Democrats in California have agreed to postpone a minimum wage rise for approximately 426,000 health care workers in order to help the state balance its budget.
The accord reached by Gov. Gavin Newsom and legislative leaders is part of a bigger plan to close a projected $46.8 billion shortfall, the second year in a row the nation’s most populous state has run a multibillion-dollar deficit.
Health care workers were expected to receive a rise on July 1 as part of a plan to progressively raise their pay to $25 per hour over the following decade. If approved by the Legislature next week, they might receive the hike on October 15 — but only if California’s receipts between July and September exceed authorities’ estimates by at least 3%.
If that does not happen, the rise will not begin until January 1st at the latest.
The postponement preserves a hard-fought victory for one of the state’s largest labor unions—and one of Democrats’ largest political contributors. According to Dave Regan, president of the Service Employees International Union-United Healthcare Workers West, employees are frustrated that they will not receive raises this summer.
“But we also recognize and appreciate that legislative leaders and the Governor listened to us as we mobilized and spoke out this year to insist that, despite a historic budget deficit, California’s patient care and healthcare workforce crisis must be addressed,” according to his statement.
Most people in California earn a minimum wage of $16 per hour, which is already among the highest in the country. The minimum wage for the majority of fast food workers in the state is $20 per hour, a hike that began in April and has had a statewide impact.
However, raising pay for health-care professionals is more difficult due to budgetary constraints. California employs some health-care workers and provides for medical coverage through the state Medicaid program.
The Newsom administration had previously stated that the minimum wage rise would cost the state approximately $2 billion.
However, if postponed until January, it will cost the general budget approximately $600 million, which will climb annually to reflect scheduled increases until it hits $25 per hour for the majority of healthcare workers.
California’s revenues, which had been decreasing for the past two years, have suddenly rebounded.
“We are confident that the initial raise for workers who have not yet received it will happen in the Fall,” Regan told the crowd.
In total, the budget agreement would authorize $297.9 billion in expenditures for the upcoming fiscal year, which begins on July 1. Newsom and Senate leaders agreed on $16 billion in cuts, including $110 million for a program that helps middle-class students pay for college and $1.1 billion for different affordable housing initiatives.
However, Newsom and lawmakers agreed to reject certain previously suggested cuts, including one that would have ended paying for workers to care for low-income handicapped immigrants on Medicaid.
Politicians voted to lend $400 million to Pacific Gas & Electric to help extend the life of the state’s only remaining nuclear power plant, despite opposition from several politicians who were concerned that the money would never be repaid.
And Newsom agreed to boost the amount of money the state’s Medicaid program pays doctors to treat patients — albeit significantly less than he had previously committed to spend. Meanwhile, doctors have qualified a bill for the November ballot that would require the state to pay them more for treating Medicaid patients.
In addition to an almost 8% decrease for all state agencies, the agreement includes a $350 million cut for state prisons. It also contains a temporary tax increase on businesses with more than $1 million in taxable income, which will take effect this year and last until 2026.
“This agreement sets the state on a path for long-term fiscal stability — addressing the current shortfall and strengthening budget resilience down the road,” Newsom told reporters.
Next week, lawmakers will most likely vote on the budget. Republicans, who do not control enough seats to influence legislation, claim they were left out of the negotiations.
