As California’s spending grows, so has the state’s workforce and salary costs
The amount of money that California spends on its workforce has grown by $6 billion since fiscal year 2019-20, which has coincided with a significant increase in the number of people who work for state government.
The nonpartisan Legislative Analyst’s Office reported the growth of employee compensation costs as part of a broader analysis of General Fund spending trends, which found California’s spending from this fund has grown by $102 billion between fiscal years 2019-20 and 2026‑27, which is based on the governor’s proposed budget. That spending growth is largely because the cost to sustain existing programs and to fund schools has increased in those years.
State operation costs — which involve the collection of taxes and fees, the delivery of state grants and other administrative functions — account for 9% of that growth, which is primarily driven by increases to compensation for state employees.
The reason for that growth is twofold, the LAO reported: “Specifically, about half of the increase in total employee compensation appears to be associated with growth in the number of filled positions (full-time equivalents), while the other half reflects higher per‑employee costs due to increases in salaries and benefits for existing positions.”
According to Finance Department records, the number of civil service positions has increased 23% between fiscal years 2017-18 and 2024-25.
When Gov. Gavin Newsom took office in January 2019, the executive branch was home to 213,000 positions. Last fiscal year, the number of positions within the executive branch grew to 254,000.
The LAO reported that much of the growth of civil service employees has been concentrated in five departments: the California Department of Forestry and Fire Protection, the Department of State Hospitals, the Department of Justice, the Department of Social Services, and the Franchise Tax Board.
Nick Schroeder, an analyst with the LAO who specializes in public employment, said that over this period state employees’ salaries have not kept pace with the high period of inflation, despite general salary increases workers have received.
Schroeder noted that the increases in salaries further drives up the state’s employee compensation costs because other benefits, such as pension contributions, are tied to workers’ pay.
The report also noted a data limitation in regard to how the state reports employee compensation data. California pays its employees through a number of different funding sources: federal funds, special funds, which are collected from specific taxes and fees; and money from the General Fund, which is not designated for a distinct purpose.
Legislative analysts found that California does not have a reliable data source on how much money from the General Fund is spent on employee compensation.
Schroeder said state departments report the total amount spent on employees’ salaries, but do not differentiate between funding sources. He said that the LAO was surprised that the amount of money spent on employee compensation could not be identified, adding that it’s better to have more data when making recommendations to the Legislature.
“Especially considering when we have budget problems that the Legislature is trying to resolve, which we’re typically talking about in the context of the General Fund,” he said. “I think it would be good to have more information about how the employee compensation costs are distributed.”
