News Summary

California has suspended its leave buy-back program for state employees for the fiscal year 2023-24 due to ongoing financial constraints. This marks the second consecutive year the program has been canceled, following a downturn in the state’s budget outlook. The move highlights the state’s fiscal challenges and the growing unfunded liabilities for leave benefits, prompting officials to encourage employees to take vacation instead of cashing out unused leave.

California has suspended its leave buy-back program for state workers for the fiscal year 2023-24, marking the second consecutive year the state has opted to cancel this program due to financial constraints. The leave buy-back program, which allows employees to receive payment for unused vacation time, has been a valuable benefit for many public employees, but current budget challenges have made its continuation unfeasible.

The decision to cancel the program follows a notable downturn in California’s budget outlook, which was affected by economic forces, including tariffs imposed during the Trump presidency that impacted the global economy. Prior to this downturn, state leaders had initially signaled that California had made strides toward recovering from earlier budget shortfalls. However, recent assessments reveal a deterioration in fiscal conditions, prompting concerns about the sustainability of various state programs.

Eraina Ortega, the Director of the California Department of Human Resources, highlighted significant fiscal uncertainty in her communication to state agencies. The leave buy-back program, which typically allows most public employees to cash out up to 80 hours of unused leave each fiscal year, had been utilized significantly in the prior year, costing the state $98.4 million in the 2022-23 fiscal period.

The California Department of Finance issued a budget letter in December 2023 that warned of substantial budget deficits, necessitating methods to rein in expenditures. Notably, this is not the first instance of the program being suspended; it was also halted in 2020, reflecting ongoing financial instability in the state budget.

In light of the suspension, Ortega recommended that agency leadership encourage employees to take vacation time instead of relying on cashing out unused leave. This recommendation comes as seven of the state’s 21 bargaining units are currently engaged in contract negotiations, creating added complexity for union leaders who had anticipated salary increases beyond the typical 2-3% increments associated with improved budget conditions.

Correctional officers were the only public employees permitted to cash out unused leave during the previous fiscal year due to a specific provision in their contracts. However, many employees may now face the prospect of exceeding the capped accrual limit of 640 hours without the option to cash out. Such a limitation means employees must take time off instead of receiving a cash payout, complicating work-life balance issues for some.

This budgetary retraction occurs against a backdrop of growing unfunded liabilities for leave benefits in California, which saw a rise of 45% from 2019 to 2023, reaching a staggering $5.6 billion by the end of 2023. Furthermore, recent union contracts have allowed some employees to accrue leave beyond the 640-hour threshold, but many of these allowances are set to revert back to 640 hours this July, exacerbating the leave liability issue.

Some state officials have recently cashed out significant amounts for unused vacation, further compounding the state’s financial obligations. The issue of growing unfunded liabilities has sparked concern among financial experts and former officials, emphasizing the need for more sustainable fiscal management in the state.

Budgetary measures being contemplated to address the current shortfall include eliminating 10,000 vacant positions and reducing operational spending across state departments by nearly 8%. The rising overtime costs in certain departments have compounded the budget challenges, highlighting the urgent need for prudent financial planning moving forward.

To effectively implement any changes to vacation policies, state leaders must navigate negotiations with powerful public-sector unions, making adjustments politically contentious. The challenges posed by the pandemic, including a lack of time off taken during this period, have contributed to the overall increase in accumulated leave, complicating the state’s fiscal landscape.

As California continues to grapple with budgetary constraints, the decision to suspend the leave buy-back program for another year illustrates the intricate balance between state benefits for workers and fiscal responsibility.

California Suspends Leave Buy-Back Program for State Workers

News Summary

Deeper Dive: News & Info About This Topic

Author: HERE Mission Viejo