Democrats in California have agreed to delay a minimum wage increase for about 426,000 health care workers to help balance the state’s budget.
The agreement between Gov. Gavin Newsom and legislative leaders is part of a larger plan to close an estimated $46.8 billion shortfall — the second year in a row the nation’s most populous state has had a multibillion-dollar deficit.
Health care workers were supposed to get a raise July 1, part of a plan to gradually increase their pay to $25 per hour over the next decade. Now, if approved by the Legislature next week, they could get that raise Oct. 15 — but only if California’s revenues between July and September are at least 3% higher than what officials have estimated.
If that doesn’t happen, the raise won’t start until Jan. 1 at the latest.
The delay preserves a hard-fought victory for one of the state’s largest labor unions — and one of Democrats’ largest campaign donors. Dave Regan, president of Service Employees International Union-United Healthcare Workers West, said workers are disappointed they won’t get 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,” he said in a statement.
The minimum wage for most people in California is $16 per hour, which is already among the highest in the nation. The minimum wage for most fast food workers in the state is $20 per hour, an increase that began in April and has had ripple effects statewide.
But increasing wages for health care workers is trickier because of the budget impact budget. California employs some health care workers, and it also pays for medical benefits through the state’s Medicaid program.
The Newsom administration had previously said the minimum wage increase would cost the state about $2 billion. But if delayed until January, it will cost the general fund about $600 million — a figure that would rise yearly to reflect scheduled increases until it reaches $25 per hour for most health care workers.
California’s revenues, while declining for much of the past two years, have rebounded recently.
“We are confident that the initial raise for workers who have not yet received it will happen in the Fall,” Regan said.
In total, the budget agreement would approve $297.9 billion in spending over the next fiscal year that begins on July 1. Newsom and legislative leaders agreed to $16 billion in cuts, including $110 million to a program that helps students from middle-class families pay for college and $1.1 billion across various affordable housing programs.
But Newsom and lawmakers agreed to abandon some previously proposed cuts, including one that would have stopped paying for people to care for some low-income disabled immigrants who are on Medicaid.
Lawmakers agreed to lend $400 million to the utility Pacific Gas & Electric to help extend the life of the state’s only remaining nuclear power plant — money that some lawmakers had opposed because they were worried it might not ever be paid back.
And Newsom agreed to increase how much the state’s Medicaid program pays doctors to treat patients — although the amount is far less than he previously agreed to spend. Meanwhile, doctors have qualified a measure for the November ballot that would force the state to pay them more for treating Medicaid patients.
In addition to a nearly 8% cut across the board for state agencies, the agreement includes an additional $350 million cut for state prisons. It also includes a temporary tax hike — starting this year and running through 2026 — on businesses with more than $1 million in taxable income.
“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 said.
Lawmakers are likely to vote on the budget next week. Republicans, who don’t control enough seats to influence legislation, say they were left out of the negotiations.
Senate President Pro Tempore Mike McGuire said it has been a “tough budget year” but elected officials were able “to shrink the shortfall, protect our progress, and maintain responsible reserves.”
Democratic Assembly Speaker Robert Rivas said the Assembly “fought hard to protect the public services that matter most to Californians.”