Then Governor Gavin Newsom signed a law establishing the nation’s first minimum wage for health care workers. Three words in an analysis of the bill foreshadowed possible concerns about its costs: fiscal impact unknown.

Now, three weeks after Newsom signed SB 525 into law, which will pay medical workers at least $25 an hour, including support staff

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cleaners and security guards to his government comes with an estimated price tag: $4 billion in the 2024-2025 fiscal year alone.

Half of that will come directly from the state’s general fund, while the other half will be paid for by appropriated federal funds

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Medi-Cal, California’s Medicaid program, according to Newsom’s Treasury Department.

SB 525 is one of the most expensive laws California has seen in years and comes as the state faces a $14 billion fine.

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budget deficit that could widen if revenue forecasts continue to fall short.

The costly legislation promoted by unions as a way to curb the health care workforce shortage and in turn improve patient care was signed into law even as Newsom warned of the state’s shaky financial future, saying last month to veto dozens of bills in the name of cost savings.

“As our state faces continued economic risks and revenue uncertainty, it is important to remain disciplined when considering bills with significant budget implications, like this measure,” Newsom said repeatedly in veto messages, rejecting some bills that had much lower cost projections than the SB. 525.

Among the many proposals Newsom vetoed due to financial concerns were a bill that would have required colleges to pay for diagnostic assessments for students with disabilities, which would have cost the state $5 million annually, and a bill that would have expanded financial support for the elderly. blind and disabled immigrants, which would have cost the state at least $100 million.

Uncertainties remain over the implementation of the new sweeping minimum wage law, including the exact long-term costs, in part because of significant changes to the bill in the final days of the legislative session following a rare truce between the union and the health care industry. industry leaders deemed necessary for its implementation.

Newsom officials declined to provide the Times with a cost estimate reflecting these changes when the governor signed the bill last month. But the changes were expected to significantly soften the immediate financial impact on the state and hospitals as gradual pay schedules were introduced rather than an immediate increase for all.

Despite the unknowns, Democrats in the state Legislature, including some who initially balked at the potential costs, quickly passed the legislation after a deal was struck among powerful interest groups.

The bill originally intended to increase the minimum wage to $25 per hour for all health care workers starting January 1. The opposition estimated this would have cost up to $8 billion a year.

While appropriations committee leaders abandoned cost-based bills in September and rejected measures that would cost millions less than SB 525,

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The bill cleared that major budget hurdle, even though the Treasury Department opposed it, citing “significant economic impact.”

It’s unclear whether other state programs will be cut to make room for the wage increases, but expect state lawmakers to rush to write bills when the Legislature returns in January to try to address some financial issues.

Unlike a law passed in 2016 that mandated a $15 per hour minimum wage statewide, the law for health care workers does not currently include any mechanism that would allow the state to defer wage increases during economic downturns.

“This is an important bill to ensure California has a robust health care workforce. We are working with legislative leadership and stakeholders on companion legislation to address state budget conditions and revenues,” Newsom spokesman Alex Stack said.

on Friday when asked about cost concerns surrounding the bill.

The $4 billion estimate could change when the Legislative Analyst’s Office releases its annual budget outlook later this month. It is expected that costs will only increase in the future as more groups of employees become eligible for wage increases.

The latest estimated costs for the state reflect pay increases expected to go to half a million health care workers who provide services to Medi-Cal patients, plus 26,000 workers in state-owned businesses.

But costs to the state could drop if hospitals pay a larger share of labor costs, said Tia Orr, executive director of SEIU California, who was involved in shaping the policy. She pointed to billions already set aside for medical providers through revenue from a tax on managed health care organizations as a way to “help manage the impact of increased labor costs.”

“SEIU California is committed to working with the Administration and Legislature to ensure safeguards are in place to ensure this critical measure is taken in a manner that preserves California’s fiscal health, just as we did in negotiating the latest statewide minimum wage increase.” Orr said. “This is how you make progress towards achieving shared goals through flexibility and compromise.

In a statement, David Simon, spokesman for the California Hospital Association, which ultimately supported the bill, called the plan Newsom signed a “better, more measured” approach to raising wages than previous efforts, which the organization feared would hurt hospitals would already harm rural areas. struggling financially and potentially passing costs on to patients.

Like Orr, Simon indicated that more work was to come.

“To the extent any future work on this issue occurs, we are committed to working with the Legislature and the Governor to advance the shared goals of SB 525: investing in our state’s health care workforce and maintaining access to healthcare,” Simon said.

Under the law, workers at large health care facilities will earn $23 an hour starting in June, $24 an hour in 2025 and $25 an hour in 2026. That applies to all staff, including money launderers and workers in hospital gift shops.

Workers at independent rural hospitals and facilities that serve high numbers of Medicare and Medi-Cal patients will see $18 per hour next year and won’t reach $25 per hour until 2033. Other smaller workplaces will have to pay their employees $21 per hour next year, up to $25 per hour. one hour in 2028.

Newsom’s supporters see the legislation as bold national leadership amid labor unrest and worker strikes in several sectors, and as a more organized way to meet local demands for $25 an hour that are already underway in cities across California . His critics wonder whether he approved it too early without a concrete plan to gain political favor.

Unions have long had outsized power in the California Legislature, but their victories this year were notable. Their influence in state politics is undeniable: The Service Employees International Union has pumped nearly $4 million into eight independent expenditures to get the Democrats of their choice elected to the Legislature this year.

Michael Genest, founder of Capitol Matrix Consulting and budget director for former Gov. Arnorld Schwarzenegger, pointed to union power and pressure as one reason Newsom may have acted too early.

“This is not the time to add really big costs to the state budget

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“If it’s entirely possible, we could be heading deeply in the wrong direction,” he said, pointing to the state’s economic uncertainty. “There’s always a reason to spend money, but some people care more about the reason than what’s in the bank account.”

HD Palmer, spokesperson for Newom’s Department of Finance, also acknowledged the state’s financial obscurity but has confidence in the governor’s budget.

“The governor is required under the state

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The Constitution must present a balanced budget by January 10 next year, which he will do,” he said. ‘There are a number of actions that can be taken to balance a budget. “The most important thing at the moment is of course: where are the revenues going?”