On October 14, ACSS joined CalHR Director Eraina Ortega and Chief Deputy Paul Starkey on a call with labor unions and employee organizations providing an update from Director of Finance Keely Bosler on the efforts to secure additional federal funding.
Triggers to Restore Employee Compensation Not Met
The 2020-2021 State Budget Act (AB 89) includes trigger language that would restore 18 categories of budget cuts if additional federal funds are available by October 15, 2020.
In a surprise to no one, Finance Director Bosler reported that no additional federal money was received by the deadline and therefore none of the Budget Act cuts will be restored.
Under Section 8.28 of the Budget Act, if $14 billion were received, the restored funding for employee compensation would add up to $1.89 billion which would end the PLP 2020 program (Section 3.90) and potentially restore the suspended general salary increases for state employees (Section 3.91). With receipt of federal funds by October 15 of more than $2 billion, but less than $14 billion, the restoration among the 18 budget categories would be proportional.
Although this means the PLP 2020 program will likely remain in place at least through the end of the budget year in June 2021, no additional state employee compensation cuts have been authorized by the Legislature.
Deficits Remain and Expenditures Up, but Budget Outlook Not as Dire as Projected in April 2020
Finance Director Bosler noted the Administration is continuing the effort to obtain needed federal funds as deficits are projected for the next few years. With any funds received after the October 15 Budget Act deadline, it is likely the Administration would work with the Legislature again to allocate those funds.
The Finance April 2020 economic forecast was bad, but thankfully was wrong with several months of revenue coming in higher than anticipated. At the same time expenditures related to wildfires have been higher than expected. While deficits will continue to be projected as the Governor’s 2021-2022 proposed budget is put together, they will be smaller deficits than originally projected.
There is no hard state hiring freeze as they want to continue to have flexibility to hire where needed. State departments will be getting instructions through a Finance budget letter to plan to reduce operating expenses by 5 percent for FY 21-22.