2024-2025 Proposed State Budget – $37.9 Billion Shortfall and End of Telework Stipend

On January 10, 2024, Governor Gavin Newsom released his proposed 2024-2025 State Budget that will fund state government for the 12-month period starting July 1, 2024.

State spending next fiscal year would be $291.5 billion as part of a balanced budget, with $208.7 billion in general fund spending. The Governor’s budget projects an estimated budget gap of $37.9 billion in the 2024-25 fiscal year. This is considerably better than the $68 billion shortfall that the Legislative Analyst’s Office had projected in early December 2023.

The Governor’s proposed solutions to bridge the shortfall include funding delays and deferrals, reductions and fund shifts, and utilizing budget reserves. Among those solutions is tapping $12.2 billion from the Rainy Day Fund. This would leave $11.1 billion in the main Rainy Day Fund.

While much remains to be seen regarding revenue projections which may change with the May Revise and the final budget for the year, the direct impact of the Governor’s proposed budget on ACSS members’ compensation is limited to state employee telework stipends as discussed below.

Regarding state employee compensation, the Governor’s budget proposal summary funds programmed salary and benefit increases:

The Budget includes $1.3 billion ($676.3 million General Fund) for increased employee compensation, health care costs for active state employees, and retiree health care prefunding contributions for active employees in 2024-25. Included in these costs are collectively bargained salary and benefit increases resulting from contract and side letter negotiations. Funding is also included for 2025 calendar year projected increases in health care and dental premiums and enrollment.

The proposed budget would eliminate the telework stipend for state employees beginning with the July 2024 pay period for a savings of $51.2 million. The budget would temporarily reduce department and agency appropriations for various vacant positions with full funding being restored in future budget years. The budget also would defer June 2025 payroll costs to the next fiscal year, an accounting mechanism that has been used previously with no impact to state employees.

In a meeting with CalHR on January 10, 2024 regarding the proposed end of the telework stipends, ACSS informed CalHR that the budget announcements would not dissuade ACSS from continuing advocacy for supervisors and managers whose classifications should have been included in the recent Special Salary Adjustments. CalHR committed to reviewing ACSS proposals regarding these salary adjustments.

As the proposed state budget progresses, ACSS will continue to meet with CalHR and to protect the interests of supervisory and managerial employees before the Legislature.

The Governor’s complete budget summary can be found here: Budget Summary (ca.gov)