On July 2, the 3rd District Court of Appeals upheld a nearly year-and-a-half old ruling that would allow the Governor to order state workers’ pay reduced to minimum wage until a new budget can be signed into law. However, Controller John Chiang refused to pay it, and argued that he had legal room to maneuver.
In a statement released by the Controller’s office on Friday, John Chiang said, “I am pleased the court ruling today spared taxpayers and California’s economy from further harm.”
He continued, “Every time the Governor and Legislature fail to get a budget deal done, California taxpayers suffer. Playing games with a 40-year-old payroll system does nothing to bridge the budget gap, but could make it worse by exposing California taxpayers to millions, if not billions, of dollars in penalties and fines for violating federal and state labor and contract laws.”
“Californians who play by the rules and pay their bills on time deserve a Governor and Legislature that do the same thing. The most important thing for our fiscal health is a budget that solves for the cash crisis we face this fall,” the controller said.
He concluded, “It is up to the Governor and Legislature to end this political distraction and focus on getting the State a budget.”
The sense is that while scheduling a hearing by the end of August is fairly rapid by the standards of courts, it is also a victory for Controller Chiang as he has been able to stall the implementation of the minimum wage checks for another two months. That buys him more time for the legislature to eventually pass a budget, although they seem in no hurry to even move in that direction.
Lynelle Jolley, a spokesperson in the Department of Personnel Administration said Friday that the ruling was procedural that will not amount to another. “We’re still confident we’ll win on the merits. We already have – twice,” she said.
This is essentially a stalling game that will play out until the legislature is able to agree on a budget.
In a larger sense this is a political football anyway. The Governor being able to impose minimum wage is not going to make much of a dent in the state’s monthly obligations. Moreover, it is a drop in the bucket compared to the broader issue of the $19 billion deficit.
LA Times columnist George Skelton has done the heavy lifting. The majority of money that flows from the state’s general fund does not go to “state employees” rather 70% of it goes to local governments whether they are schools or cities. That means that cutting money to everyone affected by the minimum wage is only factoring into the percentage of the 30% remaining of the state budget that goes to employees.
You could fire everyone in state government from the CHP, to everyone who works at the DMV, who works for the parks system, and you would not come close to closing the budget gap.
This all goes back to 2005 when the unions in the state defeated the Governor’s “reform” agenda at the ballot box. Ever since then he is trying to make them pay for it. And while dropping their wages to minimum wage will definitely hurt those who rely on those checks for a living, it will definitely impact severely an economy like Davis’ which is based on state employment and government employment, it will not take us even one step closer to solving the overall problem.
On the other hand, as the Sacramento Bee reported on Sunday the Governor’s decision would cost the Sacramento region about $60 million per week. That is a lot of money to a local economy, but not a lot when the state is looking at a $19 billion (with a “B”) deficit.
To put it into Davis terms, Davis’ General Fund is about $36 million per year.
Then there is the ripple effect. “The lost wages are enough to support as many as 25,000 jobs – from bankers to bakers – according to figures based on U.S. Bureau of Labor Statistics data,” the Bee reported, but added, “The impact, however, would be minimized if a state budget is passed quickly and the federal minimum-wage cap holds for only a month.”
Under minimum wage, “Average pay for state workers would drop from about $1,200 a week to $300 per week.” Think about the people who live in Davis, trying to survive on that.
The consensus is that if the pay cuts are short-lived, it would not have a huge impact on the economy. But if it were to last more than a month, “it would be devastating.”
The Bee article focused on Sacramento obviously, but I would imagine the same applies to Davis. “That devastation would hit Sacramento particularly hard because of its large state work force. About one in 10 local employees works for the state,” according to the Bee. “Sacramento already is staggering from a year of furloughs that Michael estimates cost the region about 3,000 private sector jobs. But the damage wouldn’t be confined to Sacramento; at least $170 million in state wages would temporarily disappear every week from the statewide economy, according to The Bee’s analysis.”
The bottom line here is that while the cumulative effect of such cuts would be minimal in terms of the overall budget problem, the impact on the economy of the Sacramento Region and Davis would be devastating. The Governor is trying to punish state employees, in so doing, he may end up hurting us all.
—David M. Greenwald reporting