Déjà Vu All Over Again: California Budget Cuts Stymied By Old IT Systems

Back in July of 2008, with California facing massive budget deficit problems, Republican California Governor Arnold Schwarzenegger signed an executive order requiring about 180,000 California state workers be paid only the federal minimum wage until a state budget was enacted, which is constitutionally required by 1 July.

Gov. Schwarzenegger, however, was told at the time by Democrat California State Controller John Chiang that this could not be done, since the COBOL-based payroll system was too difficult to fix that quickly.

Controller Chiang told the governor that "it would take at least six months to reconfigure the state's payroll system to issue blanket checks at the federal minimum wage of $6.55 per hour."

So Controller Chang refused to make the ordered changes.

Gov. Schwarzenegger then sued Controller Chiang in Sacramento Superior Court to force him to make the payroll changes.

A budget finally was passed in the late summer of 2008 before the court case was settled. However, the court cased continued anyway in order to see whether a governor indeed had the authority to lower state workers' wages as was done.

In March 2009, the Sacramento Superior Court ruled in Gov. Schwarzenegger favor. Controller Chiang promptly appealed against the ruling.

Then in a case of déjà vu, because the state budget once more did not look like it was going to pass by 1 July, Gov. Schwarzenegger said in late June that he would order state government workers (some 240,000 who would now be affected) to be paid the minimum wage amount ($7.25 per hour) again.

And Controller Chiang once more said fixing the 40 year old payroll system wasn't feasible in less than six to nine months. Furthermore, that he would need the state legislature to pass a bill to pay for the changes.

Well, last Friday the California 3rd District Court of Appeal upheld the Sacramento Superior Court ruling, stating that State Controller John Chiang overstepped his authority by refusing to issue minimum-wage paychecks to state workers during the 2008 budget impasse.

Controller Chiang says he will appeal against this ruling as well. As quoted in the Sacramento Bee,  he said:

"I will move quickly to ask the courts to definitively resolve the issue of whether our current payroll system is capable of complying with the minimum-wage order in a way that protects taxpayers from billions of dollars in fines and penalties."

Controller Chiang says he is worried that if he makes the changes as ordered he will run afoul state and federal labor laws.

By the way, according to this AP story, the State Controller's Office received $131 million in 2005 to revamp the payroll system which was designed in the 1960s and last revamped around 1970. The modernization project, called the 21st Century Project, began finally in 2006 with an estimated completion date of June 2009.

For various reasons (including the firing of the 21st Century Project's system integrator Bearing Point in February 2009 for alleged non-performance), the new payroll-system rollout-date is now late 2012 with a total project cost above $175 million.

Who knows, maybe the court cases will all be finished by then.

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