Sunday, August 03, 2008

Schwarzenegger Cuts 22,000 State Jobs Amid California's Fiscal Crisis (A wise move? Or a foolhardy one in these tough times?)


California Governor Arnold Schwarzenegger sets down the pen after signing an executive order eliminating 22,000 part-time and temporary positions and ordered that 200,000 state workers receive the federal minimum wage during a news conference at the Capitol in Sacramento, Calif., on Thursday, July 31, 2008. At the right is Director of California Department of Personnel Administration David Gilb..(AP Photo/Steve Yeater)

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

His move had been expected since last week but starkly illustrated 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."

The moves could save hundreds of millions of dollars a month, but whether full-time employees' paychecks will be cut is in doubt because the state controller, who cuts the checks, has said he will not comply with it.

Lawmakers have yet to agree on a spending plan a month after the state's fiscal year began.

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

Adding to the crisis was an unprecedented wildfire outbreak that cost far more for emergency response than the state 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.

Schwarzenegger's executive order eliminating jobs covers 22,000 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. But Schwarzenegger's finance team said just 10,300 would receive pink slips immediately. The others might be exempted because their jobs are deemed crucial to public safety.

Question

Assess the economic impact of Gov. Arnold Schwarzenegger's move to cut 22,000 jobs from the public sector and to reduce the pay of 200,000 state workers.