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Gov. Gavin Newsom announces plan to modify scheduled health care wage increases

Pictured is the Ronald Reagan UCLA Medical Center. Gov. Gavin Newsom announced plans to adjust health care wage increases in his 2024-2025 state budget proposal. (Joseph Jimenez/Photo editor)

By Dylan Tzung

Jan. 25, 2024 10:09 p.m.

Gov. Gavin Newsom announced plans to revise scheduled health care wage increases in his 2024-2025 state budget proposal, which was released Jan. 10.

Senate Bill 525, passed in October, established incremental wage increases to gradually phase in a new statewide $25 minimum wage for all health care facilities by June 1, 2028. The first increase was scheduled to go into effect on June 1, 2024.

[Related Link: Gov. Newsom signs bills to raise minimum wages for fast food, health care workers]

However, faced with closing the projected budget deficit of nearly $38 billion, Newsom’s administration intends to work with the state legislature and stakeholders to revise elements of the law, Newsom said in a budget presentation conference.

In the budget summary, his administration announced plans to specify whether state facilities are exempt, resolve any confusion surrounding the implementation of SB 525, and establish an annual “trigger” mechanism for the release of scheduled wage increases.

The planned “trigger” mechanism, which renders the release of scheduled wage increases subject to the state’s fiscal outlook, is expected to cause delays in the scheduled health care wage increases.

Chris Tilly, a professor of urban planning, said there needs to be a better response to the budget deficit that doesn’t involve delaying the wage increases necessary for health care workers to attain a decent standard of living.

“That’s not really who should be paying for the budget gap,” Tilly said.

The UC Berkeley Labor Center published a report in April analyzing how the proposed wage increases in an early version of SB 525 would impact workers, patients and the health care industry as a whole. According to the report, wage increases would play a significant role in alleviating financial concerns for health care workers who earn low wages and their families.

Laurel Lucia, the director of the health care program at the UC Berkeley Labor Center, said the report also determined that the proposed wage increases would particularly benefit women and workers of color. Workers of color account for 70% of the population included in the SB 525 wage increases, and three out of four affected workers are women, according to the report.

Tilly said delays in the wage increases will continue to make it difficult for health care workers to meet their expenses and afford housing within a reasonable commute of their place of work.

“They’re going to pay in terms of money and in terms of time,” Tilly added.

Newsom said in the budget presentation that all stakeholders involved in passing SB 525 agreed to implement the “trigger” mechanism before he signed the bill. However, Tilly said he expects labor unions will take Newsom’s revisions as a betrayal and reenter negotiations with new pressure tactics.

Lucia said intertwined concerns about the cost of SB 525 and the state budget deficit drove Newsom to request a collaborative revision of the law. However, she added that the UC Berkeley Labor Center’s cost estimate for SB 525 is far lower than the circulating estimates, falling in the range of several hundred million dollars rather than billions of dollars.

Lucia said she expects that the failure to account for Medi-Cal caseload savings is one of several methodological differences accounting for variations in other cost estimates.

According to a June report from the UC Berkeley Labor Center, the workers affected by SB 525 will become eligible to transition from Medi-Cal to Covered California, a federally subsidized insurance program. With nearly half of all the affected health care workers and their families enrolled in public safety net programs, including Medi-Cal, the report suggests that Medi-Cal caseload savings will help offset cost increases related to SB 525.

Daniel J.B. Mitchell, a professor emeritus at the UCLA Anderson School of Management and the Luskin School of Public Affairs, said state budget planning was uniquely challenging this year because of personal income tax collection delays. The Internal Revenue Service postponed the typical April filing deadline for California’s taxpayers to Nov. 16 – seven months after the typical April deadline – because of the impacts of last winter’s natural disasters, including severe storms, flooding, mudslides and landslides.

As a result of the delays, Mitchell said Newsom’s administration likely had to begin work on the 2024-2025 budget proposal well before it received an estimate of the expected revenue from personal income tax.

Mitchell said the imprecise nature of the planned revisions to SB 525 and the proposed “trigger” mechanism indicate that Newsom’s administration has not yet decided how to proceed.

“They have not really thought through what they want to do,” Mitchell said. “You can call it a trigger, or you can just say they want to delay it.”

Despite the likelihood that revisions to SB 525 will cause delays in releasing the scheduled wage increases, Tilly said the signing of SB 525 was nonetheless a victory. He added that the law not only ensures that the wage increases cannot be abandoned entirely, even if implementation is slower than expected, but it also serves as a symbolic victory, reinforcing the need to implement raises for low-wage workers.

“Low-paid workers need a raise,” Tilly said. “It’s our collective responsibility to figure out how that happens.”

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Dylan Tzung
Tzung is the 2023-2024 assistant Enterprise editor. She was previously an Enterprise team lead and a contributor for PRIME and News. She is also a third-year global studies and political science student.
Tzung is the 2023-2024 assistant Enterprise editor. She was previously an Enterprise team lead and a contributor for PRIME and News. She is also a third-year global studies and political science student.
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