New details on Newsom’s state worker proposal — what happens to raises, health deductions?

Gov. Gavin Newsom tentatively offered state employees some good news last week when he said his administration might undo the pay cuts the workers absorbed last summer.

Newsom provided few specifics, citing uncertainty that still surrounds the state’s financial forecast despite projections of a surplus.

The Finance Department later posted more specific budget documents that, while still not final, show the administration anticipates restoring pay in July while continuing to withhold raises many workers were scheduled to receive last summer.

The proposed budget anticipates ending the personal leave program that reduced most state workers’ pay by 9.23%. Workers will no longer receive two extra days off per month and they’ll have to resume contributions to their retirement health care if the program ends.

The state also suspended until July 2022 most of the raises it had agreed to give workers in union contracts. Department-level budget documents don’t reflect any general salary increases in the fiscal year to come, suggesting those raises will remain suspended.

The documents also seem to say workers will have to resume contributions to their retirement health care, said Nick Schroeder, of the Legislative Analyst’s Office. The contributions, which range from 1.4% to 4.6% of state workers’ pay, were suspended to soften the hit from the cuts.

In an email, Finance Department spokesman H.D. Palmer said only that the retirement contributions would remain suspended as long as the personal leave program is in effect.

Several union leaders said the employees they represent should get the raises they were scheduled to receive last summer, or similar increases.

“This pandemic has hurt a lot of people, but it did not have the severe budget implications that it was assumed to have last year, so let’s start undoing the cuts that state employees had to bear to be part of the solution,” said Ted Toppin, executive director of the union Professional Engineers in California Government.

A two-year contract the engineers’ union negotiated with Newsom’s administration, running from 2020 to 2022, provides a 3% general salary increase in 2022.

Three state unions, representing scientists, social services workers and attorneys and judges, are in negotiations now over contracts that expired last summer.

The contract for the union that represents Cal Fire firefighters, Cal Fire Local 2881, expires at the end of June. So does the contract for a group of maintenance workers and groundskeepers represented by the International Union of Operating Engineers.

Newsom and the Legislature faced a projected two-year budget deficit of $54 billion when they cut state workers’ pay last year. The pay reductions are saving the state about about $2.4 billion per year, according to the Legislative Analyst’s Office.

California collected more in taxes than expected in the months since July, mostly because high earners have not been hit hard financially by the coronavirus, budget officials said last week. As a result, the state anticipates a $15 billion surplus for the fiscal year ahead.

“This budget reflects this state is doing pretty damn well,” Newsom said at last week’s news conference.

Pandemic uncertainty

The pay cut agreements said that if California’s financial outlook improves significantly, or if the state receives federal help by October, the state finance director could restore “some or all of the various pay items that have been suspended or reduced.”

The October deadline came and went without federal aid that could have triggered pay restorations.

However, “the level of available federal aid or stimulus funding available could be part of the determination in May as to whether the state’s fiscal condition permits proposing to end the (personal leave) program early,” Palmer, the Finance Department spokesman, said in an email.

Finance Director Keely Bosler said in a press conference last week that while the state’s revenues came in higher than expected over the last year, the May budget revision would present a clearer picture of the fiscal year ahead.

More help in Biden’s proposal

Several union representatives expressed cautious optimism about negotiations over restoring pay, which are expected to start immediately after the May revision comes out.

“Those were promises, deals made with the bargaining units that if there’s money there they’ll restore that, said Tim Edwards, president of Cal Fire Local 2881. “I’m glad the administration is keeping its word. Now we’ll just see what the legislators do.”

Contributing to the uncertainty between this month and May are questions about the durability of the stock market’s upward climb. Markets sank early in the pandemic and then rebounded to record highs. Some fear the trends represent a bubble that could burst, which would negatively affect California’s tax revenues and the investment funds that support public pensions and retirement health care.

A coronavirus relief package released by President-elect Joe Biden on Thursday includes some potentially encouraging news for public employees.

The federal proposal sets aside $350 billion in emergency funding for state and local governments that could cover expenses including those required to “keep front line public workers on the job and paid,” according to an outline released Thursday.

Some of that money likely would flow to California, but it’s not clear if it would go to the state government or to cash-strapped local governments.

McClatchy reporter David Lightman contributed reporting from Washington, D.C.