Paychecks on Hold in State Budget Fight

It turned out to be Friday the 13th in more ways than one for about 2,000 state workers as the continuing budget standoff between Republicans and Democrats kept employees from receiving paychecks.

Gov. Gray Davis and other constitutional officers, along with their appointees, were among the first wave of workers to be hit by the delay. But the bulk of those who missed checks Friday were legislative aides who work for lawmakers.

Other casualties of the divide between Republicans and Democrats over California’s 2001-02 budget are local governments. Transfer of an estimated $91 million in funding for trial courts to local governments also was delayed, placing court employees in jeopardy of not getting paid.

Controller Kathleen Connell, who is in charge of cutting checks for the state, described Friday as a critical day in the “no-budget scenario,” which she said is putting pressure on the state’s cash flow.

“We believe this budget should have been passed in a timely manner,” said Connell, who also failed to draw a paycheck Friday. All told, the state failed to send out $2 million worth of checks that were due to be paid Friday.

Although the missed deadline is potentially disruptive, California financial institutions have, over the years, developed ways of lessening the impact on those affected by budget breakdowns. As a result, many unpaid employees are taking advantage of interest-free loans offered to state workers by a variety of banks and credit unions.

A spokeswoman for Golden 1 Credit Union said 800 legislative employees so far had signed up for the service.

As the debate drags on, however, the impact spreads. When the state lacks a signed budget as is now the case, Connell’s office does not have the authority to make certain payments. That eventually unleashes a domino effect throughout the state.

Connell predicted that starting next week the state will begin denying invoices expected to be filed by hundreds of vendors who do business with the government. Those workers perform tasks ranging from providing care at nursing homes to janitorial services at schools to delivering food to prisons.

If there is no budget by the end of the month, the pinch will reach some of those most responsible for the deadlock: Legislators themselves will not get their paychecks. In addition, a highway users tax payment to local governments totaling $94 million also will be delayed as will part of a $387-million CalWORKS payment.

Connell said the missed payments may put pressure on local governments by forcing them to borrow internally to make up for the missing money. Lawmakers are scheduled to begin a monthlong holiday next Friday, which could exacerbate problems.

“I’m hopeful that by the time the Legislature breaks that we will have a budget in place,” Connell said. “If not, obviously it becomes a much more difficult road.”

A standoff over the state budget caused Davis to miss the July 1 deadline, meaning the state began its fiscal year without a spending plan. Republicans are withholding their support for the budget blueprint over a quarter-cent cut in the state sales tax, which they are seeking to have extended through the end of next June.

It is estimated that a continuation of the tax cut would cost state coffers nearly $600 million and consequently save taxpayers the same amount. Davis and his Democratic counterparts in the Legislature contend the state cannot afford that amount, citing softening state revenues as among the reasons.

Assembly lawmakers are expected to meet today, possibly to take another vote on the budget, which has failed three times to garner the four Republican votes needed to secure its passage. Democrats were attempting Friday to secure some Republican votes by offering to fund special projects in certain Republican districts, but GOP lawmakers were vowing to hold firm.

Davis spokeswoman Hilary McLean urged the Legislature to move quickly and pass a budget that protects education and public safety. Republican lawmakers appeared ready to oblige.

Lancaster Assemblyman George Runner, the Republican’s leading legislator on budget matters in the lower house, said his members will try to pass the education and public safety portions of the budget today.

He said they also are prepared to pass an interim budget that would approve expenditures based on the previous fiscal year to ensure that no reimbursements or paychecks are missed.

“Our issue is the growth and the new programs,” Runner said of the 2001-02 spending plan. “The ongoing programs we really don’t have a problem with.”

Davis called the first meeting of the four key legislative leaders from the Assembly and Senate last week, but no agreement was reached.

Senate leader John Burton (D-San Francisco) accused the Republicans of holding up the budget to embarrass Davis.

“They’re full of rotten cheese,” he said.