Schwarzenegger orders cuts amid fiscal crisis, 22,000 jobs cut.

Discussion in 'Wall St. News' started by S2007S, Jul 31, 2008.

  1. S2007S


    Schwarzenegger orders cuts amid fiscal crisis

    By DON THOMPSON, Associated Press Writer 1 hour, 1 minute ago

    SACRAMENTO, Calif. - With California's cash dwindling and legislators still debating a new budget, Gov. Arnold Schwarzenegger eliminated 22,000 part-time and temporary state positions Thursday and ordered that 200,000 state workers receive the federal minimum wage.

    His signing of the executive order had been expected since last week but stood as a stark illustration of the cash problem facing the nation's most populous state. Schwarzenegger apologized to state workers but said he had no choice.

    "Today I am exercising my executive authority to avoid a full-blown crisis and keep our state moving forward," Schwarzenegger said. "This is not an action I take lightly."

    Lawmakers have yet to agree on a spending plan a month after the state's fiscal year began, leaving California without the ability to pay for contractors, the higher education system and legislative employees.

    Democratic and Republican lawmakers remain divided over how to close a $15.2 billion deficit, with Democrats favoring $8.2 billion in new taxes on corporations and the state's wealthiest residents. Republicans want a spending cap and oppose tax increases.

    Adding to the fiscal mess has been an unprecedented number of wildfires this year, costing the state far more for emergency response than it had budgeted.

    As of June, more than 30 states faced deficits totaling a projected $40 billion, or more than triple the gap of the previous year, according to the National Conference of State Legislatures.

    California is the last state with a fiscal year that begins July 1 that still does not have a budget. It is facing a $15.2 billion deficit, dwarfing that of all other states. The next highest at the start of the fiscal year was New York's, at $5.2 billion.

    Schwarzenegger's order exempts public safety agencies but will have an immediate effect everywhere else: Hiring, overtime and contracting will be halted, and tens of thousands of employees will feel the squeeze. Schwarzenegger said the order will lead to immediate savings.

    The 22,000 people who will lose their jobs immediately include retired state employees who work under contract, temporary and part-time workers such as those who fill in at the Department of Motor Vehicles, seasonal employees and student assistants.

    Schwarzenegger also cited a 2003 California Supreme Court ruling allowing him to slash the pay of regular full-time employees when the state lacks a budget. By law, those workers must be paid at least the federal minimum wage of $6.55 an hour and will be reimbursed once a budget is approved.

    The administration estimates that immediately terminating the contracts and suspending overtime would save the state about $80 million a month. The deferred wages would take several weeks to implement, saving the state $300 million to $400 million a month starting in late August.

    The governor's order is certain to be challenged. The state controller has said he will not comply, in part because he said the move is likely to invite lawsuits from employee unions.

    Controller John Chiang, a Democrat, has said will issue employees their regular paychecks, setting up a potential legal skirmish between his office and Schwarzenegger's.

    The governor was asked during a news conference whether his administration would sue the controller's office if it did not comply with the executive order.

    "If that's what it takes," he said. "I'm here to make sure that our state functions, and whatever it takes, I will do it."
  2. Yawn.
    Nothing new for the 7th largest economy in the world.
  3. GTG


    It's a good start. He needs to cut much more deeply and permanently, though. Oh, and he should also send state troopers to arrest Controller John Chiang for not complying with the law, and then bring suit against him for the extra money he unlawfully pays out.
  4. gnome


    Good for The Governator.... when expenses outrun revenues, time to cut back. Too bad the Federal Gummint can't see that.
  5. The common wisdom is that jobs would keep housing prices from entering a free fall. Now jobs are disappearing in Detroit, California and many other places. It's not funny.
  6. G-Boa


  7. gnome


    You're right, it's not funny.

    Throughout history heavy doses of "financial engineering" have almost always lead to a lot of pain and worse.
  8. jem


    It was estimated that 10-14 billion of that is spent in schools on the children of illegals.

    I can't even fathom how much is spent in the hospitals.

    I am not saying I want to kick kids out of school - but I would like to know what we are doing to protect the education of the american kids.
  9. olias


    I support the move by the Governor too. Obviously he's not doing it to win any popularity contests. It's nice to have a leader with some balls.
  10. Watch him get chased out of office and replaced by a taxem' high Democrat.
    #10     Jul 31, 2008