School Workers to Get Paychecks, Not IOUs : Funding: State controller tells Anaheim convention he has power to pay for education even without budget.

Even without the normal spending authority he gets from an approved state budget, State Controller Gray Davis told a cheering convention of school workers Monday that he would begin paying education’s bills this week with regular checks instead of IOUs.

Davis’ action means that the paychecks of education employees will not be at risk of bouncing next week, when three of the state’s largest banks say they will stop honoring the IOUs or “warrants” that the state has been issuing since July 1.

Davis said the state Constitution empowers the controller to pay for public education, even if a state budget has not been enacted.

“I’m going to give you good (paychecks) and not IOUs,” Davis told delegates attending a convention of the California School Employees Assn. “You deserve it.”

Teachers and other education employees, from kindergarten through community college levels, will thus become the first workers paid with state funds to get regular paychecks since the state’s fiscal crisis entered a new phase July 1, and the state began issuing IOUs for the first time since the Great Depression.

In an interview after his convention address, Davis cited as authority for his action the section of the state Constitution saying: “From all state revenues there shall first be set apart the moneys to be applied by the state for support of the public school system and public institutions of higher education.”

Davis said lawyers he consulted had assured him the constitutional language means that the controller must tap real state money, and not IOUs, to pay public education.

“The state has the money because money has still been coming into the state even though we don’t have a new budget,” Davis said.

Davis got thunderous applause here Monday morning when he addressed the convention of the CSEA, which represents 170,000 non-teaching education workers such as secretaries, bus drivers and cafeteria personnel.

In his off-the-cuff speech to the convention, Davis repeatedly criticized Gov. Pete Wilson for the state’s money crisis.

Davis, a Democrat, said Wilson, a Republican, is being inflexible and is mainly to blame for the state’s not having a new budget. Davis, who in June lost a bid for the Democratic nomination for the U.S. Senate, did not mention the role of the Democrat-controlled Legislature in the budget impasse.

“The governor has insisted that the argument be on his terms. He wants it all resolved on his terms,” said Davis.

The controller’s office pays the state’s bills in accordance with appropriations from the Legislature, and payments destined for school districts statewide are dispersed monthly. Wednesday will be the state’s first monthly payday for school districts and community colleges since the July 1 deadline for a state budget passed, and California entered uncharted financial waters.

The state money for education goes from the controller’s office to county departments of education, which in turn issue the paychecks for teachers and other workers in elementary, middle and high schools. Community college districts also receive their state funds through the county education departments.

State money travels different routes to employees of the University of California and California State University systems. Davis said in the interview that it was also his intention that workers in the university systems “get good checks” rather than IOUs.

While most financial institutions in the state have accepted the state’s IOUs, Bank of America, Wells Fargo and Union Bank announced last week that they will stop honoring them by the first week in August. This announcement alarmed many state employees, whose paychecks could begin bouncing as early as Aug. 1.

Edd Fong, Davis’ press secretary in Sacramento, said the state money going out this week is to elementary, high school and community college levels only. That money will be delivered to county departments of education on Wednesday, Fong said.

Davis said the public school teachers and other education employees will be getting checks that “look like the ones they always get.”

He said he had first looked into the legality of paying education workers when a state budget was lacking during the 1990 state budget crisis. “The (education) funds are constitutionally protected, whether there is a budget in place or not,” Davis said. “I had been told this by several government attorneys, but to be sure I ran it by a private law firm, which frequently sides against school boards, and they said that not only do I have the authority to but I must pay the schools.”

After leaving the education convention in Anaheim, Davis spoke in Orange, lambasting Wilson again in the second speech. During his talk in Orange, Davis said he does not think elected public officials, including the governor, should be paid while there is no budget. Davis said he therefore does not plan to pay any elected officials, himself included, when the monthly payday arrives on Friday.

Davis’ announcement that he will be using regular paychecks instead of IOUs for education employees came as a surprise, several Orange County education officials said.

“This is wonderful news, but I didn’t know he was going to announce this,” said John F. Dean, Orange County superintendent of schools. “I’m familiar with the part of the Constitution that puts first call on the money for education, but I didn’t know that Gray Davis planned to implement it.”

Two education workers at the CSEA convention said in interviews that they also were pleasantly surprised by Davis’ announcement.

“This is a real big thing for us,” said Barbara Michel, president of the Buena Park unit of the CSEA and a payroll clerk in the Buena Park School District. “We’ve all been wondering what will happen when banks stop taking IOUs.”

Carol Jones, past president of the Westminster unit of CSEA and a secretary in the Westminster School District, said: “We’re very happy about this announcement, but we feel sorry for our brethren, the other state workers, who are still getting IOUs. It’s time that this budget situation is settled.”

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