Governor’s Position on Pay Cuts is Legally Sound

California’s budget stalemate reflects a political war which has many fronts a myriad of combatants and an endless series of battles. The battle du jour involves the Governor’s executive order laying off thousands of temporary state workers and reducing the pay — to federal minimum wage level — of even more full time state workers.

The Controller John Chiang has said he will defy the Governor’s order as it relates to the reduction of pay for full time workers. In so doing Chiang is ignoring fairly clear California law which in fact vests the power to reduce salaries in the Executive Branch. Therefore as a matter of law Governor Schwarzenegger has the constitutional authority to direct the State Personnel Board to do what he has ordered.

But let’s clarify what this is about and what it is not about. The Governor has said he has to reduce the pay of full-time workers because the state is about to run out of cash. That’s true although Controller Chiang correctly points out that the salaries can be paid now and if necessary we can borrow money to meet payroll after late September.

Whether we "have the money" however is not really the point. The California Supreme Court in two consolidated cases from four years ago — including Howard Jarvis Taxpayers Association v. Connell — ruled that without constitutional authority many of those salaries should not be paid. Thus this is less an issue of "coulda shoulda" than it is about legal authority.

There is some speculation that the Governor implemented the layoffs and salary reductions as a means to increase the heat on the Legislature to pass the budget. That may be but he should also be given the benefit of the doubt regarding his legitimate concerns about cash flow and doing what is necessary to avoid the taxpayer expense of costly Revenue Anticipation Warrants. (Those RANS will be even more expensive for California taxpayers than in prior years because of the bad credit environment nationally).

There is also debate about whether the Governor is being vindictive against state employees from whom he has historically received little support. That is probably not the case. And except for some fringe anti-government voices few people are saying that state employees "deserve" to be laid off. Having a substantial salary reduced to minimum wage is of course a hardship and no one should wish it upon someone else.

But by the same token the salary reductions need to be put into perspective. Everyone knows that the state workers who have their salaries reduced will eventually be made whole with back pay. In the meantime credit unions such as Golden One offer zero interest "budget loans" specifically for these same employees so in actuality they stand to suffer mere paperwork hassles as opposed to real hardship.

Compare this to the abject lack of protections for employees in the private sector — many of whom have lost their jobs because their employers could no longer compete in California’s hostile anti-business climate. Those jobs are gone forever and the employees will not have the benefit of being made whole or have access to interest free loans.

As much as we have sympathy for state workers we have more for private sector employees who have neither the security the pay or benefits as those in the public sector. And at a minimum this should provide in stark clarity the reason why further tax increases would be such a horrible idea.

Higher taxes will put more Californians out of work. And they — and the businesses that employed them — have no safety net.

Jon Coupal is President of the Howard Jarvis Taxpayers Association — California’s largest taxpayer organization — which is dedicated to the protection of Proposition 13 and promoting taxpayers’ rights.