May revision proposes $400 million loan from Labor and Workforce Development Fund; unions urge rejection

The Assembly Subcommittee 5 on State Administration heard the administration—s proposal to loan $400 million from the Labor and Workforce Development Fund to the General Fund as part of the May revision and heard extended public opposition from labor and community groups who said the fund is needed for enforcement, outreach and worker education.

Grace Henry of the Department of Finance described the proposal as a loan that would be repaid in fiscal year 2029—30 with provisional language allowing earlier repayment under specified conditions. "To achieve a balanced budget, the May revision includes a loan of $400,000,000 from the Labor and Workforce Development Fund to the General Fund with resources that are not projected to be used for operational or programmatic purposes," Henry said.

Jay Sturgess of the Labor and Workforce Development Agency explained the fund—s revenues derive primarily from civil penalties recovered through actions by aggrieved employees and said the fund supports enforcement and several grant programs, including the California Workplace Outreach Project (CWAP) and Rural Strategic Engagement. "Existing statute limits the use of these funds to furthering the enforcement of labor laws and education of employers and employees about their rights and responsibilities," Sturgess said.

The Legislative Analyst—s Office concurred with the administration on current revenues and expenditures but warned that a 2024 change to the Private Attorneys General Act (PAGA) could reduce future penalty revenues. Alexander Bentz of the LAO said the LAO does not yet know how the PAGA reform will change revenue and flagged that uncertainty for the committee.

Public commenters representing labor unions, restaurant and farmworker outreach groups, and CWAP grantees urged the committee to reject the loan. San Diego-area organizers, CWAP grantees and union representatives said the fund supports direct outreach to frontline workers, helps file complaints and brings wage enforcement to agricultural regions and other under-served areas. "This fund is funded by PAGA...when an employer has violated labor law," said Sarah Flock of the California Federation of Labor Unions. "Why is this $400,000,000 not being used for outreach and enforcement as it is supposed to?"

Officials told the subcommittee the projected fund balance after the loan would be about $119 million and reiterated that some grant funds remain available through June 30, 2029. The LAO and several members asked questions about whether accumulated surpluses should be redirected to enforcement and programming rather than moved to the General Fund.

Ending: The committee heard public opposition and follow-up questions from members and the LAO about the fund—s revenue volatility and the effect of PAGA reforms. Committee staff said they will continue to discuss the proposal as part of the May revision process.