California to workers: It's minimum wage for you

arnold_gi.top.jpgSchwarzenegger ordered the state's payroll department to cut 200,000 state workers' wages to $7.25 an hour unless a budget is reached soon. By Julianne Pepitone, staff reporter


NEW YORK (CNNMoney.com) -- A year ago, California dealt with its budget crisis by handing out hundreds of thousands of IOUs to contractors and taxpayers. This year, it's threatening to cut state workers' wages to the bone.

Most of California's 240,000 state employees could see their salaries temporarily cut to the federal minimum wage because government officials can't reach agreement on a new fiscal-year budget for the financially troubled state.

It's the latest manifestation of state budget dysfunction, and workers have found themselves caught in the crossfire as the state's Republican governor, Arnold Schwarzenegger, tussles with the Democrat-led legislature.

With no end in sight to the impasse, Schwarzenegger's administration last week moved to to cut 200,000 state workers' wages to $7.25 an hour unless a budget is reached soon.

The salary reductions would cut across all job types and pay scales -- from a lifeguard who makes $16 an hour to an accountant who nets $6,000 a month. The average California state worker's salary was $65,484 last year.

Affected workers would receive back pay when the budget is passed. But state employees have already gotten the short end of the stick. Some have been forced to accept furloughs that have decreased their salaries by an average of 14%.

To help close the $19.1 billion budget shortfall for the fiscal year that began July 1, Republican lawmakers have proposed severe cuts to state social services such as welfare and Medicare, instead of hiking taxes.

By contrast, Democrats oppose the program cuts and instead want tax increases on industries like oil production. They have also proposed a delay to some corporate tax breaks.

Workers will at least receive minimum wage thanks to a 2003 California Supreme Court ruling, which said the state can withhold salaries during budget impasses as long as it complies with federal law. (Read 'Stimulus: The big bang is over.')

Controller sues over cuts: State Controller John Chiang has refused to carry out the cuts, saying he would wait until he completes an appeal of another court's ruling on a similar pay cut order from 2008.

Schwarzenegger's office sued Chiang on Tuesday, seeking an injunction to force him to make the cuts. Chiang promptly filed a cross-complaint alleging the order violates federal and state law.

"Withholding pay from state employees until a budget is enacted does nothing to solve the budget deficit, but will only make it worse," Chiang's office said in a separate statement. Chiang has also said the payroll computers aren't equipped to make the pay cuts.

A spokesman for Schwarzenegger said that an appellate court ruling on Friday upheld a trial court's decision that Chiang must enact the cuts. "That's the law here, and despite several courts' rulings, he's still going to defy the law," the spokesman said.

The Service Employees International Union, the largest union of California state workers, said in a statement that the cuts will only add to the state's budget crisis. The union claimed that it negotiated an agreement last year that would have saved the state some money, "but the governor walked away from that deal." To top of page

Just the hot list include
Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 24,370.78 -210.11 -0.85%
Nasdaq 7,601.32 -91.49 -1.19%
S&P 500 2,733.24 -21.64 -0.79%
Treasuries 2.89 -0.01 -0.38%
Data as of 9:45am ET
Company Price Change % Change
CSX Corp 64.78 0.73 1.14%
Cognizant Technology... 78.70 1.02 1.31%
Exelon Corp 41.50 0.00 0.00%
PPG Industries Inc 105.42 0.00 0.00%
Marsh & McLennan Com... 81.60 0.00 0.00%
Data as of Jun 22
Sponsors

Sections

One of the world's leading smartphone makers is aiming for the biggest stock market listing in nearly two years. More

If Trump puts tariffs on European cars, it would hurt automakers who build a lot of cars in the United States. More

The US is set to announce measures this week taking aim at Chinese investment in key American technologies amid an emerging trade war between the two countries. More