Court OKs governor's cuts to state worker pay

Saturday, July 3, 2010


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(07-02) 17:32 PDT Sacramento -- The governor has the authority to lower most state workers' pay to the federal minimum wage if a state budget isn't in place, a state appeals court ruled Friday, the second day of California's 2010-11 fiscal year.

The ruling came one day after Gov. Arnold Schwarzenegger ordered the state controller to cut pay for about 200,000 state workers to the federal minimum wage of $7.25 an hour.

The court case began in 2008, when Schwarzenegger made a similar order. Controller John Chiang, a Democrat, defied the demand and was sued by the Republican governor, but a budget was approved before the case was resolved.

Chiang on Friday said he plans to file a new suit on the grounds that it would be technically impossible to slash pay for some workers because of the state's antiquated payroll system, and also because he thinks it would violate state payroll laws, potentially costing "billions of dollars in fines and penalties."

That suit will be filed in either state or federal court, said Chiang spokeswoman Hallye Jordan; the controller has not yet decided whether to appeal Friday's ruling.

"This is not a simple software problem. Reducing pay and then restoring it in a timely manner once a budget is enacted cannot be done without gross violations of law," Chiang said in a written statement.

In Friday's ruling, the appeals court in Sacramento agreed with Schwarzenegger that the absence of a budget for the fiscal year that started Thursday eliminates the controller's authority to use state funds to pay employees, except to the extent required by federal labor law, which mandates the $7.25 an hour minimum wage. The 3-0 ruling said Schwarzenegger's Department of Personnel Administration can order the controller to delay payments during a budget impasse.

Suspend wage laws

Without a budget in place, the department also has the power to suspend the state's minimum-wage laws for its employees, the court said, rejecting Chiang's argument that workers are entitled to at least the California minimum of $8 an hour.

The governor's office, which argues it is legally bound to slash pay, praised the ruling, saying it "underscores the fact that everyone loses when we have a budget impasse."

But the ruling would not actually save the state money: State workers who experience pay cuts would be reimbursed once a state budget is in place. Most state employees are paid at the end of the month, so if a budget is in place before the end of July, they would not receive a reduced paycheck. The state is facing a $19 billion deficit for the fiscal year that began this week.

The pay cut would not apply to about 37,000 state workers represented by six unions that have tentatively agreed to concessions. However, those agreements must be approved by union membership and the Legislature.

Democrats remained critical of the minimum wage order, accusing the Schwarzenegger administration of using the issue to pressure labor and lawmakers into accepting his budget proposals. Assembly Speaker John Pérez called it "nothing more than a political stunt that will not save the state a single penny."

"I find it shocking that the governor is deliberately causing real suffering in an attempt to force the Legislature to pass his job-killing budget," he said in a statement.

Impact state's economy

Some state workers are already feeling the impact of the impasse: State law does not allow certain classes of employees to be paid at all if a budget has not been approved. Those employees include lawmakers and their staffs, gubernatorial appointees, and lawyers and doctors that work for the state.

The president of Service Employees International Union Local 1000, which represents about 95,000 state workers that would be affected by the pay cut, said the move would wreak havoc on the state's economy.

"We were at the table negotiating in good faith when the governor blindsided us with this order," Yvonne Walker said in a statement.

Chronicle staff writer Bob Egelko contributed to this report.

E-mail Marisa Lagos at mlagos@sfchronicle.com.

This article appeared on page C - 1 of the San Francisco Chronicle


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