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The 2020-21 budget: Labor agreements to achieve budgetary savings

State Budget Assumes Reduction in Employee Compensation Costs to Address Budget Problem. The coronavirus disease 2019 (COVID-19) pandemic has had far-reaching negative effects on the state economy, which have direct and indirect implications for the state budget. In May, the administration estimated the state would have a $54.3 billion General Fund budget problem in 2020‑21. As we discuss in greater detail in The 2020‑21 Budget: Overview of the California Spending Plan (Preliminary Version), the state adopted a mix of solutions to address the budget problem, including reductions in state spending.

As part of the budget solutions, the Legislature directed the administration to reduce state employee compensation costs by up to 10 percent to achieve savings assumed in the budget. Specifically, under Control Section 3.90, the budget assumes savings of $2.8 billion ($1.5 billion from the General Fund) resulting from reductions in employee compensation. The Legislature directed the administration to seek to achieve these savings through the collective bargaining process. The budget grants legislative ratification to any agreement that seeks to achieves these savings and was signed by the administration and union representing the affected state bargaining unit before June 30, 2020. In the event that an agreement could not be reached at the bargaining table by June 30, 2020, the budget authorizes the administration to impose reductions in state employee compensation.

LAO Analysis of Agreements. On June 25, 2020, our office released an analysis of the 11 labor agreements submitted to the Legislature before June 30, 2020. This analysis provides a historical record of all the labor agreements between the state and its employees to reduce state costs in 2020‑21 and—in most cases—2021‑22. In addition, this analysis looks forward and provides comments and recommendations to help the Legislature think through future decisions to reduce employee compensation should the budget problem persist beyond 2021‑22.

To read the full report, use the following link: https://lao.ca.gov/Publications/Report/4267?utm_source=laowww&utm_medium=email&utm_campaign=4267

This article was released by the California Legislative Analyst’s Office.