2025 – 2026 State Budget Bill Heads to Governor: Excluded Employee Pay Plan Remains Uncertain

On Friday June 13, 2025, the Legislature passed Senate Bill 101, the 2025- 2026 State Budget Bill. The Legislature’s version of the state budget rejects the Governor’s plan to suspend pay raises that were expected on July 1, 2025. The Legislature’s version restores the $766.7 million appropriation of funds needed for those salary increases “in accordance with approved memoranda of understanding or, for employees excluded from collective bargaining, in accordance with the salary and benefit schedules established by the Department of Human Resources.” While it is welcome news that the Legislature has thus far supported ACSS and state employees by rejecting the Governor’s plan to defer salary increases, negotiations with the Administration continue.

The State Budget bill now heads to Governor Newsom who can sign, veto, or use the line-item veto authority or “blue pencil” to reduce items of appropriation in the budget bill. Even if the legislative appropriation for salary increases were to remain in the state budget (including through a possible legislative “veto override”), it is unclear whether CalHR would issue Pay Letters to implement salary increases for excluded employees. Budget trailer bills can also be used to impact state employee pay.

In short, the Administration is continuing to seek deferrals of the July 1, 2025 salary increases from the rank-and-file bargaining units with labor contracts and is maintaining the position of no salary increases July 1, 2025 (or July 1, 2026) in the negotiations with those bargaining units seeking new labor contracts.

With the July 1, 2025 beginning of the fiscal year and the implementation date for the Governor’s 4-day mandated Return to Office two weeks away, ACSS will meet with CalHR to continue to advocate for the best pay and benefits package possible for excluded employees.