Governor orders layoffs, heavy pay cuts CALIFORNIA'S BUDGET STALEMATE Schwarzenegger moves to ease budget crisis with dismissals and pay cuts for state workers

Maria De Guia talks about how her hours at the Department of Motor Vehicles were cut because of budget cuts, Thursday July 31, 2008 , in San Francisco, Calif. "If you see me in the Golden Gate Park don't arrest me", De Guia says.Photo by Lacy Atkins /The Chronicle less Maria De Guia talks about how her hours at the Department of Motor Vehicles were cut because of budget cuts, Thursday July 31, 2008 , in San Francisco, Calif. "If you see me in the Golden Gate Park don't arrest ... more Photo: Lacy Atkins, The Chronicle Photo: Lacy Atkins, The Chronicle Image 1 of / 3 Caption Close Governor orders layoffs, heavy pay cuts 1 / 3 Back to Gallery

Gov. Arnold Schwarzenegger ordered the layoffs of thousands of state workers Thursday and steep pay cuts for most other state employees to ease California's budget crunch, moves that could mean longer lines at the DMV and delays in processing of workers' compensation claims.

The state has been without a budget since the fiscal year began on July 1 as the governor and the Democratic-controlled Legislature work to come up with a spending plan to fill a $17.2 billion gap.

"This is not an action I take lightly, but we do not have a budget, and as governor, I have a responsibility to make sure our state has enough money to pay its bills," said Schwarzenegger, whose move was expected after The Chronicle and other news outlets revealed his plans last week.

The governor's move to cut the pay of 200,000 employees to the federal minimum wage of $6.55 an hour, effective today, would save the state as much as $1.2 billion a month. But whether that will happen is in doubt because, under the order, the employees would receive their full wages for the month if a budget is enacted by the end of August.

State Controller John Chiang, who is responsible for disbursing paychecks, sent a letter to the governor on Thursday reiterating his position that he would disregard Schwarzenegger's order to cut workers' pay.

Also on Thursday, about 10,300 seasonal and temporary state workers were given layoff notices, a move that will result in savings of $19.7 million a month for the state, officials said.

Most of those jobs are clerical and administrative and won't have an impact on public safety and emergency services, administration officials said. But the cuts are likely to affect other services, such as customer service at Department of Motor Vehicles offices and the processing of workers' comp claims.

"There's no question state services will be affected, but the governor has the responsibility to make sure that the state can pay its bills," said Aaron McLear, a spokesman for Schwarzenegger.

Armando Botello, a spokesman for the DMV, said the agency could lay off as many as 2,000 temporary workers. One of them was Virginia Taaga, 28, who lost her job as a scheduler of DUI hearings at the DMV office on Fell Street in San Francisco.

"When I first got the news, I almost started crying," said the single mother of two girls, ages 7 and 3. "I had to hold it in. I didn't want to cry in front of everyone." Taaga said she might have to resort to paying her bills and buying groceries with credit cards.

"I can't risk my kids going hungry because they can't come up with a budget," she said. "I'm way past angry. I'm pissed off."

One of her co-workers, Maria De Guia, 45, wasn't laid off but she said her hours were slashed to a maximum of 20 a week, less than half her usual total.

"I'm going to be homeless in the park," De Guia said. "I have to pay rent. And I've lived in San Francisco a long time, 20 years ... maybe I'll have to leave the city, but I love San Francisco."

Those waiting to be served at De Guia's DMV office also felt the sting of the governor's order. Evelyn Wyatt, a 65-year-old phone company employee who lives in the city, was startled when a DMV employee affixed a sign to the door announcing that no walk-ins would be accepted between 3 and 5 p.m. anymore.

It was after 3 p.m., but Wyatt remained in line only to be told at the counter to go home and try again Friday.

"They just stuck (the sign) up. They were kind of sneaking around doing it," said Wyatt, who felt customers deserved at least a day's notice of the change. "I guess whoever voted for Arnold deserves it."

The governor's executive order also includes a hiring freeze, no overtime pay and releasing contract consultants. Those moves plus the layoffs would net between $80 million to $100 million in savings in August, said Department of Finance Director Mike Genest.

On Thursday, Schwarzenegger said he intends to "get a budget within the next few days."

That's why the governor's order doesn't make sense, said Assembly Speaker Karen Bass, D-Baldwin Vista (Los Angeles County), who added that she thinks a compromise on the budget can be reached in the next two weeks.

"I believe we will have a budget before Aug. 31, (the pay cuts) will never be executed, and I don't believe this action was necessary," she said. The governor "is under pressure and we are all under pressure. That's why I don't understand why this distraction is needed."

Assembly Republican Leader Mike Villines from Clovis in Fresno County said he also believes a budget deal can be completed by the end of August but added that he understands Schwarzenegger's frustration.

"I think as a chief executive he had to show he had to take steps if the Legislature doesn't ultimately get something done," Villines said.

In recent weeks, there has been little movement on budget negotiations. Democrats have offered a nearly $10 billion tax package to help balance the budget, a plan that Republicans have rejected.

The governor's budget proposal hinges on the state borrowing against future state lottery sales to help erase the deficit and start a rainy-day fund to spell the state during lean years. State revenues have plummeted in recent months as a result of declining home sales and prices.

Republican and Democratic lawmakers have said the lottery can't be part of this year's budget solution.

Schwarzenegger and Republicans in the Legislature also are demanding budget reforms, including a spending cap and a large rainy-day fund, ideas that would likely need the approval of voters in November. Last week, Secretary of State Debra Bowen notified Schwarzenegger that any new measures for the fall ballot must be approved by Aug. 16.