Existing law, the California Prompt Payment Act, generally provides that a state agency that acquires property or services pursuant to a contract with a business but fails to make payment to the person or business on the date required by the contract is subject to a late payment penalty, as specified. The act also requires the required payment approval date, as defined, to be extended by 30 calendar days if an invoice from a business under a contract with the Department of Forestry and Fire Protection (department) would become subject to late payment penalties during the annually declared fire season, as declared by the Director of Forestry and Fire Protection (director), except if the contract is with a certified small business, a nonprofit organization, or a nonprofit public benefit corporation.

This bill would, instead, require the required payment approval date to be extended by 30 calendar days if an invoice from a business under a contract with the department would become subject to late payment penalties during the peak fire protection staffing period, as determined by the director, subject to the exceptions described above.

Existing law, the California Prompt Payment Act, generally provides that a state agency that acquires property or services pursuant to a contract with a business but fails to make payment to the person or business on the date required by the contract is subject to a late payment penalty, as specified. The act also requires the required payment approval date, as defined, to be extended by 30 calendar days if an invoice from a business under a contract with the Department of Forestry and Fire Protection (department) would become subject to late payment penalties during the annually declared fire season, as declared by the Director of Forestry and Fire Protection (director), except if the contract is with a certified small business, a nonprofit organization, or a nonprofit public benefit corporation.

This bill would, instead, require the required payment approval date to be extended by 30 calendar days if an invoice from a business under a contract with the department would become subject to late payment penalties during the peak fire protection staffing period, as determined by the director, subject to the exceptions described above.

Existing law authorizes an individual to contribute amounts in excess of the individuals personal income tax liability for the support of specified funds, including the State Parks Protection Fund. Existing law requires, for each taxable year beginning on or after January 1, 2012, the Franchise Tax Board to revise the individual taxpayer return form to allow a taxpayer to designate an amount in excess of tax liability to be deposited to the State Parks Protection Fund. Existing law entitles a taxpayer making a contribution to receive a single state parks day use annual pass from the Department of Parks and Recreation if the price of the pass, as determined by the department, is less than or equal to the amount of the taxpayers contribution. Existing law allows a deduction for any contribution amount in excess of the price of the pass received, if any.

This bill would make a nonsubstantive change to these provisions.

 CONSENT  

Bill No: AB 1177

Author: Connolly (D)

Amended: 3/28/25 in Assembly

Vote: 21

SENATE GOVERNMENTAL ORG. COMMITTEE: 14-0, 6/10/25

AYES: Padilla, Valladares, Ashby, Blakespear, Cervantes, Dahle, Hurtado, Jones, Ochoa Bogh, Richardson, Rubio, Smallwood-Cuevas, Wahab, Weber Pierson

NO VOTE RECORDED: Archuleta

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 69-0, 5/15/25 (Consent) - See last page for vote

SUBJECT: California Prompt Payment Act: late payment penalties

SOURCE: Author

DIGEST:

This bill updates the California Prompt Payment Act (PPA) by replacing the current statutory reference to the “annually declared fire season,” with a new standard – the “Peak Fire Protection Staffing Period” – as it applies to granting the Department of Forestry and Fire Protection (CAL FIRE) a 30 day extension before incurring late payment penalties, as specified.

ANALYSIS:

Existing law:

1. Provides generally, pursuant to the PPA, that a state agency that acquires property or services pursuant to a contract with a business but fails to make payment to the person or business on the date required by the contract is subject to a late payment penalty to be made to the contracting business, as specified.
2. Requires, pursuant to the PPA, the required payment approval date to be extended by 30 calendar days if an invoice from a business under contract with Cal FIRE would become subject to late payment penalties during the annually declared fire season, as declared by the Director of CAL FIRE, as specified.
3. Exempts from the above 30-day extension, any contract entered into with a resource conservation district, certified small business, a nonprofit organization, or a nonprofit benefit corporation.

This bill updates the PPA by replacing the current statutory reference to the “annually declared fire season,” with a new standard – the Peak Fire Protection Staffing Period – as it applies to granting CAL FIRE a 30 day extension before the department incurs late payment penalties, as specified.

Background

Author Statement. According to the author’s office, “as large-scale wildfire emergencies are now a year-round threat, AB 1177 is a common sense measure that will align the Prompt Payment Act’s non-small business fire season emergency exceptions with this reality and allow CAL FIRE to create uniformity within the Prompt Payment Act and reduce administrative burdens when tackling wildfire threats.”

California’s Worsening Wildfire Reality. The State of California has the main responsibility for wildfire response activities on about one-third of California’s land area. With over 39 million residents, the State of California is the most populous state in the nation and has the third largest land area among the states (163,695 square miles). Over the previous two decades, wildfires in California have become larger, longer, and more destructive. This growing risk is driven by a combination of factors: years of fuel build up, a warming and drying climate, and continued development in the wildland-urban interface.

The 2020 fire season was a tipping point of sorts, as it shattered records – with five of the six largest wildfires in California history burning simultaneously. In total, more than 4.3 million acres burned statewide – twice the acreage of the previous. In January of this year, during the middle of what should be the rainy season, the Los Angeles area fires scorched an area nearly the size of Washington, D.C., resulting in the loss of 30 lives, the damage or destruction of approximately 18,000 structures, and the evacuation of nearly 190,000 Californians. The Palisades fire and Eaton fire now rank among the deadliest and most destructive fires in California history, and will set new records for total cost.

Climate change is fundamentally reshaping California’s wildfire landscape, driving longer, more destructive fire season that now begin earlier in the year and stretch well into the winter months. This shift is exacerbated by a warming climate, which increases evaporation rates and dries out vegetation more rapidly. Additionally, warmer air holds more moisture, essentially acting like a sponge, pulling water from plants and soils and leaving behind highly flammable fuels. As we are now experiencing, even historically wetter months are no longer immune to wildfire threats, and fire activity is increasingly untethered from traditional seasonal patterns. At the same time, CAL FIRE has shifted away from a single statewide fire season, instead recognizing localized and dynamic risk periods.

California’s Prompt Payment Act. The PPA requires state agencies to pay businesses on time, either by the date specified in the contract or within 45 days of receiving an undisputed invoice. If they don’t, the agency must automatically calculate and issue late payment penalties as outlined in law.

Under existing law, those monetary penalties vary depending on the type of vendor contracting with a state agency. If the payee is a Resource Conservation District (RCD), a certified small business, a nonprofit organization, a nonprofit public benefit corporation, or a small business or nonprofit serving Medi-Cal, the penalty rate is 10% above the U.S Prime Rate as of June 30 of the prior fiscal year. For all other businesses, the rate is one percent above the Pooled Money Investment Account daily rate, capped at 15%.

Current law also gives the Director of Finance authority to suspend late penalty payments if a major calamity, disaster, or criminal act makes prompt payment impossible. Additionally, if a business under contract with CAL FIRE submits an invoice during the annually declared fire season, as proclaimed by the Director of CAL FIRE, the state has an extra 30 days to approve and make the payment. However, if the contracted organization is a certified small business, nonprofit, or a nonprofit benefit corporation the 30 day extension is not applicable.

This bill updates the PPA to modernize the criteria under which CAL FIRE may delay payment without penalty to certain contracted businesses during times of high operational demand. This bill replaces the current statutory reference to the “annually declared fire season” with a new standard – the “Peak Fire Protection Staffing Period” (PFPSP) – as determined by the Director of CAL FIRE. This bill retains existing exemptions for certified small businesses, nonprofit organizations, and nonprofit public benefit corporations.

CAL FIRE Contracting. CAL FIRE currently operates on a seasonal staffing model with three levels: base, transitional, and peak. The peak staffing period, which typically runs from June through early October, is when CAL FIRE ramps up its operations in anticipation of heightened wildfire activity. During this time, all CAL FIRE stations are fully staffed around the clock, aircraft are prepositioned and crewed, and additional resources, like engines and support teams, are deployed to meet the demand.

Businesses under contract with CAL FIRE play a critical role in this work. These partnerships span a wide range of services tied to wildfire response, emergency logistics, and forest management. The scope of each contract depends on CAL FIRE’s evolving needs, but common examples include:

• Firefighting Services – From ground crews and engines to helicopters and airtankers, contractors may be called upon to provide direct fire suppression support.
• Forest Management – Some businesses help reduce wildfire risk through prescribed burns, thinning, or other land stewardship work.
• Logistics and Support – This can include everything from catering meals for crews to delivering equipment, water, or transport services in the field.
• Equipment and Supplies – CAL FIRE relies on specialized gear (like flame-resistant clothing, tools, and communications tech) that contractors supply.
• Consulting and Research – Businesses may also provide environmental reviews, Geographic Information System mapping, or scientific analysis to improve fire planning and mitigation.
• Construction and Infrastructure – From building new fire stations to upgrading base camps, infrastructure contracts help keep CAL FIRE mission-ready.

These contracts are usually awarded through a competitive process and come with clear expectations: deliver reliable services, follow safety standards, and comply with all state regulations. In short, contracted businesses and nonprofits are essential partners in California’s fire prevention and emergency response system, especially during the peak season when every hour counts.

What Problem Does this Bill Solve? Under current law, CAL FIRE can avoid late payment penalties up to an additional 30 days for certain contracts during a declared “fire season,” but only if that declaration is made by the Director of CAL FIRE. The original intent behind this delayed penalty exception was to give CAL FIRE additional flexibility during emergencies, when resources are already stretched and operational priorities shift.

However, that framework no longer reflects how CAL FIRE actually operates. Large-scale wildfires are no longer confined to a single season (the 2025 Los Angeles are wildfires for example) and the Director no longer declares an annual statewide “fire season.” Instead, fire activity is tracked locally, with individual units issuing their own fire season declarations. As a result, applying the PPA’s fire season exception has become inconsistent and overly complex – tied to regional declarations rather than a clear, department-wide standard.

This patchwork approach adds unnecessary administrative burden and increases the risk of payment delays penalties during the very times when CAL FIRE’s focus should be on emergency response and firefighting. By tying the exception to the “Peak Fire Protection Staffing Period” this bill attempts to streamline compliance and better align the PPA with how CAL FIRE manages its workforce and resources in today’s wildfire environment.

According to the Assembly Committee on Appropriations analysis of this bill, CAL FIRE notes that it paid a total of approximately $652,000 in late penalties during fiscal year 2023-24. Additionally, the analysis states that “[t]he magnitude of cost savings depends on each invoice amount submitted during the PFPSP and whether and when Cal FIRE pays the invoice during the 30-day extension window.”

Related/Prior Legislation

SB 581 (McGuire, 2025) requires the California Department of Human Resources, the State Personnel Board, and any other relevant state agency to take the necessary actions to transition seasonal firefighters employed by Cal FIRE to a permanent firefighter employment classification. (Pending in the Assembly Public Employment & Retirement Committee)

AB 252 (Bains, 2025) would have required Cal FIRE to maintain no less than full staffing levels throughout the calendar year and meet specified staffing requirements. (Held on the Assembly Appropriations Committee Suspense File)

AB 880 (Bennett, 2025) revises the PPA by expanding the definition of a “grant” to include a signed final agreement between any state agency and a nonprofit organization; requires a state agency disputing an invoice from a nonprofit organization to pay the undisputed portion of the invoice, as specified; removes the $500,000 threshold on contracts or grants with nonprofit organizations eligible for late payments. (Pending in the Senate Governmental Organization Committee)

AB 1039 (Hart, 2025) requires, rather than authorizes, 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, as specified. (Pending in the Senate Governmental Organization Committee)

AB 1776 (Gallagher, Chapter 455, Statutes of 2022) added a RCD to the list of entities entitled to a late payment penalty from the state, as specified, and exempts contracts with RCDs from specified extension provisions, as specified.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

Senate Rule 28.8.

SUPPORT: (Verified 6/23/25)

None received

OPPOSITION: (Verified 6/23/25)

None received

ASSEMBLY FLOOR: 69-0, 5/15/25

AYES: Addis, Aguiar-Curry, Ahrens, Alvarez, Ávila Farías, Bains, Bauer-Kahan, Berman, Boerner, Bonta, Bryan, Calderon, Carrillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Mark González, Hadwick, Haney, Harabedian, Hoover, Irwin, Jackson, Kalra, Krell, Lackey, Lee, Lowenthal, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Ransom, Celeste Rodriguez, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Ta, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas

NO VOTE RECORDED: Alanis, Arambula, Bennett, Caloza, Castillo, Jeff Gonzalez, Hart, Quirk-Silva, Ramos, Stefani

Prepared by: Brian Duke / G.O. / (916) 651-1530

6/26/25 9:03:05

**** END ****

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Steve Padilla

Chair

2025 - 2026 Regular

Bill No: 1177 Hearing Date: 6/10/2025

SUBJECT: California Prompt Payment Act: late payment penalties

DIGEST: This bill updates the California Prompt Payment Act (PPA) by replacing the current statutory reference to the “annually declared fire season,” with a new standard – the “Peak Fire Protection Staffing Period” – as it applies to granting the Department of Forestry and Fire Protection (Cal FIRE) a 30 day extension before incurring late payment penalties, as specified.

ANALYSIS:

Existing law:

1. Provides generally, pursuant to the PPA, that a state agency that acquires property or services pursuant to a contract with a business but fails to make payment to the person or business on the date required by the contract is subject to a late payment penalty to be made to the contracting business, as specified.
2. Requires, pursuant to the PPA, the required payment approval date to be extended by 30 calendar days if an invoice from a business under contract with Cal FIRE would become subject to late payment penalties during the annually declared fire season, as declared by the Director of Cal FIRE, as specified.
3. Exempts from the above 30-day extension, any contract entered into with a resource conservation district, certified small business, a nonprofit organization, or a nonprofit benefit corporation.

This bill updates the PPA by replacing the current statutory reference to the “annually declared fire season,” with a new standard – the Peak Fire Protection Staffing Period – as it applies to granting Cal FIRE a 30 day extension before the department incurs late payment penalties, as specified.

Background

Author Statement. According to the author’s office, “as large-scale wildfire emergencies are now a year-round threat, AB 1177 is a common sense measure that will align the Prompt Payment Act’s non-small business fire season emergency exceptions with this reality and allow Cal FIRE to create uniformity within the Prompt Payment Act and reduce administrative burdens when tackling wildfire threats.”

California’s Worsening Wildfire Reality. The State of California has the main responsibility for wildfire response activities on about one-third of California’s land area. With over 39 million residents, the State of California is the most populous state in the nation and has the third largest land area among the states (163,695 square miles). Over the previous two decades, wildfires in California have become larger, longer, and more destructive. This growing risk is driven by a combination of factors: years of fuel build up, a warming and drying climate, and continued development in the wildland-urban interface (WUI).

The 2020 fire season was a tipping point of sorts, as it shattered records – with five of the six largest wildfires in California history burning simultaneously. In total, more than 4.3 million acres burned statewide – twice the acreage of the previous. In January of this year – during the middle of what should be the rainy season – the Los Angeles area fires scorched an area nearly the size of Washington, D.C., resulting in the loss of 30 lives, the damage or destruction of approximately 18,000 structures, and the evacuation of nearly 190,000 Californians. The Palisades fire and Eaton fire now rank among the deadliest and most destructive fires in California history, and will set new records for total cost.

Climate change is fundamentally reshaping California’s wildfire landscape, driving longer, more destructive fire season that now begin earlier in the year and stretch well into the winter months. This shift is exacerbated by a warming climate, which increases evaporation rates and dries out vegetation more rapidly. Additionally, warmer air holds more moisture – essentially acting like a sponge – pulling water from plants and soils and leaving behind highly flammable fuels. As we are now experiencing, even historically wetter months are no longer immune to wildfire threats, and fire activity is increasingly untethered from traditional seasonal patterns. At the same time, Cal FIRE has shifted away from a single statewide fire season, instead recognizing localized and dynamic risk periods.

California’s Prompt Payment Act. The PPA requires state agencies to pay businesses on time – either by the date specified in the contract or within 45 days of receiving an undisputed invoice. If they don’t, the agency must automatically calculate and issue late payment penalties as outlined in law.

Under existing law, those monetary penalties vary depending on the type of vendor contracting with a state agency. If the payee is a Resource Conservation District (RCD), a certified small business, a nonprofit organization, a nonprofit public benefit corporation, or a small business or nonprofit serving Medi-Cal, the penalty rate is 10% above the U.S Prime Rate as of June 30 of the prior fiscal year. For all other businesses, the rate is one percent above the Pooled Money Investment Account daily rate, capped at 15%.

Current law also gives the Director of Finance authority to suspend late penalty payments if a major calamity, disaster, or criminal act makes prompt payment impossible. Additionally, if a business under contract with Cal FIRE submits an invoice during the annually declared fire season – as proclaimed by the Director of Cal FIRE – the state has an extra 30 days to approve and make the payment. However, if the contracted organization is a certified small business, nonprofit, or a nonprofit benefit corporation the 30 day extension is not applicable.

This bill updates the PPA to modernize the criteria under which Cal FIRE may delay payment without penalty to certain contracted businesses during times of high operational demand. Specifically, this bill replaces the current statutory reference to the “annually declared fire season” with a new standard – the “Peak Fire Protection Staffing Period” (PFPSP) – as determined by the Director of Cal FIRE. This bill retains existing exemptions for certified small businesses, nonprofit organizations, and nonprofit public benefit corporations.

Cal FIRE Contracting. Cal FIRE currently operates on a seasonal staffing model with three levels: base, transitional, and peak. The peak staffing period, which typically runs from June through early October, is when Cal FIRE ramps up its operations in anticipation of heightened wildfire activity. During this time, all Cal FIRE stations are fully staffed around the clock, aircraft are prepositioned and crewed, and additional resources – like engines and support teams – are deployed to meet the demand.

Businesses under contract with Cal FIRE play a critical role in this work. These partnerships span a wide range of services tied to wildfire response, emergency logistics, and forest management. The scope of each contract depends on Cal FIRE’s evolving needs, but common examples include:

1. Firefighting Services – From ground crews and engines to helicopters and airtankers, contractors may be called upon to provide direct fire suppression support.
2. Forest Management – Some businesses help reduce wildfire risk through prescribed burns, thinning, or other land stewardship work.
3. Logistics and Support – This can include everything from catering meals for crews to delivering equipment, water, or transport services in the field.
4. Equipment and Supplies – Cal FIRE relies on specialized gear (like flame-resistant clothing, tools, and communications tech) that contractors supply.
5. Consulting and Research – Businesses may also provide environmental reviews, GIS mapping, or scientific analysis to improve fire planning and mitigation.
6. Construction and Infrastructure – From building new fire stations to upgrading base camps, infrastructure contracts help keep Cal FIRE mission-ready.

These contracts are usually awarded through a competitive process and come with clear expectations: deliver reliable services, follow safety standards, and comply with all state regulations. In short, contracted businesses and nonprofits are essential partners in California’s fire prevention and emergency response system – especially during the peak season when every hour counts.

What Problem Does this Bill Solve? Under current law, Cal FIRE can avoid late payment penalties up to an additional 30 days for certain contracts during a declared “fire season” – but only if that declaration is made by the Director of Cal FIRE. The original intent behind this delayed penalty exception was to give Cal FIRE additional flexibility during emergencies, when resources are already stretched and operational priorities shift.

However, that framework no longer reflects how Cal FIRE actually operates. Large-scale wildfires are no longer confined to a single season (the 2025 Los Angeles are wildfires for example) and the Director no longer declares an annual statewide “fire season.” Instead, fire activity is tracked locally, with individual units issuing their own fire season declarations. As a result, applying the PPA’s fire season exception has become inconsistent and overly complex – tied to regional declarations rather than a clear, department-wide standard.

This patchwork approach adds unnecessary administrative burden and increases the risk of payment delays penalties during the very times when Cal FIRE’s focus should be on emergency response and firefighting. By tying the exception to the “Peak Fire Protection Staffing Period” this bill attempts to streamline compliance and better align the PPA with how Cal FIRE manages its workforce and resources in today’s wildfire environment.

According to the Assembly Committee on Appropriations analysis of this bill, Cal FIRE notes that it paid a total of approximately $652,000 in late penalties during fiscal year 2023-24. Additionally, the analysis states that “[t]he magnitude of cost savings depends on each invoice amount submitted during the PFPSP and whether and when Cal FIRE pays the invoice during the 30-day extension window.”

Prior/Related Legislation

SB 581 (McGuire, 2025) requires the California Department of Human Resources, the State Personnel Board, and any other relevant state agency to take the necessary actions to transition seasonal firefighters employed by Cal FIRE to a permanent firefighter employment classification. (Pending Referral in the Assembly Rules Committee)

AB 252 (Bains, 2025) would have required Cal FIRE to maintain no less than full staffing levels throughout the calendar year and meet specified staffing requirements. (Held on the Assembly Appropriations Committee Suspense File)

AB 880 (Bennett, 2025) revises the PPA by expanding the definition of a “grant” to include a signed final agreement between any state agency and a nonprofit organization; requires a state agency disputing an invoice from a nonprofit organization to pay the undisputed portion of the invoice, as specified; removes the $500,000 threshold on contracts or grants with nonprofit organizations eligible for late payments; and adds nonprofit organizations to the list of entities in state agencies’ and the Department of General Services late payment penalty reports, as specified. (Pending Referral in the Senate Rules Committee)

AB 1039 (Hart, 2025) requires, rather than authorizes, 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 also 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. (Pending Referral in the Senate Rules Commitee)

AB 1776 (Gallagher, Chapter 455, Statutes of 2022) added a resource conservation district (RCD) to the list of entities entitled to a late payment penalty from the state, as specified, and exempts contracts with RCDs from specified extension provisions, as specified.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

None received

OPPOSITION:

None received

Date of Hearing: May 7, 2025

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 1177

Author:(Connolly) – As Amended Ver:March 28, 2025

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill provides that the 30-day extension of the payment approval date required for an invoice a business submits to the Department of Forestry and Fire Protection (CAL FIRE) during the annually declared fire season instead applies during the peak fire protection staffing period.

FISCAL EFFECT:

Cost savings of an unknown amount, potentially in the mid-hundreds of thousands of dollars, to CAL FIRE by reducing the amount of late payment penalties CAL FIRE must pay under the California Prompt Payment Act (PPA) (General Fund). The magnitude of cost savings depends on each invoice amount submitted during the peak staffing period and whether and when CAL FIRE pays the invoice during the 30-day extension window. CAL FIRE notes that it paid a total of approximately $652,000 in late penalties during fiscal year 2023-24.

COMMENTS:

1. Purpose. According to the author:

As large-scale wildfire emergencies are now a year-round threat, AB 1177 is a common sense measure that will align the [PPA’s] non-small business fire season emergency exceptions with this reality and allow CAL FIRE to create uniformity within the Act and reduce administrative burdens when tackling wildfire threats across the state.

1. Background. Peak Fire Protection Staffing Period. CAL FIRE determines the peak fire protection staffing period to be the period when CAL FIRE expects increased staffing due to the increased fire severity condition, an increase in the number of fires, and the type of resources needed to meet CAL FIRE’s mission. The peak staffing period generally extends from June to early October and ensures all CAL FIRE stations are open and staffed 24 hours per day and all aircraft are pre-positioned and staffed. At other times of the year, CAL FIRE operates at either a “base” or “transitional” staffing period.

PPA. The PPA requires a state agency that acquires property or services pursuant to a contract with a business to pay undisputed invoices within 45 days of receipt or be subject to a late payment penalty. The late payment penalty amount depends on the type of claimant. If the claimant is a resource conservation district, small business, nonprofit organization, or nonprofit public benefit corporation, a state agency must pay the claimant a penalty at a rate of 10% above the United States Prime Rate (currently 7.50%). For all other businesses, the penalty rate is 1% above the Pooled Money Investment Account daily rate on June 30 of the prior fiscal year, not to exceed 15%.

Existing law requires the payment approval date under the PPA be extended by 30 calendar days if an invoice from a business under contract with CAL FIRE would become subject to late payment penalties during the annually declared fire season. According to the author, this existing law “does not align with the current department process, as large scale wildfire emergencies are now a year round threat and the Director does not declare a ‘fire season.’” This bill provides that the late penalty extension instead applies during the peak fire protection staffing period.

1. Related Legislation. AB 880 (Bennett) expands the PPA to cover additional grant or contract payments to a 501(c)(3) nonprofit organization and repeals the limitation allowing a nonprofit organization to be eligible for a higher penalty payment only if the contract or grant is less than $500,000. AB 880 is pending hearing by this committee.

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 1177 (

Author:Connolly) – As Amended Ver:March 28, 2025

SUBJECT: California Prompt Payment Act: late payment penalties

SUMMARY: Under the California Prompt Payment Act (PPA), the payment approval date must be extended by 30 calendar days if a business under contract with the Department of Forestry and Fire Protection (CAL FIRE) submits an invoice that would otherwise incur late payment penalties during the annually declared fire season, as declared by the Director of Forestry and Fire Protection (Director).

This bill would, instead, require the required payment approval date to be extended by 30 calendar days if an invoice from a business under a contract with the CAL FIRE would become subject to late payment penalties during the peak fire protection staffing period (PFPSP), as determined by the Director, as specified. Specifically, this bill:

1) Provides that if an invoice from a business under a contract with the CAL FIRE would become subject to late payment penalties during the peak fire protection staffing period, as determined by the Director, or their designee, then the required payment approval date shall be extended by 30 calendar days.

EXISTING LAW:

1) The PPA generally provides that a state agency that acquires property or services pursuant to a contract with a business but fails to make payment to the person or business on the date required by the contract is subject to a late payment penalty, as specified.

2) Requires state agencies to pay applicable penalties, without requiring that the claimant submit an additional invoice for these amounts, whenever the state agency fails to submit a correct claim to the California State Controller (Controller) by the required payment approval date and payment is not issued within 45 days from the state agency receipt of an undisputed invoice.

3) Requires a state agency to pay, through the Controller, to the claimant a penalty at a rate of 10% above the United States Prime Rate on June 30 of the prior fiscal year if the claimant is a certified small business, a nonprofit organization, a nonprofit public benefit corporation, or a small business or nonprofit organization that provides services or equipment under the Medi-Cal program, as prescribed.

3) Requires, if the Director of Finance (DOF) determines that a state agency or the Controller is unable to promptly pay an invoice due to a major calamity, disaster, or criminal act, the late payment penalty provisions be suspended, except as they apply to certain claimants, including a certified small business, a nonprofit organization, or a nonprofit public benefit corporation.

4) Requires, except in the case of a contract with a resource conservation district (RCD), a certified small business, a nonprofit organization, or a nonprofit public benefit corporation, if an invoice from a business under a contract with the CAL FIRE would become subject to late payment penalties during the annually declared fire season, as declared by the Director, then the required payment approval date shall be extended by 30 calendar days.

5) Provides, if the DOF determines that a state agency or the Controller is unable to promptly pay an invoice as provided for by the PPA due to a major calamity, disaster, or criminal act, then otherwise applicable late payment penalty provisions, as defined, shall be suspended, except as they apply to a claimant that is any of the following: a) A resource conservation district; b) A certified small business; c) A nonprofit organization; d) A nonprofit public benefit corporation; and e) A small business or nonprofit organization that provides services or equipment under the Medi-Cal program.

6) Provides a suspension, as allowed for, shall remain in effect until the DOF determines that the suspended late payment penalty provisions should be reinstated. Except as provided in law, in the event a state agency fails to make timely payment because no Budget Act has been enacted, penalties shall continue to accrue until the time that the invoice is paid.

FISCAL EFFECT: This bill is keyed fiscal by Legislative Counsel.

COMMENTS:

Purpose of the bill. According to the author, “As large-scale wildfire emergencies are now a year-round threat, AB 1177 is a common sense measure that will align the Prompt Payment Act’s non-small business fire season emergency exceptions with this reality and allow CAL FIRE to create uniformity within the Act and reduce administrative burdens when tackling wildfire threats across the state.”

The PFPSP is a defined period when CAL FIRE expects increased staffing, due to the increased fire severity condition, an increase in the number of fires, and type of resources needed to meet its mission.

What problem does this bill solve? According to information provided by the author’s office, the purpose of the non-small business fire season emergency exception in current statute is to allow CAL FIRE additional time to process payments without incurring penalties, recognizing that resources are often stretched during emergencies and that operational priorities shift in these periods.

Per existing law, the PPA’s non-small business fire season emergency exception can only be applied during “fire season” as declared by CAL FIRE’s Director. The author believes that “this does not align with the current department process, as large scale wildfire emergencies are now a year round threat and the Director does not declare a “fire season”

Currently, the PPA does not account for protocol changes in response to the growing wildfire threat across the state. Instead of the Director of CAL FIRE declaring a statewide fire season, each Fire Unit have local fire seasons. Since this change, Fire seasons are no longer declared statewide and the PPA fire exception is applied regionally. This adds unnecessary complexity to the process as each invoice is based on the region and the specific fire season that was declared. Without an efficient process to comply with the PPA, CAL FIRE is faced with more administrative and financial burdens that takes focus and resources away from CAL FIRE’s ability to address the ongoing wildfire risks across the state.

This bill would amend the PPA to activate the non-small business fire season emergency exception upon the CAL FIRE’s declaration of the PFPSP instead of upon the Director’s declaration of fire season.

Background.

California’s Prompt Payment Act. Under the PPA, state agencies that acquire property or services pursuant to a contract with a business are required to make payment on the date required by the contract, or within 45 days of the state agency’s receipt of an undisputed invoice. If this requirement is not met, state agencies must automatically calculate and pay appropriate late payment penalties as specified in state statute.

Existing law specifies penalties paid by a state agency to a RCD, certified small business, nonprofit organization, nonprofit public benefit corporation or a small business or nonprofit that provides services or equipment under Medi-Cal be calculated at a rate of 10% above the United States Prime Rate on June 30th of the prior fiscal year. For all other businesses the penalties paid by a state agency are 1% above the Pooled Money Investment Account daily rate on June 30 of the prior fiscal year, not to exceed 15%.

Existing law allows the late penalty provisions to be suspended if the Director of Finance determines a state agency or the SCO is unable to promptly pay an invoice due to a major calamity, disaster or criminal act. Existing law also requires a payment approval date to be extended by 30 calendar days if an invoice from a business under contract with the CAL FIRE would become subject to the late payment penalties during the annually declared fire season. RCDs, certified small business, nonprofit organization or a nonprofit public benefit corporation are exempt from these provisions.

CAL FIRE and business under a contract. CAL FIRE operates three staffing periods: base, transitional, and peak, with the peak staffing period typically extending from roughly June through early October, involving a higher number of resources like fire engines and aerial support. Peak staffing ensures all CAL FIRE stations are open and staffed 24 hours per day; response capabilities are enhanced; all aircraft are prepositioned and staffed; and crews are staffed, trained, and working.

Business under a contract with CAL FIRE are generally involved in delivering services or products related to wildfire management, emergency response, or forest conservation. CAL FIRE contracts with a wide range of businesses to support its operations, including fire suppression, prevention, and management efforts across California. The scope of these contracts varies significantly, depending on CAL FIRE's specific needs at any given time.

Examples of common types of contracts businesses may have with CAL FIRE:

1. Firefighting Services: This could include providing equipment, such as fire trucks, helicopters, and aircraft for aerial firefighting, or ground crews to assist with firefighting efforts during wildfire emergencies.
2. Forest Management: Some businesses may be contracted to help manage forest lands, including thinning, prescribed burning, and other forest restoration practices to reduce the risk of wildfires.
3. Logistics and Support Services: CAL FIRE often contracts with businesses that provide logistical support, such as catering services for firefighters, transportation, or other resources needed during a wildfire response.
4. Equipment and Supplies: Companies that manufacture or supply specialized firefighting equipment, protective gear, or technology used by CAL FIRE may also be under contract.
5. Consulting and Research: CAL FIRE may hire businesses for consulting, environmental assessments, data analysis, or other research-related services to enhance fire prevention and management practices.
6. Construction and Infrastructure: Businesses may be contracted for building or maintaining facilities, such as fire stations, equipment storage, and other infrastructure related to CAL FIRE operations.

These contracts are generally awarded through a competitive bidding process. Businesses that secure these contracts are required to adhere to specific terms and conditions designed to align with CAL FIRE’s objectives. This includes delivering high-quality services, ensuring compliance with safety standards, and adhering to state regulations.

Related legislation. AB 252 (Bains) of 2025. This bill would require the CAL FIRE, on or before January 1, 2028, to maintain full staffing levels throughout the calendar year at all fire stations and facilities under its jurisdiction; implement staffing requirements on a schedule; and to annually report to the Legislature on progress toward implementation, among other provisions. (Assembly Committee on Natural Resources)

AB 880 (Bennett) of 2025. This bill would extend the PPA requirements and penalties to all grants and contracts with nonprofit organizations and establishes a system for reimbursing grantees for indirect costs related to the grant program. Addresses concerns from the nonprofit community that contract with the state by providing new terms for contracts that ensure faster payments and a uniform process for including indirect costs in contract costs. (Assembly Committee on Appropriations)

AB 1039 (Hart) of 2025. 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. 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. (Assembly Committee on Governmental Organization)

SB 581 (McGuire) of 2025. This bill would require the Department of Human Resources, the State Personnel Board, and any other relevant state agency to take the necessary actions to transition seasonal firefighters employed by CAL FIRE to a permanent firefighter employment classification. (Senate Committee on Labor, Public Employment and Retirement)

Prior legislation. AB 1776 (Gallagher), Chapter 455, Statutes of 2022. Added RCDs to the list of entities entitled to a late payment penalty under the PPA and exempts contracts with RCDs from specified extension provisions. The state’s 95 RCDs have numerous contracts with state entities, ranging in value from a few hundred thousand to millions of dollars.

AB 727 (Nielsen) of 2009. Would have included RCDs within the list of entities entitled to late payment penalties when a state entity fails to make payment for goods and services to an RCD pursuant to a contract, as specified. (Held on the Senate Appropriations Suspense File)

AB 2992 (LaMalfa) of 2008. Would have made RCDs eligible for specified late payment penalties, pursuant to the state’s PPA, when state agencies are delinquent in making contract payments to RCDs. (Vetoed by Governor Schwarzenegger)

AB 2541 (Matthews), Chapter 861, Statutes of 2006. Included "grants" within the PPA and requires a state agency that awards a grant, as defined, to make payment to the person or business that is the recipient of the grant on the date required by the grant, and within 45 days of the state agency's receipt of an undisputed invoice, or be subject to a late payment penalty.  

AB 1936 (Papan), Chapter 151, Statutes of 2000. Required state agencies to make payment of invoices on the date required by the contract and within 45 days of receipt of an undisputed invoice, or be subject to late penalty fees.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

None on file

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531