Federal Judge Blocks Bankrupt California from Reducing Wages of State Workers

By Edwin Mora | June 29, 2009 | 7:12 PM EDT

In this Wednesday June, 17, 2009 picture, Gov. Arnold Schwarzenegger discusses the state budget deficit outside his Capitol office in Sacramento, Calif. Schwarzenegger has said state government operations will come to a "grinding halt," if lawmakers fail to pass a balanced budget by July 28. (AP Photo/Rich Pedroncelli)

(CNSNews.com) -- A federal judge in California has issued an injunction to stop a proposed $2 hourly wage reduction for  the state’s home-care workers, reductions that are part of efforts to cut a state budget shortfall of $24 billion.

U.S. District Judge Claudia Wilken halted the wage cuts on June 25 in response to a lawsuit by the Service Employee International Union (SEIU) on behalf of 250,000--out of a total of 440,000--home care workers that it represents in California.
The judge ordered the state to keep paying the workers, referred to as In-Home Supportive Services Workers (IHSS), up to $12.10 in wages and benefits.

Wages for IHSS workers would have been reduced to $9.50 per hour starting July 1, the beginning of California’s fiscal year, if the state budget cuts had been maintained, according to the SEIU.
California Gov. Arnold Schwarzenegger and the California General Assembly approved the wage reductions in February as part of an overall budget reduction proposal.

The governor and the legislature agreed to bring down home health worker wages to between $9.50 and $10.10 per hour, and to cut 60 cents in benefits.
However, Judge Wilken’s injunction has the potential of further increasing California’s budget shortfall, according to the California Department of Finance, which said the $2 dollar hourly wage cut would have saved a significant amount of money in 2009-10.
“It (not approving the wage downgrade) would be a hit to the state’s general fund of about $98.1 million,” H.D. Palmer, a spokesman for the California Department of Finance told CNSNews.com.

However, Pete Janhunen, a spokesman for the SEIU, told CNSNews.com that there are other options other than pay cuts to reducing California’s budget shortfall.

“The governor, primarily, and other people in the state government have a lot of options to increase revenue,” Janhunen said. “So while we understand that the budget situation is a dire one, there are a lot of other options on the revenue side, including taxing oil companies the way the other states tax them.”

He added: “We would like to see them fight for the most vulnerable first and not just sacrifice the most vulnerable just because of the budget crisis.”

California’s credit rating has been downgraded by Moody’s Investors Service and Standard and Poor’s, providing another indication of the dire financial situation that the state finds itself in.
Lawmakers are deadlocked over how to fix the $24 billion deficit--a budget shortfall that threatens to leave the state broke in July.

The lawsuit, filed on June 4 by the SEIU in the U.S. District Court of the Northern District of California, forbids Gov. Arnold Schwarzenegger, among others, from enforcing the $2 wage reduction.

However, the Schwarzenegger administration plans to appeal Judge Wilken’s ruling, according to Palmer from California’s Department of Finance.

“We will appeal the ruling and we believe we will be successful on appeal,” Palmer told CNSNews.com. “We cannot envision any type of legal scenario that would prevent the state from moving forward and implementing this (wage reduction) as the Legislature adopted it back in February.”
When CNSNews.com asked SEIU’s Janhunen to comment on what Palmer pointed out, Janhunen said:
“I’m not aware of anything that’s happened along those lines (an appeal from the administration) yet, but we have the facts and the laws on our side and we will continue to seek justice in the courts as long and as far as it takes.”
According to the SEIU, “thousands of home-care providers” would be obliged to abandon their profession “to seek living-wage jobs, forcing frail seniors and people with disabilities to enter nursing homes or other residential institutions,” if the wage reduction is placed into effect.
“It (stopping the pay cut) prevents draconian pay cuts to people that don’t make a lot of money and take care of society’s most vulnerable,” Janhunen told CNSNews.com.
The union argued that the IHSS program actually saves the state money because it keeps its users from going into nursing facilities that tend to be more expensive.
However, according to a California Senate Office of Oversight and Outcomes report this year, the IHHS program “lacks sufficient oversight and suffers from fraud and abuse.”