Governor Newsom released his May Revise of the proposed state budget on May 12, 2023. Due to falling revenues over the past few months, the $22.5 billion deficit predicted in January for the 2023-24 fiscal year has now grown to $31.5 billion. This was not good news nor a particular surprise. Fortunately, there are no proposed cuts to state employee compensation or other pay and benefit items included in the Administration’s proposal.
The Governor proposes to close the additional $9 billion shortfall by utilizing the same type of budget solutions he proposed in January - including funding delays, limited reductions and pullbacks, trigger reductions, and limited internal borrowing and revenue. The May Revise proposal includes a $450 million withdrawal from the Safety Net Reserve, but does not touch the $22.5 billion Rainy Day Fund which remains available for use in future fiscal years.
The result is a May Revise state budget that proposes expenditures of $306.5 billion ($224 billion general fund), which is about 1% less than the current fiscal year budget.
Regarding state employee compensation, the updated budget adds another $22.2 million in new employee compensation to reflect updated estimates for salary increases and updated estimates for the state employer’s health and dental costs. This addition brings the new employee compensation number to nearly $509.7 million to fund salary increases, health care costs for active state employees, and retiree health care prefunding for active employees.
This new employee compensation number is expected to increase significantly as 15 of the state’s 21 bargaining units are in bargaining for new labor contracts. ACSS is continuing the practice of making proposals to CalHR for related excluded employees and has a number of proposals pending at CalHR to address long-standing compaction and salary inequity issues.
The 2023-24 budget proposal contains a few highlights of importance to ACSS members:
- The proposed budget includes $8.5 billion to fund the state employer’s contribution to CalPERS.
- Despite the projected revenue shortfalls, the proposed budget includes a $1.7 billion additional one-time supplemental payment to CalPERS for state plans (to pay down liabilities and save state employer pension costs).
- The May Revise includes $7 billion to fund the state’s contributions for health care for active and retired state employees.
- The proposed budget maintains $711 million to meet the state’s commitment to prefund retiree health care in the next fiscal year.
ACSS will continue discussions over the next few weeks with CalHR over excluded employee pay increases and urge CalHR to address the many pending ACSS pay and benefit proposals made on behalf of supervisory and managerial employees. We will keep you apprised as the excluded pay plan for the fiscal year beginning July 1, 2023 comes into focus.
The May Revision summary can be found here: Budget Summary (ca.gov)