July 2, 2010 (Updated July 5). Public services to face severe cutbacks throughout US.

Bloomberg: Schwarzenegger minimum-wage plan legal, court rules

By Michael B. Marois and Christopher Palmeri

July 2, 2010

A California court ruled that state Controller John Chiang must comply with an order by Governor Arnold Schwarzenegger to slash the pay of almost 200,000 state workers to the minimum wage until a budget is passed.

The ruling comes as Schwarzenegger sought for a second time to cut state workers’ pay to the federal minimum wage amid a spending-plan stalemate. In 2009, Chiang appealed a similar order, claiming the instruction was illegal. Chiang, a Democrat, said today he will appeal the decision on that case from the 3rd Appellate District court in Sacramento.

Read more at bloomberg.com.

Reuters: States turn from furloughs to layoffs

By Lisa Lambert

July 1, 2010

WASHINGTON (Reuters) – For U.S. states, the practice of furloughing employees to save money is going out of fashion while the more drastic step of laying off workers is becoming a more popular cost-cutting tool.

U.S. state and local governments employ around twice as many workers as the country’s manufacturing and construction sectors combined, so the switch to layoffs risks swelling already high unemployment in the United States.

“I can confirm that states are now moving to layoffs they had hoped to avoid,” said Philippa Dunne, who polls state leaders for the economic newsletter she co-edits, the Liscio Report. “To me, this is terrible timing because private hiring remains anemic, so piling on state and local layoffs is dangerous.”

Read more at reuters.com.

Selling ads on automobile licence plates, taxing sugary soda, borrowing from pensions and billions of dollars of cuts from education are among the measures that lawmakers in US states have considered to help close budget deficits as the next fiscal year begins for most states on July 1.

All but one of the 50 states, Vermont, must balance the budget annually. The litany of cuts, tax hikes and accounting “gimmicks” have become a familiar refrain in state capitols as the recession and housing downturn have dramatically reduced tax revenue for several years now.

Read more at ft.com.

Bloomberg: States of crisis for 46 governments facing Greek-style deficits

By Edward Robinson

June 25, 2010

Californians don’t see much evidence that the worst economic contraction since the Great Depression is coming to an end.

Unemployment was 12.4 percent in May, 2.7 percentage points higher than the national rate. Lawmakers gridlocked over how to close a $19 billion budget gap are weighing the termination of the main welfare program for 1.3 million poor families or borrowing more than $9 billion in the bond market. California, tied with Illinois for the lowest credit rating of any state, is diverting a rising portion of tax revenue to service debt, Bloomberg Markets magazine reports in its August issue.

Read more at Bloomberg.com.