Will Gov. Newsom end state worker pay cuts with tax revenue soaring? Here’s what he said

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Gov. Gavin Newsom said Monday that he will continue to work through the collective bargaining process to restore state workers’ pay after the Finance Department reported tax revenue is running $10 billion above projections.

Speaking at an Elk Grove news conference, Newsom credited state employee unions with “stepping up” by agreeing to accept pay cuts last year when California was projecting a $54 billion deficit.

“We’re going to work with them in a collaborative spirit, great respect and admiration” on restoring workers’ pay, Newsom said.

Last year’s dire predictions, made at the onset of the coronavirus pandemic, didn’t come to pass. California ended 2020 with a historically large surplus, and recent Finance Department figures show the trend continues, with revenues through January coming in about $10.5 billion — or about 10% — ahead of projections.

Yet roughly 230,000 employees are still working at reduced pay, saving the state about $2.4 billion per year.

The pay cut agreements Newsom’s administration reached with state unions took effect in July, reducing most workers’ base pay by 9.23%. Employees received two days off per month in exchange and the state suspended the contributions they normally make to their retirement health care.

Unlike the furloughs imposed by former Gov. Arnold Schwarzenegger during the Great Recession, the pay cut agreements were reached quickly and without litigation.

Most of the cuts are scheduled to last two years, but the agreements give Finance Director Keely Bosler “sole discretion” to restore “some or all” of the reductions if the state gets federal aid or if revenues exceed expectations.

Bosler said in January that the administration hoped to restore workers’ pay in July, when the new budget year begins, but that budget officials were waiting on a budget update that comes in May of each year before making final determinations.

Newsom didn’t provide any specifics of a new schedule for those talks on Monday.

“We’re very cognizant of our fiscal health changing radically,” he said, citing the state’s record reserves and what he identified as a “one-time” operating surplus.

Mike Genest, who was the state finance director under Schwarzenegger, said he sympathizes with Bosler given the remaining uncertainty.

“Any director of finance is going to wish not to have to raise anything,” Genest said. “No matter what it is, you’re going to hope it doesn’t have to go up, or go up as much as somebody wants.”

In addition to the reductions, the state suspended most of the raises that workers were scheduled to receive under prior agreements.

Some union leaders have called for the state to restore workers’ pay and give them the raises they were scheduled to receive.

Questions over what happens with those raises could complicate discussions of restoring pay. Additionally, three state unions — representing scientists, social services workers and attorneys and judges — are in negotiations now over contracts that expired last summer.

Cal Fire Local 2881 and a group of employees represented by the International Union of Operating Engineers have contracts expiring at the end of June.

Newsom’s bargaining team likely would be hesitant to restore workers’ pay independently of contract negotiations for those groups.

Brandy Johnson, a district representative for the International Union of Operating Engineers, which represents state maintenance and HVAC workers, called on Newsom to make restoring pay a more urgent priority.

“He should have been addressing these issues around the concessions, or the 9.23 percent reduction, the moment he knew there was a surplus,” Johnson said. “We’ve been reaching out to him since that announcement to discuss the rollback of the concessions, and there hasn’t been a response to that.”

The California Correctional Peace Officers Association, one of the first state unions to reach an agreement with Newsom’s administration over the pay cuts last year, expressed confidence in Newsom’s dedication to restoring pay.

“We are confident that Gov. Newsom will work collaboratively with us to restore pay, on a reasonable timeline,” CCPOA President Glen Stailey said in an emailed statement Monday. “We are all on the same team.”