Gov. Schwarzennegger Slashes State Payrolls, Wages

Thursday, July 31, 2008 4:00 PM

SACRAMENTO, Calif. -- Citing an expected cash shortage striking California's government because a state budget is not in place, Gov. Arnold Schwarzenegger Thursday ordered job cuts for an estimated 22,000 temporary state employees and sharply reduced wages for 200,000 state workers.

California began its fiscal year on July 1 without a budget. The Republican governor has estimated the state must fill a shortfall of more than $17 billion, which includes his plan for a $2 billion reserve.

Lawmakers have failed to agree on how to tackle that deficit.

Democrats who control the state legislature have urged raising taxes, which minority Republicans and Schwarzenegger oppose. Budget negotiations have been plodding along amid warnings by various officials that the state is running short of cash.

"Because our state faces a looming cash crisis, the situation leaves me with no easy choices, only choices with consequences, consequences that will have a direct impact on California families," Schwarzenegger said at a press event in the state capital.

"I have a responsibility to make sure that our state has enough money to pay its bills," he added. "I understand that this will affect people at a time when they are already struggling and so I want to apologize to all those state employees for having to do that."

State Controller John Chiang, a Democrat, said in a letter to Schwarzenegger that he would not honor the governor's order to cut the pay of state employees to the federal minimum wage.

Assembly Speaker Karen Bass said lawmakers would remain focused on budget talks.

"I'm disappointed with the governor's decision. 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," Bass said in a statement.

"We are not going to let this decision get in the way of our mission, which is to deliver a budget that reflects the values of Californians," she added. "We are continuing to make progress and I remain hopeful we will have a budget on his desk in the next few days."

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