California healthcare workers banking on a state-ordered minimum wage increase later this year might have to wait a little longer.

Ana B. Ibarra

CalMatters

Because of the state’s $38 billion projected budget deficit, Gov. Gavin Newsom on Wednesday said he is seeking changes to a law he signed just three months ago that set the healthcare industry on a path to a $25 minimum wage.

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The first pay increases were expected to take effect in June. It’s unclear how long the proposed changes could push back that schedule. Newsom wants the wage increases to take place when the state’s fiscal outlook is healthy.

He said he signed the law, Senate Bill 525, in October because he “had a commitment on that trigger” from proponents of the law, meaning that the bill’s backers had agreed to tie the wage increase to the state’s budget outlook. His administration did not disclose that agreement when he signed the law.

Erin Mellon, a spokesperson for the governor’s office, said the administration publicly discussed the possibility of clean-up legislation soon after Newsom signed the law. She pointed to a Los Angeles Times article that published three weeks after Newsom signed the law in which another spokesperson said the administration was working on “accompanying legislation to account for state budget conditions and revenues.”

Newsom included his request for a delay in the state budget proposal he released Wednesday. He said he is working with legislators and the law’s proponents to craft changes that will be presented in the form of a new bill later this month. His budget proposal said he also wants the Legislature to clarify whether state health workers are exempt from the law.

California Minimum Wage Increases

The law was one of two bills Newsom signed last fall raising the minimum wage for certain workers in specific industries. A separate law that raises the minimum wage for fast-food workers to $20 an hour starting in April is moving forward. The California minimum wage for other workers is $16 this year.

Close to 500,000 California healthcare workers are expected to see pay increases under the minimum wage law for their industry once it goes into effect.

The bill came together late in the legislative year after SEIU, the law sponsor, and a group of healthcare employers, including the California Hospital Association, brokered a deal under which both sides supported the wage increase. Newsom signed it without a clear cost estimate.

Newsom’s Department of Finance released a price estimate in November, projecting it would cost the state approximately $4 billion in 2024-25, with $2 billion coming out of the state general fund.

SEIU declined an interview after Newsom’s budget remarks. It released a statement that said it would continue working with the administration and the Legislature.

Lawmakers Anticipated Budget Deficit

Newsom’s signature on the bill surprised some lawmakers because they anticipated a steep deficit.

“While we didn’t know what the deficit was at the time, I, at least, was assuming that the news was going to be not good and I couldn’t understand why we would be so deliberately adding to our own overhead,” said Sen. Roger Niello, a Fair Oaks Republican who sits as vice chair of the Senate budget and fiscal review committee

The health worker pay law aims to create more sustainable incomes as a way to retain and attract workers in a field that for years now has been dealing with serious staff shortages. The law would cost the state because it applies to workers at state-owned facilities and because the state would likely have to raise Medi-Cal rates paid to providers to offset some of the increased costs associated with the wage hikes.

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Before securing a statewide boost in pay, SEIU California and its affiliate chapters pushed to increase wages for health workers at the local level through city ordinances and ballot measures. In 2022, the union secured its first local win in the city of Inglewood, where health workers at private health facilities qualified for a new floor wage of $25 that went into effect on Jan. 1, 2023.

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