Newsom signs AI executive order, proposes universal basic capital fund

California Governor Gavin Newsom signed an executive order on May 21 directing state agencies to study artificial intelligence's workforce impact and propose revisions to mass-layoff rules, while separately floating a universal basic capital fund that would distribute public equity dividends to residents.

"Democrats should talk about AI as FDR talked in 1944, about a new social compact," Newsom said at the Center for American Progress this month, suggesting the party pursue a second New Deal centered on wage replacement programs and worker ownership stakes in AI-driven companies.

The order, designated Executive Order N-6-26, mandates the Labor and Workforce Development Agency to recommend revisions to the California WARN Act within 180 days and review safety-net policies including severance and compensation. The Employment Development Department must develop an AI playbook for dislocated worker strategies and submit bi-annual business feedback reports through December 2027. The Government Operations Agency must deliver recommendations by Oct. 15 on incentive structures that could direct a portion of AI company revenue toward public benefit programs, in consultation with the University of California system, Stanford University's Institute for Human-Centered Artificial Intelligence and the private sector.

The proposals arrive as California's 5.3% unemployment rate ties Nevada and Delaware for the highest in the nation, according to Bureau of Labor Statistics data. The state's top marginal income tax rate of 10.6% on wage income above $72,725 already ranks among the steepest in the U.S., and its $20-an-hour minimum wage for fast-food workers — the highest in the country — took effect in April 2024. Critics argue that expanding job protections and creating new entitlement programs could discourage hiring precisely when the state needs it most.

The Universal Basic Capital Proposal

Newsom's broader vision extends beyond the executive order. In his CAP remarks, he floated "universal basic capital" — a mechanism requiring companies to transfer shares into a public fund, with investment earnings distributed to citizens as dividends. "Businesses are going to make a fortune, and that is why you cannot continue to have a payroll tax system that taxes jobs and then subsidizes automation," he said.

The concept mirrors proposals gaining traction among progressive economists who argue that as AI displaces workers, the wealth generated by automation should be shared broadly rather than concentrated among shareholders. The WSJ Editorial Board, in a May 30 opinion piece, called the idea "socialism by a more politically palatable name," warning that mandated job protections would make employers "more reluctant to add other jobs and hire young people with less experience."

Parallel AI Legislation in Sacramento

The executive order is not the only AI-related regulatory action moving through California. Senate Bill 947, the "No Robo Bosses" Act of 2026, has passed the State Senate and is pending in the State Assembly. The bill would prohibit employers from using automated decision systems to make disciplinary, termination or deactivation decisions without providing workers with 12 months of their own data and a written post-use notice. A predecessor bill, SB 7, was vetoed by Newsom in October 2025.

The California Civil Rights Department issued regulations effective October 2025 prohibiting employers from using automated decision systems to discriminate under the Fair Employment and Housing Act, requiring four years of data retention. The California Privacy Protection Agency approved regulations in September 2025 under the California Consumer Privacy Act addressing automated decision-making technology, with an employer notice requirement taking effect Jan. 1, 2027.

The cumulative effect of these measures creates a compliance burden for the roughly 200,000 tech companies operating in California, many of which are already navigating federal uncertainty around AI regulation. The state's last major technology regulation — the California Consumer Privacy Act of 2018 — prompted dozens of similar laws across other states and became a de facto national standard. If Newsom's AI agenda gains legislative traction, it could set a similar precedent, reshaping how employers nationwide adopt automation technologies.

This article is for informational purposes only and does not constitute investment advice.