Schwarzenegger may skip furloughs and try permanent pay cuts instead

The Sacramento BeeJanuary 8, 2010 

Gov. Arnold Schwarzenegger will propose ending furloughs for state workers at the end of June but seek permanent pay cuts and higher employee retirement contributions in their place, administration officials said Thursday.

Those two measures, which require legislative approval, would equal a 10 percent cut in gross pay, compared with a 14 percent reduction that state workers now face with three monthly furlough days. State employees would resume a full workweek in July.

Schwarzenegger will ask the Legislature to approve those changes as part of his budget proposal today, which is a "Furlough Friday" for state workers. His plan seeks to close a $19.9 billion deficit over the next 18 months. The Republican governor plans to propose an $82.9 billion general fund spending plan for 2010-11, according to a Department of Finance chart.

Schwarzenegger's office has decided to move away from furloughs when the fiscal year ends June 30 because it believes the state cannot justify their use as an emergency measure beyond that point.

Labor unions believe the furloughs already are illegal and have filed two dozen lawsuits since they began last February. Service Employees International Union Local 1000, which represents 95,000 state workers, and two other unions won a decision in Alameda Superior Court last week. Schwarzenegger has won other cases, however, and plans to appeal the Alameda decisions.

The governor's latest plan seeks a 5 percent pay cut and an added employee pension contribution – equal to 5 percent of salary – starting July 1.

Schwarzenegger also plans to issue an executive order asking state departments to slash personnel costs by an additional 5 percent in July, installing a payroll cap. Department chiefs will have flexibility to determine how best to do that, including layoffs, attrition or hiring cheaper employees.

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