Schwarzenegger To Slash State Workers' Pay Till Budget Passes

The situation in California is getting interesting. Three days ago I wrote Schwarzenegger Needs To Face Reality: California Is Insolvent.

In a better late than never scenario, Schwarzenegger is getting tough. The LA Times is reporting Schwarzenegger plans to slash state workers' pay till budget passes.

Gov. Arnold Schwarzenegger is planning to cut the pay of about 200,000 state workers to the federal minimum wage of $6.55 an hour until a budget is signed, according to a draft of the governor's order obtained by The Times.

Administration officials said Schwarzenegger is expected to sign the order early next week as part of an effort to avert a cash crisis. The controversial move, likely to be challenged in court by public-employee unions, would save the state about $1 billion a month, the officials said.

Workers would be repaid their lost earnings once a budget was in place.

The order also calls for the state to immediately lay off 19,000 part-time workers, stop overtime payments for almost all employees and cease all hiring until a budget is enacted. The deadline for passing a budget was July 1, and without one California may be unable to borrow billions of dollars needed to keep the state solvent.

Too Bad It's Not Permanent

On January 12 I offered Mish's California Budget Proposal. The budget deficit was $14 billion at the time. The Budget deficit is now $17 billion or $20 billion depending on who you want to believe. There are entire departments that need to be eliminated, scores of them in fact.

The problem with Schwarzenegger's one size fits all is that it affects everyone equally. But this is better that than a tax hike which I am quite sure the citizens of California cannot afford. All in all, I applaud this action. Many don't.

LA Times Reader Comments

I waded through 19 pages of reader comments. They are numbered but the LA Times makes the current comment #1 so the number is constantly changing. I numbered them according to the number at the time I read them even though it will be impossible to find them by that number. I will respond to each Comment. My reply is the same number suffixed with an "A".

6. How about reversing the BILLIONS of pension benefit increases that Schwarzenegger gave away RETROACTIVELY. These government employees had no claim to the increase, but they got it anyway. Don't worry, we'll just force the upper-middle class pay for it.
Submitted by: Will Roberts
9:20 PM PDT, July 23, 2008

6A. Pension obligations and retirement benefits are indeed a problem. Some way needs to be found to eliminate the problem. Bankruptcy is one such way.

28. Way to go, Governor! As a Libertarian, I believe the government is best which governs the least. This action is just what the state needs to get so many of the red-tape bureaucrats off of the government payroll. It is about time for state employees and legislators to realize the hard truths that private businesses have to deal with on a regular basis. The only downside to the plan is that the cronies would all get back pay down the road. Why not just cut the pay permanently and force them to seek employment in the private sector rather than on the back of taxpayers!?!?
Submitted by: Grant
9:02 PM PDT, July 23, 2008

28A: I have a hard time cheering someone who wanted to spend $500 billion to "rebuild California the way it needs to be rebuilt". Nonetheless, I applaud your call to cut them permanently.

56. Wow. In a state with the highest rate of default, 200,000 workers are set to take a paycut beyond California's own minimum wage? Surviving on $10/hr with a roommate is next to impossible. Explain how families are supposed to manage on 60% of that. Does no one see the economic implications of drastic wage cuts amidst spiraling inflation. Thank God I skipped out on California for Asia. I think I'll wait the storm out over here.
Submitted by: Steve
8:32 PM PDT, July 23, 2008

56A. Inflation is spiraling because the state and the federal government are spending money they do not have on stupid unneeded programs and other bureaucratic boondoggles. If you stop the insanity in Iraq, and kill the pension benefits of bureaucrats, and in fact just kill the bureaucrat jobs period, I assure you the dollar would buy a lot more. The problem is not that pay is too low, but rather the dollar does not go far enough. One reason it does not go far enough is government taxation and waste.

60. Does this include legislators? $6.55/hr is too much for them, because they don't work!
Submitted by: FHBILL
8:28 PM PDT, July 23, 2008

60A. While some do not work, many do. The real problem is malinvestment and waste. Government decree is not an efficient use of funds. Waste and graft are massive.

62. This is stupid. State employee have to pay rent, feed their children and take care of their family too. Unlike our wealthy governor, we are trying to meet our end every day.
Submitted by: alan win
8:26 PM PDT, July 23, 2008

62A. Clearly spoken like an overpaid bureaucrat whose job in in jeopardy.

69. about dang time.
Submitted by: chuck
8:19 PM PDT, July 23, 2008

69A. Tough to argue with that, but realistically the legislature will work some silly compromise to raise taxes or float bonds rather than addressing the real problem which is massive numbers of useless bureaucrats.

71. State workers should just walk off their jobs for a week and see how the highways, prisons, and Universities operate without all those "overpaid" folks sitting on their rumps. Maybe parolees can come to your offices to report in, and you can track them down yourselves when they don't...
Submitted by: tbaines
8:17 PM PDT, July 23, 2008

71A. I am in favor of this proposal. Of course I am also in favor of firing everyone who does walk off. Furthermore, I would replace those who walked off with a system to hire the most qualified applicant willing to work for the least, assuming of course the person who walked off needs to be replaced at all. I suspect most won't be missed.

95. Go Arnold! As we speak, the California Teachers Assn. is enjoying a free spree at Asilomar in Monterey...on our $$. So while you're at it, close the redundant Dept. of Education -- say my two sibling public school teachers!
Submitted by: pete sommer
7:55 PM PDT, July 23, 2008

95A. Eliminating the California department of education is a very good idea except it is too limited in scope. We should eliminate the department of Education at the national level as well. And while we are eliminating departments, add to it the Department of Energy, HUD, Homeland Security, the FHA, and scores of other useless departments.

96. Good. Go Arnold. Minimum wage workers are usually not even worth $5 per hour. Trust me, I know this.
Submitted by: glc
7:54 PM PDT, July 23, 2008

96A. I trust you glc.

97. There are two types of people: Those that pull the cart and those that ride in it. If you work for the state, you are riding in the cart and living off the taxes paid by those pulling the cart. Slash more state jobs, cut budgets of every department and turn the legislature into part time positions, paying $20 per hour, no benefits. That's what I would call a good start.
Submitted by: Mike
7:54 PM PDT, July 23, 2008

97A. I do not know about part time, but certainly a case can be made to eliminate 3/4th of them by making the districts larger. Someone get this idea on the ballet as a proposition immediately. It will save a fortune. I think it would pass.

103. Release ALL non-violent drug offenders from state prisons, close the unneeded prisons then legalize pot and tax it. The budget deficit would be over tomorrow,
Submitted by: Hal Summers
7:47 PM PDT, July 23, 2008

103A. This is a needed move but no, it won't balance the budget.

105. I hate all the comments about prison guards wages being too high. I would like to see all the prissy people who think the guards are overpaid work a few shifts with the dregs of society and then see what they think. The midwests opinion of California is just bunch of fruit cake with a lot of nuts mixed in by the Governor. Lets see the overpaid Governor work in the prison system.
Submitted by: Kliebe
7:44 PM PDT, July 23, 2008

105A. Clearly a comment from an overpaid guard or a family relation to one.

122. State workers are not to blame for these budget woes, and nor should they be penalized for them. I worked in CA state government for 10 years, and the salaries range from the lowest to the high based on the job, same as in the private sector. Any pay freeze should start with the Governor and the Legislature.
Submitted by: John Abroad
7:28 PM PDT, July 23, 2008

122A. This is a red herring attack. Needless bureaucrats are a punishment on taxpayers, whether they are to "blame" for having a job or not. Most of the bureaucratic jobs should never have been created in the first case. The fact that the person holding the job is not to blame for creating the position is irrelevant. The relevant factor is not the person holding the job, but the fact that the job should not exist, and every taxpayer suffers for it.

129. Excuse me, but every time one of you uninformed people throws around that 'State Workers Are Overpaid' rhetoric it just chaps my hide. We are not overpaid! Most state workers are paid well under their private sector counterparts. My particular job, an IT manager, would receive about $110k/year in the private sector. I get less than half that. There are some perks to public service but they are not monetary. I agree that some in upper management are overpaid, but this is a relatively small number. So don't throw us all to the lions, most of us are hard working conscientious people who enjoy serving the public and helping people.
Submitted by: An Underpaid State Worker
7:25 PM PDT, July 23, 2008

129A. Dear USW... If you can get $110K in the private sector then you are a fool for working for the state for half that. Perhaps your skills are half that of the private sector person, if that. I suspect you are underpaid in your own mind and no one else's.

139. At $6.55 an hour most of these workers will still be overpaid.
Submitted by: woodwose
7:15 PM PDT, July 23, 2008

139A. Finally a comment that makes perfect sense. I cannot quibble over a single thing. Notice his clever use of the word "most". I am sure there are some bureaucrats somewhere that deserve what they makes. Most don't.

140. I work for the state, and trust me, I am no where near being "overpaid" for what I do. I work hard at my job and feel that I contribute much to our state. I'm proud of what I do and proud to live her and be a part of our society. Arnold should not be taking this out on us. If he wants to cut someone's pay, he should cut the Legislator's pay until they get a budget passed.
Submitted by: Charles
7:15 PM PDT, July 23, 2008

140A. Charles get a grip on reality.

150. Sorry, but I think one thing we're being utterly bilked on is pensions. Why should we continue to pay huge pensions for police & firemen when they can make 100k a year? Why aren't they saving like everyone else? This is a bad play. Minimum wage is impossible to live on.
Submitted by: clie
7:03 PM PDT, July 23, 2008

150A. CLIE, the last sentence makes no sense in relation to the rest. You were on a roll but blew it.

153. This is crazy. Why is he allowed to do this? The consequences would be worst. Just imagine 219,000 people unemployed and upset.
Submitted by: Miguel
7:01 PM PDT, July 23, 2008

153A. Imagine the revolt if Arnold instead proposed a tax hike just to support a bunch of needless bureaucrats.

157. It is pretty simple. Cut government spending, and don't raise taxes on people that are already suffering with high housing, food and gas bills. We the people have to cut our spending. Why can't the government do the same? Do we really need 200,000 full time employees?
Submitted by: Allan
6:58 PM PDT, July 23, 2008

157A. The second comment that makes perfect sense. This one stands out because it was multiple sentences.

163. Amazing - in the same day we can cut state workers pay and rescue Fannie/Freddie execs (20 million annual salary each!). This country is so crooked and rotten that it stinks.
Submitted by: jb
6:52 PM PDT, July 23, 2008

163A. JB, on top of crooked and rotten, insolvent is the word you are missing. Insolvent.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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