tax code

Gov. Gavin Newsom signed a landmark bill that would give a financial boost to California’s struggling newsrooms.

Assembly Bill 2222 will create refundable tax credits for California local news organizations based on the number of journalists they employ. It passed through both houses. It marks an innovative yet controversial attempt to slow the decline of local journalism.

The bill, called the Community Newsroom Employment and Workforce Sustainability Act, works by assigning a “job retention credit” of $20,000 per journalist for up to five positions, and after that $15,000 for every additional journalist. Part-time positions will be awarded half-credits. It also stacks an additional $15,000 credit for each new hire, to incentivize expanding journalist head counts.

Before signing the bill Wednesday morning, Newsom spoke about what he called the “assault on the free press and the First Amendment..coming from Washington D.C. and Donald Trump.”

“It’s journalists that need to report those stories and local journalists that need to uncover and sort of peel back the facade if democracy is going to survive, let alone thrive,” Newsom said.

The bill was supported by the California News Publishers Assn., of which the Los Angeles Times is a member and a wide range of other community news boosters. Backers said it could be a lifeline to local news organizations, many of which have struggled to maintain staffing levels over the past two decades.

California has lost more than 12,000 of its local journalists since 2002, according to nonprofit advocacy group Rebuild Local News. And almost 40% of all local U.S. newspapers have vanished, according to an annual report on the state of local news put out by Northwestern University’s Medill journalism school.

To pay for the credits, the bill would amend California’s tax code to align with a little-discussed component of President Trump’s “Big Beautiful” tax bill that expanded taxes on some companies by eliminating a deduction for executive salaries of over $1 million annually.

It is common practice for the state to consider aligning its tax code with the federal structure to make filing taxes easier and administering them more cheaply. But California has not yet sought to adopt this federal tax change, a move which would increase tax revenues to the state.

The California Taxpayers Assn. and groups representing business interests such as the California Chamber of Commerce oppose the bill because it raises taxes on employers that they argue already face billions of dollars in new taxes.

They contend that the higher costs will be passed along to consumers.

The governor’s finance office issued an analysis opposing the bill for not including a cap on the tax credits, thus creating “unlimited fiscal liability to the state,” and argued the bill mainly subsidizes existing activity rather than encouraging the creation of new jobs.

While speaking with reporters on Wednesday, Newsom acknowledged some of the concerns that have been raised about those who will receive benefits from the bill’s funds, specifically hedge funds and billionaire owners and outlets who he says spread propaganda.

“It does subsidize those that don’t need to be subsidized,” he said. “We have hedge funds in this space. We have billionaires in this space. We have people that are profiteering in this space by gutting the newsrooms and extracting value out of the space that also are the beneficiaries.”

Newsom said he chose not to veto the bill because he believes its benefits outweigh the liabilities. He added that he hopes the legislature and next governor can work to narrow down who benefits most from the legislation.

“We should not be subsidizing hedge funds,” he said. “We should be focused on where the need is the greatest, in my humble opinion, and I do think when you have no cap, the limitlessness of this…to some of the most well-heeled organizations, where now they simply could pull from this bill the benefits that they didn’t even ask for or need, is self-evident.”

Assemblymember Chris Ward (D-San Diego), who authored the bill, said the governor’s signature shows California’s commitment to the free press at a time when newsrooms are shrinking and misinformation is rampant.

“Local journalism is the backbone of an informed democracy, and today California made clear that the people doing this essential work are worth investing in,” Ward said in a statement. “This historic investment will help keep reporters in our communities, strengthen nonprofit and public media, and ensure Californians continue to have access to trusted, fact-based local news.”

In signing the bill, Newsom emphasized the role of journalism in uncovering scandal and wrongdoing.

“The L.A. Times to their credit did a big investigative piece on Bell, and people getting paid a million dollars in some cases, local government officials, a million damn dollars a year. No one would have known had it not been for local journalism. How many more Bells are out there, not just in this state, but all across the country?”