California controller’s fortunes have risen through battles with governor

Despite two losses in court and a dwindling stock of legal arguments, John Chiang has made himself the roadblock to Gov. Arnold Schwarzenegger’s attempt to ratchet down the paychecks of some 200,000 state employees to minimum wage.

Chiang, the state controller, has said the order is illegal. He has said it is impractical. He has said his computers can’t do it. Mostly, he’s just said no.

Through the tussle, the unassuming 47-year-old Democrat has emerged as an unlikely counterweight to the muscle-bound Schwarzenegger. Chiang is a former IRS tax specialist who looks the part. He prefers a formal memorandum to a news conference. And he peppers his media appearances less with sound bites than with obscure fiscal references.

“He’s just looks like a nerd, right?” said Brian Leubitz, founder of Calitics, a liberal blog.

But beneath the wonkish exterior, Chiang has displayed sharp political instincts that have made him a favorite of the politically potent labor unions that represent the state’s workforce and have contributed significantly to his campaigns.

“He’s the state controller standing up to the Terminator,” said Steve Smith, communications director for the California Labor Federation.

But the Schwarzenegger administration sees him as a willful law-breaker hiding behind the “absurd excuse” of antiquated computers. “Three and a half years is more than enough time to figure out how to do his job,” said Schwarzenegger spokesman Aaron McLear. “Saying you can’t figure it out is not legitimate.”

Schwarzenegger argues that unless the Legislature can agree on a state budget, he has no choice under state law but to pay workers the federal minimum wage. But Chiang, an independently elected official who won his office in 2006, has made the most of his authority to actually issue state checks. Since 2008, when the governor first pushed the effort to cut worker pay, confrontations with Schwarzenegger have been the hallmark of Chiang’s tenure.

That year, after Chiang defied the governor’s order to reduce pay, Schwarzenegger sued and won in both a trial and appeals court, but the rulings came long after that impasse had ended.

With yet another late budget this year, Schwarzenegger is again trying to slash workers’ pay to the federal minimum of $7.25 an hour. Workers would be repaid once a budget is signed.

Chiang is refusing on two grounds. The first is that his computer system, designed during the Vietnam War era, simply can’t make the adjustment. The second is that, in trying to do so, the state would run afoul of other federal labor laws, such as one that requires anyone who works overtime to be paid in full.

“This governor’s act is going to put the taxpayers of California on the hook for billions of dollars” in legal damages, Chiang said on the Fox Business Network last week.

But with the court losses piling up, the controller is not “on the strongest legal ground in the world,” said Jonathan Zasoff, a law professor at UCLA. Schwarzenegger is now seeking an injunction to force Chiang’s hand. A ruling could come as early as Friday.

In the political realm, though, the legalities are beside the point, said Chris Lehane, a Democratic political strategist. “It is a defining moment for him politically,” he said.

The moment comes as Chiang runs for reelection, facing the same opponent he defeated in 2006, state Sen. Tony Strickland (R- Thousand Oaks). That contest, which Chiang won by 10 percentage points, was expensive, with the labor unions who backed Chiang and the business interests fueling Strickland spending more than $5.5 million combined.

Chiang has already parlayed his battles with Schwarzenegger into some notoriety. Shortly after bucking the governor’s wage-cut edict in 2008, he got a speaking role at the Democratic National Convention. The latest episode with the governor has some whispering that Chiang, California’s top-ranking Asian American elected official, could be headed for even higher office.

“When he was elected in 2006, he was an unknown commodity,” said Leubitz, the liberal blogger. Now, Chiang is one of only a “few people in California politics that progressives really love.”

Eliseo Medina, executive vice president for the national arm of the Service Employees International Union, called Chiang’s combative tenure as controller “a breath of fresh air.

“The fact is somebody’s got to stand up,” Medina said. “There’s too many politicians who get elected and don’t do anything and just put their fingers up to test the political winds.”

Of course, that is exactly what Republicans say Chiang is doing, by protecting mostly unionized state employees from pay cuts. The labor unions, which spent millions to elect him in 2006, are among the largest contributors to his reelection, giving more than $350,000.

“In electing John Chiang, the public employee union bosses got exactly what they wanted,” said Jon Fleischman, a regional vice chairman of the California Republican Party. “They have, in essence, de facto control over the state controller’s office.”

In early June, weeks before Schwarzenegger even issued his pay cut order, Chiang’s office had reached out to California’s top labor leaders in a confidential memo. He urged them to seek “Labor Secretary Hilda Solis’ immediate intervention” on their behalf in the looming fight with Schwarzenegger.

Tuesday, Chiang was among the featured speakers at the annual convention in San Diego of the 2.1-million member California Labor Federation. Smith said the controller received an “incredibly raucous reception” from the 600 attendees at the closed-door meeting of the state’s top labor leaders.

“The building was practically shaking,” Smith said.

“There’s really one man standing between over 200,000 state employees and the federal minimum wage,” Smith said. “And that man’s John Chiang.”

shane.goldmacher@latimes.com