One of the few bright spots of this 8-week budget roller coaster has been the leadership of State Controller John Chiang, who stood up and simply said “no” to the shock doctrine tactics of the Governor and his attempts to slash state worker salaries to the minimum wage and eliminate the jobs of thousands of others.  Schwarzenegger’s talk of compromise among the legislature and right-wing Republicans didn’t extend to state workers, and he took Chiang to court to force him to uphold his executive order.  As a result of Chiang at least offering resistance, the workers have a reprieve for August.

State workers targeted by a gubernatorial order to cut their pay to federal minimum wage have dodged that bullet – at least for August.

A Sacramento Superior Court judge Wednesday set a hearing to decide the pay dispute for Sept. 12, too late to affect this month’s state payroll.

Judge Timothy Frawley’s timetable ensures that 145,000 state employees and an additional 30,000 managers and supervisors will receive full pay for August.

This doesn’t happen unless Chiang goes to back for those employees.  And the grassroots in California is grateful.  Frank Russo reports on a meeting in Oakland:

California Controller John Chiang spoke to the Alameda County Democratic Lawyer’s Club yesterday at a small restaurant in Oakland and had a lot to say about the state employee pay order. But he had a lot more to say, about his approach to government, helping average Californians, and his values and philosophy about government while speaking for over a half hour without notes and then taking questions.

From the beginning, he was treated as a rock star-introduced by club President Meredith Brown, as “the man who stood up to the man.” He covered a lot of territory-and was paid rapt attention as he challenged this body of lawyers to continue their good work for the betterment of society. He even worked in themes from the Obama campaign, as he prepares to speak at the Democratic National Convention in Denver and appear on the national stage. Josh Richman, a reporter and “blogger” for the Oakland Tribune attended this meeting and you can see his write up for a feel of what transpired as well.

Read the whole thing for Chiang’s comments, which are great.  Hopefully he’ll repeat them at the DNC this week.  Amazing what can happen to Democrats if they stand up for themselves, isn’t it?

UPDATE: The big issue, as Russo details in a separate post, is making sure this case is decided in federal court and not state court.  Otherwise, California could be on the hook for billions in fines.  Read the post at the link.

Just a quick update on the latest on Gov. Schwarzenegger’s slashing of state worker salaries.  After John Chiang refused to carry out the executive order, today Arnold sued him.

Schwarzenegger’s Department of Personnel Administration filed a lawsuit against Chiang late Monday in Sacramento County Superior Court. The suit says the state Constitution and several sections of law prohibit the state from paying full wages without approval of a budget.

“Except where payments are self-executing under the California Constitution, the state has no authority to pay state employees their full salaries where it does not have an appropriation such as in this case, where there is no budget for fiscal year 2008-2009,” the lawsuit says.

Chiang, a Democrat, has balked at making the pay cuts, saying the state has enough money to cover its needs into October.

“The governor has created a solution to a problem that does not exist…,” Chiang said in a statement after the lawsuit was filed.

This has become less about fiscal responsibility during a budget crisis and more about an authoritarian demanding his way.  As for the original intention of the order, to force a compromise on the budget, that’s, er, not happening.

Schwarzenegger met Monday with the Legislature’s Democratic leaders to try to reach a budget compromise.

“We’re still talking. We haven’t thrown anything at each other,” Senate President Pro Tem Don Perata, D-Oakland, said after emerging from the governor’s office.

Arnold Schwarzenegger didn’t just vow to keep taxes low, he ran an entire campaign in 2006 based on scaring people into believing that his opponent would raise taxes by $18 billion dollars.  None of it was true, but he hammered away at it.  In the one and only debate he chided Phil Angelides, saying “you love taxes” and other nonsense.  Dan Weintraub even remembered this spiel:

“They get into their car, they’re taxed. They go to the gas station, they’re taxed. They go for lunch, they’re taxed. This goes on all day long. Tax, tax, tax, tax, tax. Even when they go to bed, you can go to bed in fear that you are going to be taxed while you’re sleeping, that there is a sleeping tax.”

The admission of defeat, that there’s no way to balance this budget without revenue increases, is truly astonishing.  What’s more, the broad-based sales tax he’s proposing, the most regressive imaginable, really would tax Californians at virtually every point of the day.  He’s become a caricature (if he wasn’t one already).

The proposal amounts to an admission of failure. Running in 2003 as a novice politician after careers as a bodybuilder and actor, Schwarzenegger thought he could cut taxes, control spending and balance the budget, ending what he called “those crazy deficits.” But the fiscal and economic problem was more complicated than he knew, and the politics far more vexing.

Schwarzenegger did cut taxes. He campaigned on a pledge to roll back the vehicle license fee, or “car tax,” which his predecessor, Gray Davis, had tripled. And on Schwarzenegger’s first day in office, the new governor issued an executive order reducing the tax by two-thirds.

But controlling spending proved far more difficult, as, ironically, that first tax-cut order foretold. The car tax against which Schwarzenegger had railed, while controlled by the state, was actually a source of revenue for local governments. And so when Schwarzenegger reduced it, he also made good on a pledge to pay cities and counties what was then $4billion a year to make up for what they lost when he cut the car tax.

The state, however, did not have that money to spare, and the payments to cities and counties added to the deficit Schwarzenegger had vowed to eliminate. That obligation to local government has since grown to $6 billion – not coincidentally the same amount that would be raised by the sales tax increase Schwarzenegger now supports.

The VLF was the original sin here, but not the only one.  The problem is structural and the VLF would have only delayed the inevitable.  The truth is that the state is only built for success, never for a downturn like we’re currently having.  And so this results in gimmicks like slashing state employee salaries and putting them in the middle of a budget spat, or borrowing more and more to pass the deficit on to our children and grandchildren.

(The latest on the wage cuts, by the way, is that the governor is demanding that his order be followed, which John Chiang will refuse, leading to a likely lawsuit.  Chiang really is a hero in all of this, and he’s filling a leadership vacuum.  Marcus Breton has a nice profile today.)

Schwarzenegger has never concerned himself with the business of governing – he preferred slogans to policy.  And with the policy going to crap, the slogans sound more hollow – especially the one that goes “tax, tax, tax, tax, tax.”

It’s really the ultimate way for this state employee wage cut to end up – turns out that the payroll generation is so antiquated, they can’t change it to reflect the new salary structure for months.

State Controller John Chiang said Monday an antiquated state computer system makes it impossible to adjust the state payroll quickly to issue minimum-wage checks to state workers. He said it would take at least six months to make the change.

The Democratic controller has vowed to defy Gov. Arnold Schwarzenegger’s executive order directing the state to pay workers the federal minimum wage of $6.55 per hour until a budget agreement is reached. He has previously asserted that the Republican governor’s order is based on an untested 2003 state Supreme Court legal opinion and that he will continue issuing full paychecks to state employees.

But in a meeting with The Bee Capitol Bureau on Monday, Chiang said that even if Schwarzenegger’s legal reasoning were sound, the state could not logistically retool its outdated payroll system in a matter of weeks, as the governor has asked. If the change were eventually made, Chiang also said it would take an additional nine to 10 months to issue checks to employees for their full back pay.

We’ve seen this in LA County with errors in paychecks to teachers, which resulted in major repayments and “treble” damages, which require the government to pay three times as much in damages to those affected.

Of course, the state could always update their payroll systems – which would require more revenue.  Or they could just throw more manpower at the problem – which would require hiring those state workers that Arnold tried to fire (which agencies are promptly not firing).

It’s really a tragicomedy over there in Sacramento.

I’m preaching to the choir here when I say that laying off all those state workers was penny-wise and pound-foolish.  Another sickening facet of all that is that Arnold and his cronies don’t even know just how pound-foolish it was.  Well, they know it was a bit fool-hardy, they just aren’t sure how much.  Because, you know, they didn’t really study that:

But state officials said Thursday that they couldn’t predict how much state services will suffer now that Gov. Arnold Schwarzenegger has laid off an estimated 10,300 temporary workers.

***

“I think that whenever you have layoffs and you do that, it will have an impact,” Schwarzenegger said. “… In the private sector, we read every day stories where companies have to lay off. That means there is less productivity there. So we have to tighten our belt, everyone has to tighten our belt.” (SacBee 8/1/08)

Everybody has to tighten our belt, yet that doesn’t extend to the entirety of the state? Sure, we have to tighten our belts, but we can’t sacrifice the strength of our government.  There is no further “fat” to cut from the bone.  Yet, I guess we’ll just roll the dice and hope that it doesn’t burn us too bad.  Pun intended.

Great plan, Arnold.

I was on a conference call earlier with State Controller John Chiang and Rep. Hilda Solis about the Governor’s callous executive order, and both delivered predictably strong comments.  Chiang, who has told the governor he will refuse to comply with the order, blasted Schwarzenegger, saying “state workers shouldn’t be put in the middle of a political battle,” and that this was a nakedly punitive attempt against California’s state employee unions, which the whom the Governor has always held a grudge (they helped deep-six his “reform” agenda in 2005).  Rep. Solis was even more outraged, saying “let’s put him on the federal minimum wage, and get rid of the special interests paying for his hotel room across the street from the Capitol, and see how he likes it.”  She rocks.  

Chiang has made his decision, and now only litigation can force him to carry out the Governor’s order (and Chiang discouraged litigation as a “waste of time.”)  But we expect these kind of statements from Democrats.  Take a look at this one from Republican Greg Aghazarian:

“While I appreciate the Governor’s leadership on this budget crisis, I cannot support reducing the salaries of our state employees to minimum wage.

If our state workers had the power to pass a budget, then it might be appropriate to hold them accountable, but that’s not where the responsibility lies according to our State Constitution. I cannot predict when a budget will be passed, but I do know this, when it does happen it will be because we worked to achieve bipartisan solutions.

I understand what the Governor is trying to accomplish with this action, but I must respectfully disagree and urge the Governor to reconsider his executive order.”

Now, Aghazarian is talking out of both sides of his mouth.  He’s trying to win a Senate election against Lois Wolk in SD-05, and he wants to be seen as some kind of moderate when his record suggests the opposite.  But the fact that he’s gone off the reservation means that there’s a lot of pressure to come out against the Governor on this one, putting him alone on an island of his own making.  It’s important to keep pounding away and make him completely unpopular and unable to help his party in the fall as a result of this stupid, heartless action.

The Governor has set up a Web site to answer employee questions about the wage cut.  Predictably, it has no interactive function.  If he allowed comments on it the server would be down.

OK, so check this out.  Arnold signs the executive order slashing state employee salaries to $6.55 an hour, the federal minimum wage.

At the same time, he’s agreed to host a fundraiser in three weeks with Oregon Senator Gordon Smith (R).  Here’s the invite, courtesy his Democratic opponent Jeff Merkley:

The bottom of the invite says “Host and Photo Opportunities at $10,000 give/raise.”

The annual salary for a state worker under the federal, based on a 40-hour work week and a 50-week year, is $13,100.

So Arnold thinks the cost of getting a picture with him is roughly equivalent to the cost of working for an entire year running his state government.

Priceless.

The Governor did what he said he would do today.  He just cut the pay for over 200,000 state workers to the federal minimum of $6.55/hour and fired 22,000 temporary or seasonal workers.  We do have someone fighting back and that is Democratic Controller John Chiang.  SacBee:

While budget delays have nearly become an annual rite in the Capitol, Schwarzenegger argues that this year calls for drastic steps because the state has less cash due to a sour economy. The move could save roughly $1 billion per month, and the governor believes California will not have a sufficient cash reserve in September without the executive order.

But Democratic state Controller John Chiang disputes Schwarzenegger’s view of the state’s cash situation, insisting the state has enough cash to last through September without engaging in expensive borrowing. Chiang has vowed to defy part of the governor’s order by paying state workers their full wages, though he cannot help temporary state employees retain their jobs.

There remains a high threshold for the federal minimum wage cut to take effect for 200,000 state workers. Most get paid at the end of the month, so the lawmakers would have to remain in a stalemate through the end of August. Even then, Chiang has said he intends to issue full paychecks at that time, so Schwarzenegger would have to sue the controller to ensure workers receive the federal minimum wage, a process that could take weeks or months and pose image problems for the governor.

Any minute my aunt, who works for the state is going to call me back.  She called earlier today from a room filled with seasonal workers.  I get the unhappy task of letting her know they all got fired.

Damn you Arnold.  We didn’t need to do this.  Once the budget is passed, it is going to be a pain in the rear to process the paperwork and hire everyone back.  The amount of pain and financial hardship this is going to cause is immense.  

[UPDATE] Here is Speaker Bass’s statement:

“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. 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. We are continuing to make progress and I remain hopeful we will have a budget on his desk in the next few days.”

As we brace for the Governor’s executive order slashing state employee salaries, the Senate Governmental Organization committee wants some answers.

Anticipating that Governor Arnold Schwarzenegger today will sign an executive order to cut state worker pay and terminate about 22,000 temporary, part-time and contract jobs, the Senate’s Governmental Organization committee has called on Schwarzenegger to explain his rationale. The committee, chaired by Senator Dean Florez (D-Schafter), has scheduled the hearing for Monday at 10 a.m. Schwarzenegger is invited. Controller John Chiang and leaders of state worker unions will testify, according to a press advisory.

Florez, who sought the advisory opinion from the legislative counsel about this move (which showed that John Chiang has more than enough constitutional authority to deny the wage cut from going through), said in his press statement: “I think the Governor owes the public a full explanation as to why he has singled out the state’s workforce with his executive order to cut their salaries.”

Right on.  Which is why you should keep calling Arnold and ruin his birthday by demanding an explanation of your own.

This is a good move by Florez, both from the standpoint of policy and politics.

The CDP sent out a message from Controller John Chiang about the proposed wage cut to state workers:

When I received word that Gov. Schwarzenegger was proposing to use California’s state workers as pawns in the budget battle by cutting their pay to the federal minimum wage of $6.55, I said civil servants should not bear the brunt of the budget stalemate.

Since then, thousands of Californians have joined with me to protest the Governor’s proposed — and needless — order to slash the pay of California’s public servants. I want you to know I will stand strong against the Governor’s threats.

Show Gov. Schwarzenegger that you stand with me by signing the California Democratic Party’s petition at www.cadem.org/supportcaliforniaworkers.

Forcing public servants to involuntarily loan the State cash by foregoing their hard-earned paychecks puts an untenable burden on our teachers, health care workers and those who provide critical public services.  That is just wrong.

Excellent.  Chiang is really coming out like a hero in this.

Taking another tack, Lt. Governor John Garamendi sent a letter to the Governor (via the SacBee’s new state worker blog:

Dear Governor Schwarzenegger:

I write to you today regarding the proposed executive order to reduce the minimum wage of 200,000 of California’s state workers to the federal minimum wage of $6.55 an hour.

As you contemplate signing this executive order, please ask yourself – how would you feed and care for your family on $262 per week ($1,048 per month)?  How would your hardworking staff fare on these minimal earnings?  Could you and your family do it for one week?

It is our duty, as elected officials of this great State, to find solutions to the many challenging problems that face California, such as the state budget.  Those solutions should always look to improve the quality of life for all Californians, not impede it.

Please walk a week in a state worker’s shoes before you sign this executive order and imagine yourself and your family surviving on $262 per week.

This is reminiscent of the SEIU’s “Walk A Day in My Shoes” program, as well as the challenge taken by members of Congress earlier this year to live on a food stamp budget for a week.  It gets replicated because it works.  Garamendi is taking the right approach to humanize the budget crisis.