An act to amend Sections 19829.9854, 19829.9855, 19829.9856, 19851, 20677.5.1, 20677.61, 20677.92, 20677.93, 20677.94, 20683.81.3, and 22944.5 of the Government Code, and to amend Section 3.90 of the Budget Act of 2025, relating to state employment, and making an appropriation therefor, to take effect immediately, bill related to the budget.
AB 138 is a budget trailer bill that approves and implements a package of collective bargaining agreements and related addenda between the state and multiple state employee bargaining units. It authorizes the Legislature to approve provisions of those agreements that require spending, while also stating that those provisions do not take effect unless the needed funds are specifically appropriated. If the money is not appropriated, either side may reopen negotiations. The bill also makes the approved provisions effective even if they are enacted in legislation other than the annual Budget Act, and it takes effect immediately as a budget-related appropriation bill.
The bill makes a broad set of conforming changes to state employment law. It expands the list of bargaining units covered by the Personal Leave Program 2025, which reduces pay in exchange for leave credits for many state workers, with exclusions for certain entities. It also adjusts or delays various Public Employees Retirement Law contribution rules for Units 2, 12, and 19, and suspends or resets certain employee retirement contribution increases. In addition, it modifies retiree health care prefunding rules under PEMHCA, suspending employer and employee OPEB contributions for several bargaining units in 2025-26 and 2026-27 and setting new contribution schedules beginning in 2027. The bill further updates contingency appropriation provisions for future budget years so that, if a budget is late, the Controller can continue paying employees covered by the specified MOUs.
AB 138 also reduces several employee compensation appropriations in the 2025 Budget Act by a total of $528.074 million, reflecting savings associated with the negotiated agreements and the Personal Leave Program. The bill expressly excludes employees of certain state entities from the PLP 2025 reductions, including the Legislative Counsel Bureau and the California State Auditor's Office. Overall, the measure changes state law governing wages, leave, pension contributions, and retiree health prefunding for a large share of the state workforce, while tying those changes closely to the budget process and the terms of the negotiated agreements.
The general sentiment around the bill appears favorable and budget-driven. It passed both houses with substantial margins, including strong Assembly and Senate concurrence votes, and it was chaptered into law as Chapter 78. The vote pattern suggests broad support for the negotiated labor and budget package, likely because it provided immediate fiscal savings and formalized agreements with multiple bargaining units. No committee transcript was provided, so there is no recorded discussion here indicating organized opposition beyond the recorded no votes.
The main points of contention are likely the pay reductions, leave program participation, and the shifting of employee and employer retirement and retiree-health contribution obligations. Affected employees and bargaining units may have concerns about reduced take-home pay, suspended contributions, and delayed or altered cost-sharing formulas, while the state’s fiscal managers likely viewed those changes as necessary savings. Another possible point of tension is the bill’s use of a budget trailer bill to approve labor agreements and make appropriations, which can raise procedural concerns about legislative leverage over collective bargaining outcomes.
AB 138 amends multiple Government Code provisions governing state employee labor agreements, compensation, leave programs, pension contributions, and retiree health care prefunding. It expands emergency and contingency payment authority for several bargaining-unit MOUs in future fiscal years, revises contribution formulas and effective dates under the Public Employees Retirement Law, and suspends or resets certain employee and employer OPEB contributions under PEMHCA. It also amends Budget Act of 2025 Section 3.90 and reduces specified compensation appropriations by $528.074 million, directly affecting state payroll and benefit expenditures.
The bill’s overall sentiment appears positive and pragmatic, with strong bipartisan or cross-faction support reflected in the vote totals and its enactment as a chaptered budget measure. The Legislature and Governor appear to have treated it as a necessary fiscal and labor-relations package, likely because it locked in negotiated savings and updated employee benefit rules. The absence of committee transcript material limits insight into detailed debate, but the recorded votes indicate the bill was not broadly controversial at the final stage.
The most notable contention points are the required personal leave/pay reductions, the suspension of employer and employee retirement and retiree-health contributions, and the bill’s approval of labor agreements through budget legislation rather than a standalone labor bill. State employee bargaining units and affected workers would be most directly impacted by reduced pay and altered benefit contributions, while fiscal policymakers would support the savings and budget flexibility. Another likely point of concern is that the bill conditions some agreement terms on specific appropriations and allows negotiations to reopen if funding is not provided, creating uncertainty for both labor and the administration.