Calif. governor orders cuts amid fiscal crisis

Image: Schwarzenegger cuts jobs
Calif. Arnold Schwarzenegger sets down the pen after signing an executive order eliminating 22,000 part-time and temporary positions and ordered that 200,000 state workers receive the federal minimum wage. Steve Yeater / AP
/ Source: The Associated Press

With California's cash dwindling and legislators still debating a new budget, Gov. Arnold Schwarzenegger eliminated thousands of part-time and temporary state jobs Thursday and ordered that 200,000 state workers receive the federal minimum wage.

His move had been expected since last week but starkly illustrated the cash problem facing the nation's most populous state. Schwarzenegger apologized to state workers but said he had no choice.

"Today I am exercising my executive authority to avoid a full-blown crisis and keep our state moving forward," Schwarzenegger said. "This is not an action I take lightly."

The moves could save hundreds of millions of dollars a month, but whether full-time employees' paychecks will be cut is in doubt because the state controller, who cuts the checks, has said he will not comply with it.

Lawmakers can't agree on budget
Lawmakers have yet to agree on a spending plan a month after the state's fiscal year began.

Democratic and Republican lawmakers are divided over how to close a $15.2 billion deficit, with Democrats favoring $8.2 billion in new taxes on corporations and the wealthiest residents. Republicans want a spending cap and oppose tax increases.

Adding to the crisis was an unprecedented wildfire outbreak that cost far more for emergency response than the state had budgeted.

As of June, more than 30 states faced deficits totaling a projected $40 billion, or more than triple the gap of the previous year, according to the National Conference of State Legislatures.

California is the last state with a fiscal year that begins July 1 that still does not have a budget. It is facing a $15.2 billion deficit, dwarfing that of all other states. The next highest at the start of the fiscal year was New York's, at $5.2 billion.

Schwarzenegger's cuts exempt public safety agencies such as police and fire departments and prisons but will have an immediate effect everywhere else. Hiring, overtime and contracting will be halted, and tens of thousands of employees will feel the squeeze.

Assembly Speaker Karen Bass, a Democrat, said she was disappointed with the decision to defer the pay of full-time employees until a budget is signed.

"It is an unwise and unfortunate move to cause economic strife to public servants and their families who are working hard and playing by the rules," she said in a statement.

Bass said she hoped a new spending plan would be offered to Schwarzenegger "in the next few days."

Pawns in the budget fight
Tiffany Woodruff, 28, works part-time at the state Employment Training Panel, which provides training to those who are out of work. She was expecting a pink slip Thursday afternoon and said she and other employees feel like pawns in the budget fight.

"We're just completely upset with having your salary completely abolished because of the inaction of the Legislature and the political inaction here," she said.

Schwarzenegger's executive order eliminating jobs covers 22,000 retired state employees who work under contract, temporary and part-time workers such as those who fill in at the Department of Motor Vehicles, seasonal employees and student assistants. But Schwarzenegger's finance team said just 10,300 would receive pink slips immediately. The others might be exempted because their jobs are deemed crucial to public safety.

Schwarzenegger also cited a 2003 California Supreme Court ruling allowing him to slash the pay of regular full-time employees when the state lacks a budget. By law, those workers must be paid at least the federal minimum wage of $6.55 an hour and will be reimbursed once a budget is approved.

Department heads were ordered to develop a list of exempt employees by Friday.

Comptroller to defy minimum-wage order
The first paycheck to be affected by the minimum wage order would be in early September, but state Controller John Chiang, a Democrat, sent a letter to Schwarzenegger on Thursday saying he will defy the order and issue employees their regular paychecks.

He said the executive order was based on "faulty legal and factual premises." Chiang said the 2003 ruling did not specify the amount of the salary his office could pay state employees during a budget impasse.

The controller and the Republican administration also differ over the state's financial condition. Chiang maintains that California has enough money to meet all its expenses through September.

As Schwarzenegger left the news conference to return to his office, a man in the hallway of the Capitol began shouting at him "no, no" and saying the cuts were unfair. He was quickly surrounded by California Highway Patrol officers and taken away.

Officer Keith Troy said the man was detained for protesting without a permit and escorted out of the Capitol; he was released without charges when officers determined he posed no threat. Troy said he did not have the man's name.