Governor Gavin Newsom has signed sweeping changes to California’s Subsequent Injuries Benefits Trust Fund (SIBTF), capping an 18-month fight over a workers’ compensation program that grew, by the state’s own account, until it rivaled the size of the entire standard workers’ compensation system.

SIBTF dates to 1945, when California created it to encourage employers to hire disabled World War II veterans: if a worker with a pre-existing disability suffered a new, unrelated workplace injury and the combination left them severely disabled, the fund — not the employer — would cover the added cost. For decades it was a minor corner of the system. That changed over the past ten years. According to the Legislative Analyst’s Office, in a July 2025 report, the fund “now rivals the size of the standard workers’ compensation system but with looser standards, broader eligibility, and more generous benefits.” Employer assessments that funded SIBTF rose from roughly $14 million in 2015 to nearly $850 million by 2025, and a 2024 RAND Corporation study commissioned by the Department of Industrial Relations put the fund’s total potential future liability at $7.9 billion, with a plausible range of $6.4 billion to $10.5 billion. The RAND and LAO reports both pointed to a 2020 Workers’ Compensation Appeals Board en banc decision, Todd v. Subsequent Injuries Benefits Trust Fund, as a major driver, finding that it had significantly loosened the disability-combination rules that determine who qualifies.

That backdrop is what prompted the law. In October 2025, Newsom vetoed an earlier, narrower reform bill, AB 1329 by Assemblymember Liz Ortega, D-San Leandro, saying it did not go far enough. In his veto message, Newsom wrote that the program had “expanded beyond its original purpose” and directed the Department of Industrial Relations and the Division of Workers’ Compensation to build a comprehensive reform plan for the 2026-27 budget cycle. That plan arrived as proposed budget trailer bill language in early 2026 and, after months of committee hearings, became Senate Bill 171, the “Labor” trailer bill attached to this year’s state budget.

The bill was contentious throughout. Business and public-employer groups, including a coalition of counties, cities, and industry associations, backed the changes; in an April 2026 letter, that coalition urged lawmakers to “take swift action to pass this bill through the budget process.” Labor and injured-worker advocates pushed back hard on both the substance and the process. The Coalition of California Injured Workers, a coalition of labor organizations, public safety associations, and injured-worker advocacy groups, publicly urged the Governor and Legislature to strip the SIBTF provisions out of the budget trailer bill entirely and instead send them through the regular legislative process, where they would get full committee vetting and public input. The group cited a poll it commissioned finding that 64% of likely California voters opposed the proposed SIBTF changes once informed of their impact, and that 79% believed reforms of this scope should not be fast-tracked through a budget trailer bill. Assemblymember Ortega’s California Applicants’ Attorneys Association allies raised a related but somewhat more measured concern: at a June 17, 2026 hearing before the Senate Labor, Public Employment and Retirement Committee, former Assemblymember Alberto Torrico, testifying for the CAAA, acknowledged “there is a serious problem with the SIBTF” but argued its roots include understaffing at the agency as much as the Todd decision, and Ortega continued pushing a competing, less sweeping bill, AB 1576, through the same period. Separately, a self-described investigative outlet, The Jacobi Journal, published an analysis in January 2026 disputing the RAND report’s headline $7.9 billion liability figure, arguing that adjusting the study’s discount-rate and payout assumptions would put the real number closer to $1.25 billion — a claim RAND and DIR have not publicly conceded, but one opponents of the trailer bill cited as reason to doubt the urgency behind it.

Despite that opposition, SB 171 passed the Legislature along largely party-line-adjacent budget votes in the final days of June 2026 and was enrolled to the Governor’s desk on June 30. Newsom signed it on Monday, July 13, 2026.

As signed, SB 171 changes SIBTF eligibility and claims-handling in several concrete ways. It adds a statutory definition of “labor disabling” to the Labor Code for the first time, limiting qualifying pre-existing disabilities to impairments that caused a loss of earnings, interfered with the worker’s ability to do their job, or otherwise had a demonstrable impact on their capacity to work — replacing a looser, case-law-based standard. It requires that the existence of a pre-existing disability be proven by substantial evidence drawn from medical records, testimony, or other evidence that predates the subsequent work injury, rather than being established after the fact. It also excludes the future-earning-capacity adjustment and the 1.4 permanent-disability multiplier from the calculation used to determine whether a worker clears the eligibility threshold, and it codifies clearer standards for calculating benefit amounts once eligibility is established. On process, the bill shifts responsibility for paying SIBTF awards from the State Compensation Insurance Fund to the Director of Industrial Relations, acting as trustee of the fund, and it clarifies that workers have five years from a subsequent injury, or six months from the resolution of the permanent disability portion of that injury claim, whichever is later, to file a SIBTF claim. Separately, the bill permanently removes the sunset date on a related provision, Labor Code section 5909, which gives the Workers’ Compensation Appeals Board 60 days from receiving a case file to act on a petition for reconsideration.

The new SIBTF eligibility rules took effect immediately upon signing, since SB 171 is a budget-related bill declared to take effect immediately, but they do not apply retroactively across the board. The law exempts claims that had already reached a specified procedural stage as of June 1, 2026, as well as any claim filed on or before July 1, 2020, from the new standards, leaving those claims to be decided under the prior rules. The new eligibility and calculation provisions are also not permanent as written: the bill makes them inoperative on July 1, 2031, and repeals them outright as of January 1, 2032, meaning the Legislature will need to revisit the program again before the decade is out.