Davis Vows to Meet State Payroll : Budget: Wilson Administration challenges his authority to issue IOUs without an adopted spending plan or a court order. Controller would pay all but a few workers.

Despite the absence of a state budget, state Controller Gray Davis--over the objections of the Wilson Administration--vowed on Friday to meet the payroll by means of IOUs for almost all state workers as the fiscal crisis continues.

The possible exception, Davis said, will be legislative employees and elected officials such as himself, who would not be paid at all.

“When you work, you expect to get paid, no matter how entangled the state is in budget disagreements,” said Davis, pointing to past federal court decisions that required prompt payment of employees who continue to work even without an approved budget. “You can’t trifle with people’s lives,” he said.

However, the Wilson Administration immediately challenged Davis’ authority to send out IOUs to state staff without a budget in place, except in cases where there is a specific court order to do so.

“We believe the controller has no authority to pay state employees . . . unless a court has ordered that the state pay,” said Department of Finance spokeswoman Cynthia Katz.

So far, IOUs have been used to pay vendors, Medi-Cal obligations and income tax refunds. Some state employees were paid with IOUs, or “registered warrants,” but only for work performed before the start of the new fiscal year on July 1.

Next week, Davis, who is the state’s official paymaster, will begin sending checks to 5,000 highway maintenance workers to cover the first two weeks in July. These Caltrans employees are explicitly covered by a 1990 federal court order, which said that they must be paid on time if the state is to avoid a penalty.

Because of the federal court ruling, there is no dispute that they are entitled to their mid-month paychecks. And because the money is paid out of special highway money--and not the state general fund--they will be paid with regular checks and not IOUs.

But Davis said that his legal staff has told him that the same principle applies to all employees covered by the Federal Labor Standards Act--two-thirds of the state’s work force. Essentially, the court has ruled that if workers are expected to show up at work, they are entitled to get their wages when payday comes around.

Because the controller’s payroll system does not distinguish between those covered by the federal law and those who are not, Davis said he intends to pay all state workers, with few exceptions. The legal issue will only come to a head at the end of the month, when most of the state’s 152,000 workers are scheduled to be paid.

“The courts have made it abundantly clear that they will protect workers and sock the employer with . . . damages,” Davis said. A failure to pay can mean fines equal to the delayed wages, he said.

In addition to the Caltrans workers, about 850 state printers and 200 laborers at state prisons and hospitals are also due mid-month paychecks.

Davis said that the federal law does not apply to the governor and other state elected officials or to legislative employees. He said he would not pay these individuals--either with IOUs or regular paychecks--unless he is “presented with a compelling legal argument” to do so.

Of course, if Gov. Pete Wilson and the Legislature can agree on a budget, any debate about who is entitled to a paycheck will vanish.

On Friday, there was no indication of significant progress.

The Republican governor met briefly with Democratic Senate President Pro Tem David A. Roberti of Van Nuys.

Wilson described the session as “a legitimate, bona fide and a good-faith effort to try to make progress and to come to some common ground.”

Roberti said, “We talked about old things and we charted a few new things,” but he indicated no progress in settling remaining differences.

Conspicuously absent was Democratic Assembly Speaker Willie Brown of San Francisco, who said he had no invitation to meet with Wilson.

The Administration continues to blame Brown and the Assembly Democrats for scuttling a budget deal that Roberti and the Senate had voted to accept. However, the Democrats point back to Wilson for insisting on cutting $2.1 billion from his original budget for public education.