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Strategic Budget Advisory Committee (SBAC)
Strategic Budget Advisory Committee

Schwarzenegger Gets OK to Furlough State Workers

January 29, 2009

By Mike Zapler
Mercury News Sacramento Bureau

SACRAMENTO — A Sacramento judge Thursday gave Gov. Arnold Schwarzenegger the green light to furlough hundreds of thousands of state employees for two days a month, rejecting a union challenge that the governor exceeded his authority in issuing the December order.

And in another key development regarding the state's yawning budget shortfall, news emerged from the nation's capital that a federal stimulus package passed by the House this week would slice the projected $40 billion deficit almost in half. The plan would deliver nearly $19 billion in additional funds for Medi-Cal, the state's health insurance program for the poor, education and other state programs.

The Senate is considering a slightly different version of the $819 billion stimulus bill, which if passed will have to be reconciled with the House bill. It would have to be signed by President Obama before California would see the money. If the $19 billion figure holds up, it would significantly reduce the size of California's problem. But that could be a mixed blessing because it might relieve pressure on lawmakers to broker a budget deal.

The likeliest scenario would have both sides agreeing to major concessions: for Republicans, tax increases, and for Democrats, a spending cap and fewer regulations on businesses.

The federal aid "could take the urgency out of pushing for some very needed reforms," said Assemblyman Roger Niello, R-Sacramento, the vice chairman of the budget committee.

In a more immediate win for the governor, Sacramento Superior Court Judge Patrick Marlette ruled the state's sprawling budget gap justifies Schwarzenegger's furlough plan, which roughly equals a 9 percent pay cut for the 235,000 workers affected. It would save the cash-strapped state about $1.3 billion.

Although attorneys for unions said they would appeal the ruling, the furlough plan is expected to begin as soon as next week and last through mid-2010. Employees will be told to stay home without pay the first and third Fridays of each month, or take an equivalent pay cut. It would mean state offices, such as DMV branches, would be closed next Friday.

"I cannot help but recognize the huge impact on state workers this will have to take this kind of hit in these economic times," the judge said.

Typically the governor must negotiate changes in employee compensation with unions or persuade the Legislature to adopt them. But Schwarzenegger argued that the budget shortfall is so severe that he could act unilaterally. The judge agreed.

"The current crisis does constitute an emergency," Marlette said.

The governor's staff is negotiating with state employee unions and the furlough plan could be modified if labor representatives come up with other ways to reach the administration's savings target.

"We're still open to discussion," said Lynelle Jolley, a spokeswoman for the Department of Personnel Administration.

David Miller, a state scientist who regulates hazardous waste, said the furlough plan would cause pain for thousands of families. He said his wife may have to delay plans to attend graduate school.

"It's a real bite," Miller, 49, said, "and it doesn't benefit the state or the economy."

J. Felix De La Torre, an attorney for SEIU Local 1000, said Schwarzenegger's move violates the separation of powers between the executive and legislative branches.

"The governor is in essence creating laws" on his own, De La Torre said.

Schwarzenegger has cast the furlough plan as an alternative to mass layoffs.

The governor and legislative leaders on Thursday huddled again to discuss the deficit, but an agreement appeared to be at least a week away. The state controller has begun withholding tax refunds from people who file early as a way to conserve cash, and starting Sunday the state will stop paying money owed to a host of state programs, including grants for college students and aid for the poor and disabled.

Even as anxiety mounts on that front, the looming prospect of billions from Washington could alleviate pressure on lawmakers to reach a deal.

According to two U.S. House committees (Appropriations, and Transportation and Infrastructure) and an economic think tank, the Center on Budget and Policy Priorities, the state would receive about $11 billion for its Medi-Cal program and $7.8 billion for education and some other state services.

California would also receive $4.3 billion for infrastructure improvements (highways, bridges, mass transit), but that will not help the budget shortfall.

"The worst scenario is if Sacramento leaders look at the federal funds and decide they can relax," said Tim Hodson, executive director of the Center for California Studies at Sacramento State University.

Hodson said relying on the money long term would likely put the state on a path toward another budget crisis once it expires.

Frank Davies reported from Washington. Contact Mike Zapler at mzapler@mercurynews.com or (916) 441-4603.

  • The state would receive about $11 billion for its Medi-Cal program and $7.8 billion for education and some other state services.
  • California would also receive $4.3 billion for infrastructure improvements (including highways, bridges and mass transit), but that will not affect the shortfall in the state"s operating budget.
  • California residents would also receive about $31 billion in direct tax cuts for working families, increased unemployment insurance and food stamps.
  • 12.3 million California workers would benefit from a $500 tax credit.
  • Almost 2 million children would benefit from the child tax credit provision.
  • 2.3 million jobless workers would receive increased unemployment benefits.
  • 744,000 students would be eligible for increases in the Pell Grant Program.
  • The stimulus plan is designed to protect or create 4 million jobs by the end of 2010, of which more than 800,000 could be in California.

Sources: House Appropriations and Transportation and Infrastructure committees, Center on Budget and Policy Priorities, Center for American Progress, economist Mark Zandi