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HEALTH COSTS - A higher minimum wage for health care workers that Gov. Gavin Newsom signed into law is set to take effect in two weeks, but he is racing to delay it because of its potential impact on the state budget deficit.
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Update: California lawmakers on Monday announced they are pursuing legislation to postpone the health worker minimum wage law by one month to July 1.
According to the office of Sen. Maria Elena Durazo, who authored the law, the proposed delay aligns the law to the state fiscal year and gives legislators and the Newsom administration time to continue discussions about tying health care wage increases to California budget conditions.
Gov. Gavin Newsom is cutting it close. He signed a law last fall that phases in a $25 minimum wage for California’s lowest-paid health care workers beginning June 1. Then, he said he wanted to delay it because of its potential to exacerbate the severe state budget shortfall.
But two weeks before the deadline for employers to start paying more to their employees, many health workers are still waiting to hear whether they will in fact see a raise.
Some health workers remain hopeful. Others have already been notified by their employers of their upcoming raise or have already started to see increased pay.
When Newsom presented his latest budget proposal last week, the governor said negotiations around potential changes to the health worker minimum wage law, Senate Bill 525, are still taking place. He promised a deal between his administration, the Legislature and proponents of the law would be hashed out in the upcoming weeks.
“This budget will not be signed without that deal that we committed to being addressed,” Newsom said. He usually signs a budget for the next fiscal year in late June.
Meanwhile the union that advocated for the health care pay increase has launched an advertising campaign that aims to hold Newsom to the law he signed.
One ad by Service Employees International Union-United Healthcare Workers West on the social media site X shows a dialysis worker named Alice and it reads, “The dialysis care Alice provides is lifesaving. Yet, with caregivers at her facility starting out at only $18/hr, it’s no wonder there’s a short staffing crisis.
A $25/hr minimum wage for healthcare workers will help ensure patients get the care they need.”
Nathan Selzer, communications director for SEIU-UHW, said his union posted the messages because, “Our workers were concerned and remain concerned. What we saw in conversations earlier this year was folks really focusing only on money and only on dollars and cents, and not on what those dollars and cents are used for.”
SEIU-UHW is an affiliate of SEIU California, which sponsored the law.
“We made a decision that we’ve got to make sure we’re reminding people why this was made into law to begin with,” he said.
Selzer said he is not directly involved in conversations with the governor’s office and legislators, but that confusion among many workers rings true. “We’ve heard June 1, we’ve heard July 1. It remains to be seen what actually happens here,” he said.
Deadline to postpone minimum wage hike
What exactly is holding up the negotiations is unclear. Lawmakers and Newsom would have to pass and sign legislation that would push back the start date within two weeks to delay it effectively.
Newsom said he wanted to postpone the wage increase when he released his initial budget proposal in January. He asked the Legislature for an annual “trigger” that would tie the minimum wage increases to the state’s budget outlook. His administration projects the state is facing a $27.6 billion deficit in 2024-25.
The state has estimated the minimum wage increase could cost the state around $4 billion a year. That’s because the state would have to pay for the wage increases for its own employees at state health facilities and because the state may be forced to increase what it reimburses facilities for services provided to patients on Medi-Cal, its insurance program for low-income people, as a way to partially cover the pay raises.
The UC Berkeley Labor Center estimates the cost to the state to be much lower. Total health spending in California would increase by about $2.7 billion because of the law, but the state would be responsible only for a fraction of that, according to the Labor Center’s analysis.
Laurel Lucia, director of the Health Care Program at the Labor Center, said that there is no requirement in the law that directs the state to raise Medi-Cal payments to hospitals and clinics as a way to make up for the costs of higher wages, but the law could play a role in Medi-Cal rate negotiations.
“When the rates were set for 2024, there was recognition in the (rates) reportthat there might need to be changes to those rates due to” the minimum wage increase, Lucia said.
California hospitals, dialysis clinics raising pay
Absent any confirmed changes to the law, some employers and associations representing health employers say they are moving forward with the raises as scheduled.
“As far as we know, the minimum wage for health care workers will be going up as of June 1. We have no information that would indicate otherwise,” Jan Emerson-Shea, a spokesperson for the California Hospitals Association, said in an email this week.
The California Kidney Care Alliance, a trade association representing dialysis providers and clinics, said members are following the wage requirements as laid out by the law. “In fact, many providers have already increased wages well ahead of the requirements of the bill,” Jaycob Bytel, a spokesperson for the alliance, said in a statement.
Depending on where they work, employees are scheduled to receive from $18 to $23 an hour starting next month. That’s compared to the current statewide minimum wage of $16.
The wage hike will phase in over the years until workers reach $25 an hour.
Some health systems have already notified employees of the upcoming pay boost, including the University of California Health system. In a post on its website, UC Health said it would be moving forward with their scheduled wage hike of $23 an hour “meeting the most ambitious timeline” of June 1.
Meanwhile, some hospitals have already raised wages because of competition in the labor market. As an independent hospital that serves a high rate of low-income Medi-Cal patients, the wage law requires Kaweah Health Medical Center in Visalia to raise wages starting at $18 an hour.
“We are already seeing competitive changes in the market that have forced us to implement pay increases now, so we have not waited for June 1st,” Gary Herbst, chief executive of Kaweah Health, said in an email. “We are exceeding the state required $18 to remain competitive, and to continue recruiting and retaining great employees.”
Herbst said he rolled out increases beginning in February, and “will continue to evaluate it as time goes on.” He expects the law to cost his hospital about $30 million a year.
(Ana B. Ibarra covers health care for CalMatters where this article was first featured. Her reporting largely focuses on issues around access to care and affordability. )
