(Bloomberg Government) — A new minimum wage for health care workers in California will be delayed until at least Oct. 15 under a deal between state lawmakers and Democratic Gov. Gavin Newsom.
The agreement announced on Saturday ties the implementation of the minimum wage to state finances. The rate was due to take effect on July 1.
Passage of the wage bill last year was a major victory for California labor unions, but Governor Newsom expressed concern about the cost the bill would impose on state government at a time when the state is struggling with a budget deficit.
Under the agreement, the minimum wage would take effect on Oct. 15 if state revenues from July through September are at least 3% higher than current projections.
If state revenues don't rise to that level, the minimum wage increase could be delayed until Jan. 1.
As state lawmakers grapple with a projected $27 billion deficit, the governor has been pushing for months to add annual conditions that would condition the minimum wage increase on the state's general fund situation.
But the proposal initially failed as workers and lawmakers defended the minimum wage increase.
Parliament voted in late May to delay the minimum wage by just one month, delaying its implementation from June 1 to July 1.
The move postpones the law's implementation until the state's new fiscal year, giving lawmakers time to work out the budget and negotiate further changes.
The agreement announced Saturday also includes a commitment from the Newsom administration to seek additional funding from the federal government to help hospitals cover costs.
The new minimum wage, if implemented in January, is expected to cost the state $1.4 billion next fiscal year, about $600 million of which would come from the state's general fund, according to preliminary state government data.
Dave Regan, president of SEIU-United Healthcare Workers West, said in a statement that union members are disappointed but “we recognize and appreciate that legislative leaders and the governor listened to us when we mobilized and spoke out this year.”
The law covers not only health care workers, but also cleaners, groundskeepers, cooks and other workers in health care facilities.
The new minimum wage will vary by the size, location and type of health care facility, with workers at larger systems and dialysis clinics receiving at least $23 an hour. Twelve health systems in California fall into that category, including hospitals owned by Tenet Healthcare Corp., the University of California Health Department and Stanford Health Care.
Health systems are adjusting wages in preparation for the tax hike, which the University of California, Berkeley Labor Center estimates will affect 322,000 workers directly employed by health care facilities.
According to the center, an additional 76,000 workers will indirectly see a wage increase through a “spillover” effect on the wages of workers in the same establishments who earn just above the new minimum wage.
To contact the reporter on this story: Andrew Oxford in Sacramento at aoxford@bloombergindustry.com
To contact the editor on this story: Bill Swindell at bswindell@bloombergindustry.com
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