Pay Cut Looms For 200,000 California Workers Until Budget Is Signed

Sacramento, CA (AHN) - Unless California's budget is signed soon, the state's 200,000 employees will take a temporary pay cut and receive the federal minimum wage of $6.55 an hour.

The proposal is contained in a draft executive order California Gov. Arnold Schwarzenegger is expected to sign. The document is likely to generate controversy as the state controller vowed not to sign the order and bring it to court.

July 1 was the deadline for California to approve the budget. Without the financial plan it could not borrow money to keep the state running.

The difference in the employee's real salary and the minimum wage they receive will be paid at the end of August if the budget is passed by then. California's budget deficit for the fiscal year which started July 1 was projected to hit $17.2 billion.

To further cut costs, the executive order would no longer authorize overtime work except for critical services, freeze hiring new staff and lay off almost 22,000 temporary, seasonal and student workers. The temporary pay cut will save California $1.2 billion a month, while the layoff of non-permanent staff will raise $28.5 million more savings monthly.

The governor's office declined to confirm or deny signing the order. The only response from Schwarzenegger was a statement from his spokesman, Aaron McLear, who said, "The governor is looking at a number of different options to ensure that the state does not run out of cash."

The $6.55 per hour federal minimum wage is below California's $8 minimum. But the California Supreme Court, in a 2003 decision, allowed the state to reduce its employees wages to the federal minimum if the budget was not passed.

California needs $2.5 billion cash on hand to pay its operational expenses, including the payroll. But by the end of September it is projected to have only $1.8 billion left on its coffers.

State controller John Chiang said he would continue to pay California employees their full pay even if the governor signs the executive order. Chiang insisted California has sufficient money to meet its payroll until September. "Cutting workers' salaries will do nothing meaningful to improve our cash position... It is nothing more than a poorly devised strategy to put pressure on the Legislature to enact a budget," Chiang said in a statement.