California Finance

California Faces Second Year of Budget Deficit, Delays Minimum Wage Increase for Health Care Workers

California Faces Second Year of Budget Deficit, Delays Minimum Wage Increase for Health Care Workers

California Democrats have reached an agreement to postpone a minimum wage increase for approximately 426,000 healthcare workers in order to address the state’s budgetary concerns.

An agreement has been reached between Gov. Gavin Newsom and legislative leaders as part of a larger plan to address a significant budget shortfall. This marks the second consecutive year that the nation’s most populous state has faced a multibillion-dollar deficit.

Healthcare workers were scheduled to receive a salary increase on July 1 as part of a long-term plan to gradually raise their pay to $25 per hour over the next ten years. If approved by the Legislature next week, the raise could be received on October 15th. However, it is contingent upon California’s revenues between July and September surpassing the estimated 3% increase.

The delay ensures the preservation of a hard-won victory for a prominent labor union in the state, which also happens to be a major campaign contributor for Democrats. Dave Regan, president of Service Employees International Union-United Healthcare Workers West, expressed workers’ disappointment over the lack of summer raises.

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California’s minimum wage of $16 per hour is one of the highest in the nation. Fast food workers in the state now earn a minimum wage of $20 per hour, a change that took effect in April and has had a widespread impact.

However, finding a solution to increase wages for healthcare workers is challenging due to the potential budget implications. California has a workforce of healthcare professionals who provide essential services, and the state ensures that medical benefits are covered through its Medicaid program.

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California Faces Second Year of Budget Deficit, Delays Minimum Wage Increase for Health Care Workers
Image: CBS News.

The administration of Newsom had previously stated that the increase in minimum wage would result in a cost of approximately $2 billion for the state. However, if the implementation is postponed until January, there will be a significant financial impact on the general fund.

The estimated cost would be around $600 million, and this amount would increase annually to account for scheduled raises until it eventually reaches $25 per hour for the majority of healthcare workers, as reported by ABC News.

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The budget agreement would allocate a total of $297.9 billion in spending for the upcoming fiscal year, starting on July 1. Newsom and legislative leaders have reached an agreement on a series of budget cuts amounting to $16 billion. These cuts include a reduction of $110 million to a program that provides financial assistance to college students from middle-class families, as well as a decrease of $1.1 billion across multiple affordable housing programs.

However, Newsom and lawmakers have reached a decision to eliminate certain proposed cuts, including the discontinuation of funding for caregivers of low-income disabled immigrants on Medicaid.

Lawmakers are expected to vote on the budget next week. Republicans, lacking sufficient seats to sway legislation, express their exclusion from the negotiations.

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