Newsom To Propose 10 Percent State Worker Pay Cut In Wake Of COVID-19 Budget Shortfall
SACRAMENTO (CBS SF/AP) -- As the state's budget deficit continues to rapidly increase by the minute with the devastating fiscal toll being taken on California's economy by the coronavirus outbreak, Gov. Gavin Newsom was expected to propose a 10 percent pay cut for state worker in the new revised budget..
Gov. Gavin Newsom says the state's coffers -- flush with surplus cash in January -- have been drained by nearly two months of a forced industrial shutdown, the cost of purchasing the medical supplies ended to battle the virus and more than 4.5 Californians filing for unemployment aid since mid-March.
In a press release, state officials said negotiations would commence or continue with the state's collective bargaining units to achieve reduced pay of approximately 10 percent. The May budget revision includes a provision to impose reductions if the state cannot reach an agreement.
A prominent union leader had taken to social media to warn that Newsom will be proposing 10% pay cut to all state employees when he talks about the projected $54.3 billion budget deficit during his Thursday news conference.
SEIU Local 1000 President Yvonne Walker said in a Facebook video that Newsom's office informed her of the proposed cut on Wednesday. A state official with knowledge of the budget confirmed the proposal to the Associated Press, adding it will be part of the collective bargaining process.
The state official spoke on condition of anonymity because they were not authorized to release the information ahead of Newsom's formal announcement.
If the Newsom administration fails to achieve the necessary savings through negotiation, the governor could order furloughs instead.
Walker said the union will try to negotiate an alternative plan. Newsom's office did not immediately respond to a request for comment.
"We can call the bargaining team together and we can figure out the equivalent of what that 10% represents and try to negotiate something," Walker said. "Yeah, there might be a little pain involved but it won't be the same as two furlough days."
Tim Edwards, president of CalFire Local 2881, the union representing state firefighters, said Thursday the state notified them there will be a 10% pay cut. "We just don't know what it means for us as a whole," Edwards said.
Four months ago, Newsom revealed a $222.2 billion spending plan that included a nearly $6 billion surplus and a host of new programs, including starting the state's own prescription drug label and giving taxpayer-funded health care to low-income senior citizens living in the country illegally.
All that changed in March, when Newsom issued a mandatory, statewide stay-at-home order to slow the spread of the coronavirus. The order closed schools and most businesses, prompting more than 4.5 million people to file for unemployment benefits. With so many people out of work, state tax revenues have plummeted.
Budget problems are not new for California, having spent much of the last decade navigating through multi-billion deficits in the wake of the Great Recession.
But it is a first for Newsom, who had a historic $21 billion surplus when he took office in 2019. He won praise from key constituencies for paying off the state's lingering recession-era debts and handing out first-in-the nation subsidies to help middle-income earners pay their monthly health insurance premiums.
Now, Newsom has to decide what to cut.
"My history with government is it does a really good job of expanding and it does an awful job of contracting," said Republican state Sen. John Moorlach, who was the Orange County treasurer-tax collector in the aftermath of the county's bankruptcy in the mid-1990s.
Lawmakers must pass an operating budget by June 15. .
On Wednesday, Newsom said his revised budget will include more than $200 million to increase the state's preparations for looming wildfires and other disasters. That includes hiring 600 firefighters who will help make up for the loss of dozens of inmate firefighters who were paroled early to ease the risk of coronavirus outbreaks in state prisons.
It includes money for the state's Public Utilities Commission to hire more than 100 people for a new wildfire safety division to oversee Pacific Gas and Electric and other power companies whose equipment can spark fires and who have increasingly turned out the lights to prevent ignitions during dry windstorms.
Newsom also wants to spend $50 million in grants to local governments to help prepare for those power shutoffs.
He has repeatedly noted that California is in a better position to deal with it than before the last recession. The state has at least $16 billion in its "rainy day fund." The money isn't enough to cover the shortfall, but it cushions the blow.
State Sen. Holly Mitchell, a Democrat from Los Angeles and the chair of the Budget and Fiscal Review Committee, said lawmakers have identified $94 billion in savings over the next two years. About $41 billion comes from reserves, spending cuts, internal loans and deferring some costs to future years.
The rest would come from the federal government, including a $33 billion request that Congress has not yet approved. State Senate President Pro Tempore Toni Atkins vowed earlier this week to avoid "major ongoing program cuts or broad middle class tax increases," saying they may help in the short term but "cause more economic damage and prolong our budget struggles."
"Our budget approach seeks to avoid becoming part of the economic problem," she said.
The state Assembly's leaders have made no such promises. Assembly Budget Committee Chair Phil Ting has said the chamber is considering all options, including tax increases. A memo from the Assembly Budget Committee this week said they expect "to make difficult decisions to ensure California's budget is balanced."
© Copyright 2020 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.
