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  • Here are the winners and losers in California Gov. Gavin Newsom’s May Revise budget

    Here are the winners and losers in California Gov. Gavin Newsom’s May Revise budget

    California Gov. Gavin Newsom’s May Revise budget proposal offered few winners, and plenty of losers, Friday, as he unveiled an austere vision for state finances.

    Newsom called for slashing more than $32 billion in one-time and ongoing spending, with reductions, cost shifts and delayed spending across a wide variety of state departments and programs.

    The governor however presented a defiant stance at his press conference Friday, telling reporters that “we’re holding the line on unprecedented investments.”

    State lawmakers and Newsom will hash out the details over the next few weeks. The Legislature is required to pass a balanced spending plan by June 15 and the governor must sign it before the new fiscal year begins on July 1.

    Here is a look at who won and who lost under Newsom’s revised budget proposal:

    Losers

    State workers: While state workers dodged furloughs in this year’s tough budget, they didn’t emerge entirely unscathed.

    Newsom announced that he wants a 7.95% cut to state operations beginning this next budget year. That’s in addition to the 10,000 vacant state worker positions that he wants to see eliminated.

    “So we want a leaner government…streamlined government. We want to do what all of you are doing in your personal lives, all the businesses out there doing in their professional lives as well, and we think we can do that and still achieve outstanding outcomes,” Newsom said.

    Public health: Despite being just a year removed from one pandemic, and amid growing concerns of a possible future one, Newsom has proposed slashing hundreds of millions of dollars from state and local public health spending.

    The governor wants to see $52.5 million reduced from last year’s budget, and a further $300 million in ongoing spending reductions.

    Asked about his proposal to cut public health spending amid pandemic concerns, Newsom offered a matter-of-fact response.

    “We have a shortfall. We have to be sober about the reality of what our priorities are,” he said.

    The governor’s proposal drew condemnation from those in the public health sector.

    “Local public health officials are astounded that just one year after the COVID-19 public health emergency ended, the administration has proposed repeating the same mistakes that left public health departments under-prepared and under-resourced and communities of color so vulnerable,” said Michelle Gibbons, Executive Director of the County Health Executives Association of California in a statement. “The biggest lesson of COVID-19 is that waiting until a crisis to invest in public health is a costly and deadly mistake that we can’t afford to repeat.”

    Cities that rely on homelessness grants: California has given out billions of dollars in flexible spending grants in recent years for local governments to put toward reducing homelessness. Mayors of large cities have praised the Homeless Housing, Assistance and Prevention program, or HHAP, and the flexibility it provides to spend money on as needed in their own communities, whether it’s standing up new shelters or placing people in interim housing. City leaders have asked Newsom and lawmakers to dedicate permanent funds to the program.

    Instead, Newsom’s spending plan would cut $260 million from the next round of funding, which was slated to be $1 billion. It does not include funding for HHAP beyond that.

    “That may not sit well with some, but we’re not seeing the results I want to see,” Newsom said.

    San Diego Mayor Todd Gloria, who chairs the Big City Mayors coalition, said “California’s homelessness problem will only get worse” if the program is cut.

    “If the state wants to reverse the trend of more people falling into homelessness, cutting off funding for programs that are keeping tens of thousands of people indoors and off the streets isn’t the way to do it,” Gloria said.

    Child care providers: After years of increasing investments in child care for California’s low-wage workers, Newsom proposed freezing subsidies at their current level.

    That means about 81,000 state-subsidized child care slots won’t be available for working parents as planned by 2026. The number is part of an agreement between the state and child care providers union to reach 200,000 subsidized child care slots.

    Newsom’s administration estimates the freeze would save $1.4 billion over two years. “Right now we don’t want to cut programs but we want to hold the line,” he said.

    Child Care Providers United, the union representing 40,000 workers in child and family care, ratified its first contract with the state in 2021.

    “We cannot build a stronger economy when our lowest paid workers, including those working irregular hours, don’t have somewhere safe to send their children during their shifts,” said Yolanda Thomas, a child care provider in Contra Costa County and member of the CCPU negotiating team. “The state cannot fix our current budget outlook by making cuts to the safety net or balancing the budget on the backs of working families.”

    Middle class students: Newsom’s budget proposal would slash scholarships for middle class students by $510 million, leaving $100 million in the program. The scholarship is open to undergraduates and students seeking teaching credentials at state universities with family income under $217,000.

    Newsom said the program saw infusions of cash in recent years of state surplus. He characterized the cuts as “basically level-setting back to where it was.” He also expressed disappointment about cutting the scholarship fund, saying he “enthusiastically” supported its creation as lieutenant governor.

    Winners

    Taxpayers: Faced with a large deficit, state lawmakers and governors can cut spending, raise revenue, or do some combination of both. As governor, Newsom has strongly resisted general tax increases, and he once again declined to get behind raising taxes on individuals or businesses.

    “I don’t see there’s real evidence and need right now to increase general taxes and put more burden on working folks,” he said.

    Some progressive lawmakers have tried to raise taxes on businesses and wealthy earners, but none of those have gained traction over the governor’s opposition.

    Newsom joked his resistance to tax increases was “subject to some random act of God” noting he had experienced “a number of those” crises over his five-plus years in office.

    State workers: Despite a massive deficit, state workers managed to get through another year with no furloughs. Newsom’s budget proposal also maintains scheduled cost of living adjustments under existing union contracts.

    “No furloughs, no layoffs. We’re not asking for wage cuts,” he promised.

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  • NC health plan discriminates against transgender workers, federal appeals court rules

    NC health plan discriminates against transgender workers, federal appeals court rules

    A federal appeals court ruled that North Carolina’s state health insurance plan discriminated against transgender patients by not covering gender-affirming care.

    Transgender state workers sued the state in 2019 over a coverage exclusion in the State Health Plan for treatments for gender dysphoria, the medical term for distress occurring when someone’s physical sex doesn’t match their gender identity.

    The 4th Circuit U.S. Court of Appeals sided with the workers on Monday, finding that the exclusion violated the Equal Protection Clause of the U.S. Constitution by discriminating on the basis of gender identity and sex.

    The case could be appealed to the U.S. Supreme Court.

    Defendants in the case, which included state Treasurer Dale Folwell, argued that the exclusion did not specifically target transgender people because it applied to everyone diagnosed with gender dysphoria.

    “In this case, discriminating on the basis of diagnosis is discriminating on the basis of gender identity and sex,” Judge Roger Gregory wrote in the majority opinion.

    “Gender dysphoria is so intimately related to transgender status as to be virtually indistinguishable from it,” Gregory wrote. “The excluded treatments aim at addressing incongruity between sex assigned at birth and gender identity, the very heart of transgender status.”

    The State Health Plan covers over 740,000 public employees and their dependents.

    The North Carolina General Assembly passed several laws targeting transgender people last year, including a ban on gender-affirming care for minors and a ban on transgender women’s participation in women’s sports.

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  • California Gov. Gavin Newsom could cut vacant state worker jobs to solve budget deficit

    California Gov. Gavin Newsom could cut vacant state worker jobs to solve budget deficit

    State departments could lose some funding for personnel and operations this fiscal year as California leaders try to whittle down spending and deliver a balanced state budget.

    The nonpartisan Legislative Analyst’s Office estimates in a new report that salaries and benefits for California’s roughly 250,000 state employees cost the state roughly $40 billion a year.

    “It’s kind of hard to envision a full solution that doesn’t touch personnel costs,” said Nick Schroeder, an LAO analyst who specializes in public employment and state worker labor relations. “Personnel costs constitute a significant portion of every department’s budget.”

    Union contracts generally prevent layoffs, pay cuts and suspension of health and retirement benefits. But one target for funding cuts are vacant positions that departments have the funding for but, for whatever reason, haven’t filled. Departments can re-purpose the money that would otherwise pay those salaries and benefits for vacant positions. To save money, the state could identify which vacancies the departments could survive without and then cut departmental budgets by the cost of those positions.

    Vacancies have been unusually high across the board, according to the latest LAO report. While the statewide vacancy rate has consistently hovered above 10% for at least the last 20 years, vacancies in recent years have at times ballooned to more than 20%. As of last month, about one in five state jobs was vacant.

    How would the governor cut vacant positions?

    Gov. Gavin Newsom’s administration has proposed cutting $1.5 billion in vacant staff positions across departments. These cuts would reduce salary and benefits costs by about 4%. For comparison, the Personal Leave Program imposed during the pandemic reduced personnel costs by 4.62%.

    The “vacancy sweep” would save the state’s General Fund an estimated $762.5 million. The General Fund currently faces a projected $73 billion deficit, according to the LAO (the administration originally tabulated the deficit closer to $38 billion).

    Under the governor’s proposal, the cuts would be “unallocated,” meaning the budget bill would not precisely outline which programs and positions would be cut. Instead, the Department of Finance would work with each department to take an inventory of vacancies and determine which positions could be cut. The administration wants to “minimize disruptions to state services and operations” and essentially reduce inefficiencies. The cut costs would be reinstated for the 2025-26 fiscal year under the current budget proposal.

    The LAO argues that the proposed method elbows the Legislature out of the decision-making process. It also says the speedy timeline required to reap savings in the 2024-25 fiscal year would likely lead to fewer dollars saved than originally projected.

    “Unallocated cuts can be difficult to achieve in full,” the report states. “This especially is true when the reductions are determined through a collaborative process that allows for departments to be exempt from any reductions or receive a lower level of reduction.”

    On top of that, questions remain about whether public safety departments that rely heavily on the General Fund, such as the Department of Corrections and Rehabilitation and Cal Fire, would be excluded from the cuts.

    Instead, the LAO recommended the Legislature try a different approach for this fiscal year and use the vacancy analysis to identify ongoing and one-time cost savings for the 2025-26 fiscal year. As for this fiscal year, the state could reap savings similar to those in Newsom’s proposal if it imposed an up-to 1.5% across-the-board reduction in General Fund spending levels from the 2023-24 fiscal year.

    The nonpartisan analyst also questioned the wisdom of reinstating the costs a year later, if the governor’s goals is to reduce inefficiencies in state government.

    “Under any circumstance, but especially given the severity of the state’s budget problem, we question the value of reinstating any of these funds if their reduction does not affect state services or operations.”

    State employee telework stipend would be ‘disproportionately difficult’ to cut

    The governor’s January budget also proposed doing away with the state employee telework stipend that was introduced in 2021 via contract bargaining. Currently, state workers who work remotely more than 50% of the time are eligible for $50 monthly stipends. Those who work remotely up to 50% of the time receive $25 in monthly stipends. These payments are in lieu of reimbursements for Wi-Fi or extra telework equipment.

    But the LAO argues that eliminating telework stipends, as the governor previously suggested, “likely would result in difficult labor relations and an erosion to any savings.” Typically, unions won’t give up a benefit in their contract without receiving something of equivalent value in return. If the state were to unilaterally impose the cut “it is possible that state employee unions would sue the state.”

    “Implementing the governor’s proposal seems disproportionately difficult relative to the modest savings that would be achieved,” the report said.

    The governor’s office has also not yet mentioned the possibility of furloughing state employees, although Schroeder said CalHR would likely face significant pushback from state worker unions given the circumstances of the last furlough-like program.

    “It’s a difficult situation, because in 2020, the bargaining units did agree to the Personal Leave Program, and then that year we ended up not having a budget problem,” Schroeder said. “It kind of makes it more difficult for the state to try to get concessions of that size again.”

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