California's Economy In Shambles

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California's unemployment rate is 12.4 percent, among the highest in the nation. Melissa Block talks with John Myers of member station KQED about jobs in California.

MELISSA BLOCK, host:

Elected officials in California blew the deadline this week to pass a new state budget - that's a familiar failure in that state. Yesterday, Governor Arnold Schwarzenegger invoked what he says is state law: That until a budget is in place, employees of the state can only receive minimum wage. And today, an appellate court agreed with him.

But the man who actually writes the state's paychecks, California State Controller John Chiang, says that's a mistake.

Mr. JOHN CHIANG (State Controller, California): You ought to keep it a political dispute among the governor and legislature, and leave the good people of California out of their political battle.

BLOCK: John Myers covers California State House for member station KQED and he joins us now.

And John, given the controller's misgivings about this, can he tell Governor Schwarzenegger: Sorry, no dice?

JOHN MYER: Well, you know, Melissa, the appeals court's decision earlier today says no, he can't. But the state controller has decided to appeal this fight. He said he'll appeal it probably to the Supreme Court. That was expected.

You know, part of what's happening here is that the California state controller is independently elected by the voters. So in effect here in California, you've got the chief financial officer who thinks he doesn't answer to the chief executive officer, the governor. The state controller, John Chiang, who you heard from, is a Democrat and of course, as we know, Arnold Schwarzenegger is a Republican. So there's probably some politics in all of it.

But I think at the end of the day, we're really talking about what the state can and cannot pay when there's no budget in place. And, you know, none of this will be happening if the governor and the state legislature had come to an agreement on a new budget for California by the beginning of the fiscal year, which was Thursday. They did not and so now you got an awful lot of employees of the state wondering about that paycheck, come August.

BLOCK: Yeah, how many workers would this affect?

MYERS: Well, we're talking about 200,000 state workers would have their pay dramatically cut. And, you know, the average state worker in California earns about $65,000 a year. So we're talking about federal minimum wage, which is $7.25 an hour, obviously a dramatic lowering of those paychecks and could have a ripple effect in communities all across the state.

BLOCK: Yeah, what are you drawing(ph) about that? How much of a ripple effect would that be?

MYERS: Well, you know, these are rank and file. They work at every state agency. I mean, you know, whether it's DMV - you know, Division of Motor Vehicles - whether it's other agencies around the state. And of course, you know, in communities like here in the state capital in Sacramento that has a real cluster of the state workforce, I think there are a lot of community officials who'd be really worried about the economic impacts. And don't forget, California has been hit harder by this global recession than a lot of places. So this could have serious impact if, in fact, it happens.

BLOCK: Yeah. And John, does this light a fire under folks, saying look, we better figure out a way to pass this budget?

MYERS: I think it might have to because I mean, you know, the real question here is: What can the state pay in the absence of a budget. And one of the reasons that we're getting to this whole problem is that, frankly, the state computer system that actually issues these paychecks is so antiquated - it's from the 1970s - and that's why the controller says he can't make it work that fast to change all of this. But, you know, the courts are telling him, he might have to. So it'll be interesting to see what politicians, the governor and the legislature, do as a result.

BLOCK: Okay, John, thanks so much.

MYERS: You're welcome.

BLOCK: John Myers covers California State House for member station KQED.

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