California seeks to delay $25 healthcare minimum wage to ward off budget crisis

California Gov. Gavin Newsom is seeking to delay a healthcare worker minimum wage increase that will cost the state $4 billion this year alone as the state faces a budget crisis.

Among Newsom’s proposals to cut the deficit from $73 billion to $7 billion are tying the state’s healthcare minimum wage increases, which would hike the wage to $23 per hour this June cost the state $4 billion in just the first year, to the financial position of the state’s general fund and exempt state facilities. The state’s minimum wage is $16 per hour, which means the increase would raise base labor costs by 44%.

“The Administration is … to add an annual 'trigger' to make the minimum wage increases subject to General Fund revenue availability, clarify the exemption for state facilities, and make other implementation clarifications,” wrote the governor in his January budget proposal.

State Sen. Maria Durazo, D-Los Angeles, author of the state’s $25 per hour healthcare minimum wage, which would be fully phased in by 2026, submitted an “urgent” bill to delay the wage from taking effect for another month as negotiations on the wage’s implementation continue.

The law increases the minimum wage for employees at employers with more than 10,000 full time or equivalent employees, or facilities in counties with more than 5 million residents, and applies to any employee in the health sector, including “food service staff” and “gift shop staff.”

California recently adopted a $20 per hour minimum wage for the fast food sector, a move that small businesses say effectively creates a new minimum wage for them as well given that they are in competition with fast food companies for the same pool of minimum wage workers. The $23 per hour, and ultimately $25 per hour, healthcare minimum wage would likely bring up labor costs for small businesses further, says National Federation of Independent Business California Director John Kabateck.

“We are finding more and more small business owners are already struggling to identify, hire, and retain qualified employees, and these kinds of policies are just making it next to impossible,” Kabatek told The Center Square. “This policy does nothing to advance our already fragile healthcare system in our state. The state is seeing the potential pain to its bottom line and state-run facilities; economic realities exist and they have real-world consequences.”