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California has suspended its leave buy-back program for state workers for the 2023-24 fiscal year due to ongoing budget constraints, marking the second consecutive year this program has been canceled. State employees will no longer have the option to cash out unused vacation time, following warnings of significant budget deficits. The decision complicates ongoing contract negotiations and reflects the ongoing financial challenges faced by the state, including rising unfunded liabilities and a need for budgetary discipline.

California has suspended its leave buy-back program for state workers for the 2023-24 fiscal year due to ongoing budget constraints. This marks the second consecutive year the program has been canceled, preventing employees from cashing out unused vacation time. The decision comes in response to a downturn in the state’s financial outlook, exacerbated by the economic ramifications of tariffs imposed by former President Donald Trump.

The leave buy-back program, generally allowing most public employees to convert up to 80 hours of unused leave into cash, was put on hold after the state’s Department of Finance issued a warning of significant budget deficits in a budget letter from December 2023. In the previous fiscal year, California had paid out $98.4 million to state workers participating in this voluntary program. The cancellation follows a trend that has seen budget forecasts shift negatively after state leaders initially indicated a recovery from previous deficits. Eraina Ortega, Director of the California Department of Human Resources, noted considerable fiscal uncertainty in her communications with state agencies.

State agencies were advised by Ortega to encourage employees to utilize their accrued leave, especially those exceeding the allowable cash-out maximum of 640 hours. As a result of the suspension, some employees will now need to take time off instead of opting for cash benefits. The leave buy-back program was also suspended in 2020, reflecting ongoing financial challenges faced by the state.

This announcement occurs at a time when negotiations for new contracts involving seven of the state’s 21 bargaining units are underway. Union leaders had been optimistic about securing pay increases greater than the typical 2-3% annual raises due to improved budget conditions, but the suspension of the leave buy-back program complicates those discussions. It’s noteworthy that correctional officers were the only employee group allowed to cash out their unused leave last year under a specific provision in their contract.

California’s unfunded liability for leave benefits has notably increased, climbing by 45% from 2019 to 2023, resulting in a total of $5.6 billion in 2023. Recent agreements with public-sector unions have permitted certain employees to accrue leave beyond the 640-hour limit for cash-out. However, many of these provisions will revert back to stricter limitations, demanding that employees either use their accrued leave or lose the cash-out option altogether.

The state has seen a rise in accumulated leave, particularly attributed to the lack of paid time off taken during the COVID-19 pandemic. Furthermore, the ongoing economic landscape has led to heightened concerns regarding the state’s long-term financial sustainability, with former state senator John Moorlach expressing worry over the soaring unfunded liabilities. Additionally, overtime costs have surged in certain departments, compounding the budgetary issues faced by state leaders.

To further balance the budget, California is considering comprehensive cost-cutting measures, which may include the elimination of 10,000 vacant positions and a nearly 8% reduction in state operations spending. Any adjustments to vacation policies or leave benefits would necessitate negotiations with influential public-sector unions, leading to disputes that may prolong or complicate those negotiations.

As budgetary challenges persist, the state’s continued decision to suspend the leave buy-back program reflects broader economic uncertainties and the necessity for fiscal discipline amid a complex landscape of state employee benefits and financial needs. State officials emphasize the importance of employees taking vacation time not only for their well-being but also for maintaining a healthy work-life balance as they navigate through these challenging financial conditions.

California Suspends Leave Buy-Back Program for State Workers

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Author: HERE Anaheim