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Furloughs Begin for California Employees After High Court Ruling

ALAMEDA, Calif. — Many California government employees are off without pay today, after the state Supreme Court said that Gov. Arnold Schwarzenegger could implement his order furloughing workers for three Fridays per month.

Tuesday's action is not the final word on furloughs — the high court Wednesday simply removed a lower court's order blocking the furloughs while the issue is being litigated.

A three-day-per-month furlough policy was in place for most of the fiscal year that ended June 30.

Schwarzenegger ordered the latest round of furloughs July 28, describing them as a cash-conservation measure in the absence of a state budget.

The court is scheduled to hear a case next month consolidating the more than 30 legal challenges that have been filed against Schwarzenegger's furlough policies, the Sacramento Bee reported.

This week's Supreme Court order allows the furloughs to proceed until the justices make a final ruling on the furloughs, or until a budget deal emerges.

California has been operating without a budget since July 1, and there is little sign that a compromise is in sight over how the state will close an almost $18 billion structural gap in its general fund, which the Republican governor projects will generate $91 billion in revenue.

Because two-thirds votes are needed in each house of the Legislature to adopt a budget, the majority Democrats must find common ground with at least a few members of the GOP minority.

So far, Republicans have held firm against any tax increases, while Democrats have insisted that some hikes are needed to preserve some welfare and education programs.

The governor is also insisting on reforms to state employee pensions and a larger rainy-day fund before he would would sign any budget.

State Controller John Chiang, speaking Thursday at the Sacramento Press Club, reiterated earlier warnings that California would have to begin issuing IOUs to some creditors in the near future if the state doesn't have a budget in place.

During the state's 2009 budget crunch, Chiang's office issued $2 billion of IOUs to lower-priority creditors to preserve cash for creditors with higher legal standing, such as bondholders. The IOUs were ultimately redeemed.

Last year's crisis was financial, but this year's is "100% political," Chiang said Thursday, according to a report in the San Francisco Chronicle.

"The only thing standing in our way is the absence of leadership," he said.

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