The 2023–25 operating budget as passed by the Legislature includes $4.707 billion in appropriations for new policies from funds subject to the outlook (NGFO). Of that, $2.823 billion is appropriated for increased compensation and increased service provider rates.

At the same time, the budget saves $803.8 million from lower contribution rates toward unfunded actuarial accrued liabilities in two state pension plans. Net of those savings, compensation and provider rate increases total $2.019 billion (42.9% of total new policies).

The increases (in terms of the NGFO) include:

• $851.9 million to increase compensation for state and higher education employees. (The collective bargaining agreements generally include wage increases of 4% in FY 2024 and 3% in FY 2025.)
• $85.6 million from a shift of higher education compensation funding from operating fee revenue to the NGFO.
• $39.5 million for a benefit increase for Public Employees’ Retirement System (PERS) and Teachers’ Retirement System (TRS) plan 1 members.
• $37.2 million to increase health care rates for public employees.
• $259.5 million to increase the school employee health insurance funding rate.
• $261.4 million to increase state salary allocations for public school employees by 3.7% in SY 2023–24 and 3.9% in SY 2024–25.
• $671.8 million to fund collective bargaining agreements with non-state employees (including family child care providers, adult family homes, individual providers, and language access providers) and provide parity with agency providers.
• $616.0 million to increase service provider rates. For example, this includes $106.6 million for nursing homes, $56.4 million for assisted living facilities, $50.1 million for the Early Childhood Education and Assistance Program, $96.4 million for Medicaid behavioral health providers, $55.7 million for non-Medicaid behavioral health providers, and $45.6 million for homeless service providers.