Big Win for Small Business Minority Contractors and Subcontractors As Governor Signs Into Law Senator Cortese’s Bill To Fast Track Payments For Work on Privately Financed Projects

SACRAMENTO – California Governor Gavin Newsom today signed into law Senator Dave Cortese’s Senate Bill 61 which will expedite cash payments to construction contractors and subcontractors for their work on privately financed projects.    

When the new law takes effect in January 2026, it will directly address the chronic cash flow challenges caused by excessive retention withheld on privately financed projects. By reducing retention from 10 percent to 5% percent, the new law will bring financial stability and predictability to contractors statewide, aligning private sector practices with the successful 5% cap already in place for public works.

“What this law will do is  enable small business owners, minority contractors and subcontractors working on private projects, to keep the cash flowing for materials used and labor performed just as if the private project was a public works project” said Senator Dave Cortese, a longtime labor champion. “Keeping the cash flowing will reduce construction timelines and costs.”

“SB 61 is a long-overdue fix to a harmful practice that has placed enormous financial strain on contractors for decades. By reducing from 10 percent to 5 percent retention, the bill creates a more equitable and stable business environment, particularly for small and emerging contractors, and will ultimately help reduce construction costs for developers and property owners,” said Eddie Bernacchi, Legislative Advocate for the National Electrical Contractors Association (NECA)

“Without the passage of SB 61, contractors will continue to rely on expensive credit lines to cover the cost of labor, materials, and overhead for work they’ve already completed to the owner’s satisfaction, driving up construction costs across the board. We’re grateful to Senator Cortese for championing this critical reform and standing up for California contractors. His leadership will bring lasting change, financial fairness, and more competition to construction projects throughout the state,” said Rob Meadows, President of Morrow-Meadows Corporation, a family-owned California-based electrical construction firm.

BACKGROUND:

• More than 20 states including Oregon, Nevada and New York have also signed into law five percent retention caps for private projects.
• In California, recent legislation is making it easier for privately financed affordable housing developments to move forward. The makes this law even more critical.

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