California Democrats have decided to postpone a planned minimum wage increase for about 426,000 health care workers to help address the state’s budget deficit. The decision, made by Governor Gavin Newsom and legislative leaders, aims to tackle an estimated $46.8 billion shortfall, marking the second consecutive year the state has faced a significant deficit.
Health care workers were initially scheduled to receive a wage hike starting July 1, as part of a plan to raise their pay to $25 per hour over the next decade. Under the new agreement, if approved by the Legislature next week, the wage increase will be delayed until October 15. However, this delay is contingent on California’s revenues between July and September being at least 3% higher than officials’ estimates. If revenues fall short, the raise will be postponed further, with January 1 as the latest start date.
This postponement maintains a significant win for one of California’s largest labor unions, the Service Employees International Union-United Healthcare Workers West. Dave Regan, the union’s president, expressed disappointment that workers won’t receive their raises this summer. Nonetheless, he acknowledged the efforts of legislative leaders and the Governor in addressing the state’s patient care and healthcare workforce crisis amidst a historic budget deficit.
Currently, the minimum wage in California is $16 per hour, one of the highest in the nation. Fast food workers in the state receive a minimum of $20 per hour, an increase implemented in April that has influenced wages across various sectors. Raising wages for health care workers presents additional challenges due to its budgetary implications. California employs many health care workers and funds medical benefits through its Medicaid program.
The Newsom administration estimated that the minimum wage increase for health care workers would cost the state about $2 billion. Delaying the increase until January reduces the cost to the general fund to approximately $600 million, with yearly costs rising until the wage reaches $25 per hour for most health care workers.
California’s revenues, which had been declining over the past two years, have shown signs of recovery recently. Regan expressed confidence that the initial wage raise will take effect in the fall.
The budget agreement outlines $297.9 billion in spending for the upcoming fiscal year, starting July 1. It includes $16 billion in cuts, such as $110 million from a program aiding middle-class families with college expenses and $1.1 billion from various affordable housing initiatives. Some proposed cuts were abandoned, including a measure to stop funding caregivers for some low-income disabled immigrants on Medicaid.
Lawmakers also agreed to lend $400 million to Pacific Gas & Electric to extend the life of California’s only remaining nuclear power plant, despite concerns over repayment. Additionally, Newsom agreed to increase Medicaid payments to doctors, although the amount is less than previously planned. Meanwhile, doctors have qualified a measure for the November ballot to mandate higher payments for treating Medicaid patients.
