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Furloughs Not the Right Way to Save a Buck

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Furloughs Not the Right Way to Save a Buck

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CORTE MADERA, CA - JULY 10: A California Department of Motor Vehicles customer peers into the door of a closed DMV branch July 10, 2009 in Corte Madera, California. As California struggles with a $26-billion budget imbalance, Gov. Arnold Schwarzenegger declared a state of emergency earlier this month and has ordered three work furlough days per month leaving most state offices closed today. (Photo by Justin Sullivan/Getty Images)

Once again Governor Arnold Schwarzenegger has attempted to impose furloughs on state workers without going through any negotiated agreement which is required in the contract between the state and most of its employee unions. For now, the courts have said otherwise.

Honoring a contract is a cornerstone of the American legal system, something that's difficult to do in a time of crisis but must be done nonetheless. The governor says he has to furlough state workers because the state is suffering a cash crunch.

But when you do the math, you quickly realize a three day per month furlough doesn't even come close to solving the budget mess.

State employee salaries amount to $1.3 billion per month, or $15.6 billion per year.  We know this because last year when the legislature and governor were congering up their latest round of budget gimmickery, they postponed delivery of all state worker paychecks from June 30 to July 1. Of course, that one-time, illusory savings can't be replicated, but served the momentary purposes of "closing" the budget gap--on paper at least, only for it to reappear this year. Regardless, furloughs, whether for three days per month or any entire month, can't make up any shortfall or make even a dent in bridging a $20 billion budget gap.

For argument's sake, however, let's buy the governor's claim that he needs to save cash. 

The easiest thing to do would be what Pete Wilson did in 1992 during a similar crisis and legislative stalemate. Wilson ordered the Controller to issue IOUs to employees for their entire work periods until settlement of the budget, potentially saving much more money than furloughs. The state also arranged for banks to cash the IOUs, with the understanding that the banks would receive a 5 percent handling fee for managing the transaction. Nobody liked it, but at least employees were kept whole.

All of which begs the question: If there is another way to save funds in the short term, why isn't the governor taking it?

Opponents claim that he's using the 300,000 state employees as leverage on the legislature. Schwarzenegger counters that he's just trying to  avoid laying out cash. Still, the fact that there is an alternate, less disruptive way of meeting his stated goal without causing harm makes one wonder whether the governor's detractors are right.

If so, Schwarzenegger's shot across the employees' bow may wind up hitting him in the foot as employee unions focus on the general election candidates and campaign issues.   
 

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