California Suspends Leave Buy-Back Program for State Workers

News Summary

California has suspended its leave buy-back program for state workers for the 2023-24 fiscal year due to budget constraints. This marks the second consecutive year of cancellation. The decision is a response to worsening budget forecasts and aims to limit expenditures amidst significant financial uncertainty. Employees must now rely on taking their accrued leave, impacting contract negotiations with unions and overall employee morale. The suspension coincides with contract talks for several bargaining units, complicating anticipated salary increases amid rising unfunded liabilities.

California has officially suspended its leave buy-back program for state workers for the upcoming 2023-24 fiscal year due to ongoing budget constraints. This marks the second consecutive year that the state has chosen to cancel this program, which traditionally allows employees to convert unused vacation time into cash payouts.

The decision to halt the program is a response to a downward trend in California’s budget outlook, exacerbated by economic effects stemming from tariffs imposed by former President Donald Trump that have impacted the global economy. Despite initial reassurances that the state had recovered from prior budget shortfalls, the financial situation has since worsened.

Eraina Ortega, the Director of the California Department of Human Resources, highlighted considerable fiscal uncertainty in recent communications to state agencies. This messaging comes as the Department of Finance issued a budget letter in December 2023, forecasting significant budget deficits and calling for measures to curtail expenditures.

The leave buy-back program, which receives approval from the Finance Department, generally permits most public employees to cash out up to 80 hours of accrued unused leave each year. Last fiscal year, California expended approximately $98.4 million to reimburse workers under this program. However, due to the ongoing financial constraints, employee options are now largely limited to using their accrued leave instead of cashing it out. In a proactive measure, Ortega urged agency leaders to encourage employees to utilize any leave exceeding the maximum cash-out threshold of 640 hours.

The suspension of the leave buy-back program comes at a strategic time, coinciding with negotiations for new contracts for seven out of the state’s 21 bargaining units. Union representatives had anticipated securing salary increases beyond the typical 2-3% annual raises given the initially positive budget forecasts. However, the cancellation of the leave buy-back option complicates these contract negotiations and overall morale among employees.

Last year, correctional officers were the only group allowed to cash out their unused leave due to special provisions in their employment contracts. While some recent union agreements have enabled certain employees to accumulate more than the maximum cash-out limit, many of these exceptions will revert to the standard 640-hour limit in July. Workers who surpass this cap will now be required to take time off rather than convert their leave into cash.

Ortega stressed the necessity for employees to take vacation time for both their health and work-life balance, underlining the potential risks of accumulating large amounts of unused leave. The state has seen a marked increase in accumulated leave benefits, growing an alarming 45% from 2019 to 2023, totaling approximately $5.6 billion in unfunded liabilities as of this year. This increase can be partly attributed to the COVID-19 pandemic, during which employees were less likely to take time off.

In light of these challenges, the California government is evaluating further budgetary adjustments. Potential measures include eliminating around 10,000 vacant positions and significantly reducing operational spending by nearly 8%. Additionally, across various state departments, overtime expenses have surged, compounding existing budgetary pressures.

Alarming budget numbers have also drawn commentary from figures like former state senator John Moorlach, who expressed concerns about the burgeoning unfunded liabilities and the long-term sustainability of California’s finances. Any amendments to vacation policies will require careful negotiation with influential public-sector unions, making the conversation around budgetary adjustments politically sensitive.

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