of the grant funds that may be distributed as an advance payment.
EXISTING LAW:
1) Provides it is the intent of the Legislature to improve and expand the state’s existing advance payment practices for state grants and contract with nonprofits and tribes.
2) Authorizes a state agency administering a grant program or contract to advance a payment to a recipient entity, subject to specified requirements.
3) Defines “Recipient entity” means either of the following:
- A private, nonprofit organization that qualifies under Section 501(c)(3) of the Internal Revenue Code.
- A federally recognized Indian tribe whose territorial boundaries lie wholly or partially within the State of California, and any agencies, entities, or arms of the tribe, as applicable, either together or separately.
4) Requires the administering state agency, among other things, to prioritize recipient entities and projects serving disadvantaged, low-income, and under-resourced communities, and to ensure an advance payment to the recipient entity does not exceed 25% of the total grant or contract amount, except as specified.
5) Requires each state agency shall register every grant the state agency administers with the California State Library prior to commencing a solicitation or award process for distribution of the grant. Each agency shall provide information regarding the grant that assists the California State Library with cataloging the distribution of grants and provides potential applicants with understandable and consistent information about available funding opportunities, including, but not limited to, all of the following:
- The title of the grant opportunity and grant identification number.
- The revenue source allocated to fund the grant.
- The purpose of the grant.
- A brief description of the grant, including, but not limited to, the mechanism used to announce the availability of funding.
- Any eligibility requirements, including, but not limited to, any matching funds requirements.
- Geographic limitations, if any.
- A description of the total available grant funding, the number of awards, and the amounts per award.
- The period of time covered by the grant.
- The date the grant will be issued.
- The deadline for proposals to be submitted.
- Internet address for electronic submission of the proposal.
- Contact information of a staff member responsible for communicating the grant requirements.
FISCAL EFFECT: This bill is keyed fiscal by Legislative Counsel.
COMMENTS:
Purpose of the bill. According to the author, “AB 1039 is necessary to address a key barrier that prevents under-resourced communities from applying for and implementing state-funded projects: inconsistent application of the state’s advance pay policy for contracts and grants administered by state agencies across government. By ensuring nonprofits can secure a percentage of contracted funds up front for all new funding opportunities, effective January 1, 2026, AB 1039 will improve the nonprofit sector’s capacity to provide quality services to communities and carry out state-funded priorities. The bill also supports stronger transparency about a funding opportunity’s terms, including clearer indication of the available percentage of advance pay.”
What problem does this bill solve? According to the bill’s sponsor, the effectiveness of nonprofits to carry out state programs and projects is hampered by financial and service-delivery issues from piecemeal implementation of the state’s advance pay policy across agencies, two years after the practice was permitted under AB 590 (Hart), Statutes of 2023. Relying too heavily on reimbursements instead of advance payments creates an unnecessary obstacle to the nonprofit sector’s ability to effectively collaborate with the state. This issue is especially critical as the demand for nonprofit services continues to rise, driven by mounting environmental challenges and federal actions that disproportionately affect vulnerable populations served by nonprofits daily.
By requiring advance payment under AB 1039 for new grant and contract opportunities, both nonprofits and the state can fully leverage existing policies to provide high-quality services to Californians in need—without placing nonprofits at financial risk when launching programs. Without the stability of advance pay, partnering with state agencies becomes an expensive and burdensome endeavor for many nonprofits, particularly smaller organizations with limited resources.
It is important to note that not all recipients will opt to receive an advance payment from the administering state agency.
Background.
The California Grant Information Act of 2018. The Act, established by AB 2252 (Limon, Chapter 318, Statutes of 2018), aims to streamline the process of grant discovery and application, making it easier for nonprofit organizations to secure essential funding. At the heart of the Act is the California Grants Portal, an online platform overseen by the California State Library. This portal serves as a centralized and comprehensive repository of state grant opportunities, simplifying the process for nonprofits to identify and access relevant funding sources.
Moreover, the Act mandates that each state agency provide a detailed account of each grant they administer. This includes critical information such as the purpose of the grant, eligibility requirements, and the total available funding. This level of detail and transparency is instrumental in enabling nonprofit organizations to strategically target grants that align with their mission and operational needs. The Act also emphasizes inclusivity, requiring the portal to be accessible and provide valuable information to a diverse array of potential applicants. This includes community-based organizations and entities that work to support and uplift disadvantaged and low-income communities. This provision ensures that the benefits of the Act are widespread and reach organizations that are often at the forefront of addressing critical societal issues.
Furthermore, the Act modernizes the grant application process by requiring state agencies to accept electronic proposals. This provision not only streamlines the application process but also reduces the administrative burden on nonprofits, allowing them to focus more resources on their core mission.
Small grant programs. Grants play a vital role in strengthening local communities in California by funding initiatives and programs that address diverse needs. These grants create a ripple effect by uplifting individuals and empowering organizations, ultimately strengthening the fabric of the community as a whole.
The state of California relies heavily on nonprofits to implement critical policies and provide essential services to its communities. These organizations play a pivotal role in addressing homelessness, building affordable housing, responding to climate change impacts, supporting victims of domestic violence, community infrastructure, and improving the lives of vulnerable community members in countless ways. The eligibility criteria can vary depending on the specific grant. Generally, grants are categorized by applicant type, such as nonprofits, individuals, businesses, public agencies, or tribal governments. Each grant listing provides detailed eligibility requirements, which can be found on the California Grants Portal.
Advance Payments for State Grants and Contracts. In order to provide Californians with a wide range of vital services, nonprofit organizations consistently stress the significance of a solid partnership with the state. These services include educational programs, health and human services, housing assistance, emergency management activities, and food security initiatives.
Nonprofits have stated that advance payments play a critical role in expanding opportunities to a more diverse base of nonprofits and supporting financial stability for many more. Because many state grants and contracts are reimbursement-based, nonprofit partners resort to taking out lines of credit or loans to start-up services. For nonprofits that take on the financial risk of a contract for which payments can take multiple months to receive from the state or third-party administrator, they have to “float” the funds, often times putting at risk other programs, or when securing a line of credit, never being able to cover the cost of the interest associated with these financial options.
AB 1039 aims to enhance transparency by mandating that funding opportunities clearly outline the method of fund disbursement and the percentage allocated for payment. This information must also be displayed on the funding opportunities portal operated by the California State Library. grants.ca.gov
Action by Assembly and Senate Select Committees. On February 17, 2022, the Assembly and Senate Select Committees on the Nonprofit Sector held a joint hearing featuring panelists and public comment from nonprofit leaders across the state. The hearing, entitled, “A Blueprint to Ensure Nonprofits are Supported and Thrive during Future Emergencies” focused on the challenges nonprofits faced in implementing programs during the height of the COVID-19 Pandemic. The committees concluded that government contracting challenges remain a key barrier for nonprofits providing needed services. “Strong government-nonprofit partnerships are vital to ensure Californians have access to quality services and programs, to support the nonprofit sector as key employers in the state, and to bolster economic recovery, particularly in historically underserved communities.”
Executive Order N-16-22. In September of 2022, Governor Newsom issued Executive Order (EO) N-16-22, which represents a comprehensive effort by the State of California to address disparities in opportunities and outcomes, and to advance equity through the design and delivery of state services and programs. It calls for explicit consideration of equity in policies and practices, improved data analysis tools, and enhanced community engagement strategies. The order underscores the state's commitment to achieving equal opportunity for all Californians and addressing persistent disparities in outcomes.
The order emphasizes the need for state agencies to embed explicit equity considerations in their policies and practices. This includes analyzing demographic and geographic gaps in outcomes and access to funding and services, developing data analysis tools to understand these gaps, and reviewing community engagement strategies with a focus on Californians residing in historically underserved and marginalized communities.
In support. According to the California Association of Nonprofits (CalNonprofits), “AB 1039 addresses a critical equity and access issue by mandating that nonprofits have the ability to secure a percentage of contracted funds up front for all new funding opportunities, effective January 1, 2026. The state’s current advance pay policy lacks uniformity and consistency in implementation across state agencies, resulting in inequitable opportunities for nonprofits.
The lack of equitable access to advance payments is an unnecessary barrier to the nonprofit sector’s effective partnership with the state at a time when new threats are emerging every day from both the federal government and environmental challenges like devastating wildfires. Now more than ever we must prioritize stronger partnerships between nonprofits and the state. Under AB 1039, nonprofits that may be best equipped to deliver timely and effective projects (but short on up-front capital) would no longer be forced to pass on numerous grants and contracts to support vulnerable Californians.”
The United Way of California writes, “Advance pay provisions are currently authorized but not mandated under state law. Advance pay is a successful practice that has been authorized by the state for dozens of specific grant and contracting programs over the years but in a piecemeal fashion without consistency for too many funding opportunities. AB 1039 will allow the state to meet the full potential of the state’s advance pay policy by requiring universal adoption for new funding opportunities, which will help to address long-standing contracting practices that often make partnership too expensive for many nonprofit organizations. After all, capacity and resource limitations should not be a strain on nonprofits’ ability to access resources to serve vulnerable Californians. Providing advance payments strengthens the essential partnership between the state and nonprofits and our mutual efforts to deliver the highest quality services to the people of California.”
Related legislation. AB 880 (Bennett) of 2025. This bill would revise the definition of “grant” to also mean a signed final agreement between a state agency and a nonprofit organization and would delete the $500,000 exception, as specified in law. This bill would revise the condition described above to require the discrepancy to be of an amount greater than $250 or 5% of the invoice or claimed amount, whichever is less, in order to qualify as a reasonable cause for the state agency to dispute it. This bill would require a state agency administering a grant program to reimburse a grantee’s indirect costs, as defined. (Assembly Committee on Appropriations)
Prior legislation. AB 3017 (Hart), Chapter 664, Statutes of 2024. Authorized a state agency administering a grant program to provide for advance payments to a federally recognized Indian tribe and, subject to certain conditions, authorizes a grantee to make an advance payment to a sub-recipient, as specified.
SB 336 (Umberg) of 2024. This bill would have required state agencies administering a grant program to reimburse a grantee’s indirect costs at one of three specified rates requested by the grantee in its state grant program application, as specified. (Vetoed by the Governor)
AB 590 (Hart), Chapter 535, Statutes of 2023. Authorized a state agency administering a grant program to provide for advance payments to a recipient 501(c)(3) nonprofit organization, as specified. The advanced payment shall not exceed 25% of the total grant or contract amount, unless the state agency determines that the project requires a larger advance and the recipient entity provides sufficient justification and documentation for that larger amount.
AB 860 (Valencia) of 2023. This bill would have streamlined the process of applying for and receiving small state grants, particularly those not exceeding $20,000 and with a duration of less than 12 months, and requires the creation of a more accessible and equitable grant application process, as specified. (Held on the Senate Appropriations Committee Suspense File)
SB 557 (Limón) of 2023. This bill would have expanded the definition of a grant for the purposes of the California Prompt Payment Act (PPA) requiring timely payments to include nonprofits by changing what is considered a grant and sets a specific monetary threshold of $250 or 5% of the invoiced amount (whichever is lower) for when a state agency can dispute a bill related to property or services delivered. (Vetoed by the Governor)
AB 156 (Committee on Budget), Chapter 569, Statutes of 2022. Authorized, until July 1, 2025, state agencies administering specified programs to advance payments to local agencies, nongovernmental entities, and other state agencies if certain criteria are met including requiring advance payment recipients to provide an itemized budget, spending timeline, and work plan.
AB 2252 (Limon), Chapter 318, Statutes of 2018. The California Grant Information Act of 2018, requires the California State Library to create an internet web portal to provide a centralized location for grant seekers to find state grant opportunities and requires the CSL to report to the Legislature on the effectiveness of the portal, including, among other things, the utilization rate by state agencies.
AB 1530 (Gonzalez), Chapter 720, Statutes of 2017. Authorizes the director of CAL FIRE to issue advance payments from a grant awarded to a nonprofit organization that is located in or providing service to disadvantaged or low-income communities. Prohibits the advance from exceeding 25% of the total grant award. Makes other technical and clarifying changes.
REGISTERED SUPPORT / OPPOSITION:
Support
A New Beginning
Accelerate Neighborhood Climate Action
Apidanh Alliance
Asociacion De Emprendedor@s
Becky Foreman Facilitation and Training
Brilliant Corners
Building Resilient Communities
California Alliance of Child and Family Services
California Association of Nonprofits
California Behavioral Health Association
California Partnership to End Domestic Violence
Children's Fund
Children's Institute
Comite Civico Del Valle, INC.
Community Alliance With Family Farmers
Community Bridges
Elder Love Usa, INC.
Faith in Action
Forces
Giving 365
Honore's Home of Care
Inland Caregiver Resource Center
Inland Empire Community Collaborative
Inland Empire Community Foundation
Inland Equity Community Land Trusts
Integrated Learning Institute
Jewish Family Service of San Diego
Koinonia Family Services
Koreatown Youth + Community Center
LeadingAge California
Mission Hope
National Black Grads
Nehemiah Charitable Fund
No Drugs America Association, INC
Out of the Ashes Organization
Parkview Legacy Foundation
Rainbow Pride Youth Alliance
Repeat Reuse
Riverside County Black Chamber Health and Wellness Foundation INC.
Rural Community Assistance Corporation (RCAC)
Sage Pathways, INC
SCCCC Rebuilding Lives FFA
Self Help Enterprises
Silicon Valley Council of Nonprofits
Starting Over Strong
Studio 395 Foundation
The Mom & Dad Project
The Nonprofit Partnership
Thrive Alliance
Tree People
United Ways of California
Walden Family Services
World Be Well Organization
Youth Action Project
Opposition
None on file
Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531
Discussed in Hearing
1MIN
Assembly Floor
2MIN
Senate Floor
53SEC
Assembly Floor
10MIN
Assembly Standing Committee on Governmental Organization
Bill Author
Bill Co-Author(s):
