In a move to address California’s significant budget shortfall, state Democrats have agreed to delay a planned minimum wage increase for healthcare workers. The decision, part of a broader budget agreement with Governor Gavin Newsom, aims to mitigate the state’s $46.8 billion deficit.
Initially, approximately 426,000 healthcare workers were set to see a pay raise on July 1, with their hourly wage gradually increasing to $25 over the next decade. Under the new plan, this raise will be postponed to October 15, contingent on the state’s revenues exceeding projections by 3% between July and September. If this condition is unmet, the raise will be delayed further to January 1.
This delay is a significant development for the Service Employees International Union-United Healthcare Workers West (SEIU-UHW), a prominent labor union and major supporter of Democratic campaigns. Dave Regan, SEIU-UHW president, expressed mixed feelings: “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.”
California’s minimum wage, currently $16 per hour, is among the highest in the United States. Fast food workers in the state earn a minimum of $20 per hour, a policy implemented in April. However, raising the minimum wage for healthcare workers presents unique challenges, given the fiscal impact on the state’s budget, which funds healthcare workers and medical benefits through Medicaid.
Governor Newsom’s administration previously estimated the wage increase would cost the state about $2 billion. Postponing the raise until January reduces this financial burden to approximately $600 million, with costs expected to rise annually as the wage increases.
The budget agreement includes $297.9 billion in spending for the upcoming fiscal year starting July 1. The plan involves $16 billion in cuts, affecting programs such as middle-class college assistance ($110 million) and affordable housing ($1.1 billion). However, some proposed cuts were rescinded, including funding for caregivers of low-income disabled immigrants on Medicaid.
Additionally, the budget includes a contentious $400 million loan to Pacific Gas & Electric to extend the life of California’s last nuclear power plant. This move faced opposition due to concerns about repayment.
Governor Newsom also reversed his stance on Medicaid payments to doctors, agreeing to increase these payments despite earlier proposals to cut them. This change was driven by concerns over doctor shortages willing to treat Medicaid patients, with the potential for adjustments based on a November ballot measure’s outcome.
“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 stated.
The state Legislature is expected to vote on the budget this week. Republican lawmakers, excluded from the negotiations, voiced their frustration. Senate President Pro Tempore Mike McGuire acknowledged the challenging budget year but emphasized the efforts to protect key services and maintain reserves. Assembly Speaker Robert Rivas echoed this sentiment, highlighting the fight to safeguard essential public services.
As California grapples with its financial challenges, the delay in the wage increase for healthcare workers underscores the difficult decisions faced by state leaders. Balancing fiscal responsibility with the needs of workers and public services remains a critical and complex task for the administration.
