California Governor makes layoffs, orders pay cuts for California state workers

Governor Arnold Schwarzenegger today ordered his administration to lay off thousands of part-time state workers and to work with the state controller to temporarily slash the pay of most full-time employees to the federal minimum wage of $6.55 an hour.

The governor apologized to state employees, many of whom, he acknowledged, are already struggling in a difficult economy. But he said he had no choice in the absence of a budget one month into the fiscal year.

Nearly 200,000 employees could have their pay cut to the federal minimum wage of $6.55 an hour, with full salary reimbursed once a budget is signed. Schwarzenegger also limited overtime and imposed a hiring freeze.

It is far from clear, however, whether the governor can put the salary cuts into effect, or how long it might take. State Controller John Chiang, a Democrat who was elected to his post, suggested that the governor had overstepped his authority and said he would not cooperate.

Chiang disputed the governor's interpretation of a 2003 decision by the California Supreme Court that Schwarzenegger says requires most employees to be paid only the federal minimum wage during a budget impasse. And the controller insisted that the state has enough money to pay its bills through September.

Schwarzenegger said he would file suit against the controller in court "if that's what it takes." But the governor also expressed hope of signing a budget within days, which would make a battle unnecessary.

Assembly Speaker Karen Bass (D-Los Angeles), calling Schwarzenegger's action "most unfortunate," said she was confident a budget compromise would be reached before the end of August, when most employees would feel the effect in their monthly paychecks.