Banks, credit unions poised to help state workers facing delayed paychecks

State government workers, told by the governor that they faced across-the-board pay cuts to help balance California's red-ink budget, had little to cheer about this week.

But there was one bright spot: Some financial institutions popular with state employees are making arrangements to help cover their customers in case paychecks are reduced or interrupted. Leading that effort is The Golden 1 Credit Union, which was founded by state employees 75 years ago.

As of Wednesday evening, there was a big question mark as to whether state paychecks actually will be cut or stopped. State Controller John Chiang, who signs state paychecks, said he will continue to issue them at full pay, despite Gov. Schwarzenegger's plans to cut state worker's pay to $6.55 an hour, matching the federal minimum wage. Some 200,000 workers could be affected.
"This is a cynical attempt by a governor who has spent the past few weeks going up and down the state criticizing others for political posturing," Chiang, a Democrat, made the comments on July 23. Chiang said the state "will continue to have sufficient cash to make all payments, including state payroll, through September. Cutting workers' salaries will do nothing meaningful to improve our cash position or help us make our priority payments."

Gov. Schwarzenegger, who has suffered a loss in popularity at least in part because of his inability to negotiate a budget, released a draft of an executive order last week, but did not actually sign the document. The governor said "an impending cash crisis" necessitated the cuts and layoffs.

Aside from the potential pay reductions, the governor has proposed the layoffs of some 22,000 temporary, seasonal and student workers.

In fact, scattered layoffs of at least one class of workers known as "retired annuitants" began a few days ago, in preparation for an executive order issued by the governor.

"The budget has affected our folks, because a lot of them are now gone," said Trinda Lundholm, a spokeswoman for the California State Employees Association's retirees unit. "Retired annuitants" are retired state workers with pensions who work up no more than 960 hours a year.

"They've been told their services are no longer needed. Departments anticipating the cuts went ahead and did it (layoffs) already," she added. The state has about 6,000 "retired annuitants;" Lundholm did not know how many had been laid off.

The new fiscal year began July 1. The 2008-09 budget was supposed to be approved by the Legislature by June 15 and signed by the governor by July 1. The budget often is late, although usual a matter of a few weeks or less. The latest budget, 67 days over due, was signed in 2002.

Those most immediately affected by the stalled budget are some 2,300 legislative employees and several hundred gubernatorial appointees. State government employees are less affected, although a prolonged budget impasse may cut into their pay as well.
The Schools Financial Credit Union is offering "zero-interest, short-term loans and extensions of loan payments for Schools members who are not receiving their regular paychecks due to the budget impasse," the credit union said.

Golden 1 has a total of 600,000 members, including some 80,000 to 100,000 state employees. For those who use direct deposit, Golden 1 is offering zero-percent loans for the duration of the budget crisis. For those who do not use direct-deposit, there is a 4.99 percent interest rate.

"We were founded by state employees. They are the people who have supported and grown this institution, and we want to give back," said Teresa Halleck, Golden 1's president and CEO. "They have earned the most benefit by supporting us all these years."
This year's dispute over state-employee wages is reminiscent of 2003, when a unanimous decision by the state Supreme Court held that hourly state workers are only entitled to the federal minimum wage if the state begins the new fiscal year without a budget. The ruling stemmed from a 1998 suit brought by the Howard Jarvis Taxpayers Association. But that decision did not address the issues Chiang – issues similar to those raised by then-Controller Steve Westly five years ago – which means the legal ramifications of the pay cuts and layoffs remain unclear. At the time, Westly continued paying the state workers in full.

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