As noted in a post last Friday, employees at the Department of Corporations have returned to working on the first three Fridays of each month.  This is good news for state employees because they will now get paid for those days.  However, this good news is tempered by the fact that Governor Schwarzenegger has ordered a deferral of state employees' salaries (except for the federally mandated minimum wage) because no appropriation exists due to the failure to have a budget enacted. The Governor had attempted the same thing last year, but the State Controller refused to go along. The predictable result was a lawsuit by Department of Personnel Administration (DPA) against the Controller.

Although the lawsuit became moot when the Legislature eventually enacted a budget, the trial court issued a declaratory judgment concluding that the Controller "must follow the decisions of the [DPA] so long as DPA is acting within the fundamental authority delegated to it by the Legislature". This judgment was appealed. By coincidence, the Court of Appeal issued its opinion on Friday, July 2, 2010. Although the Court of Appeal sustained the trial court's decision, the battle is not over. Controller John Chiang issued this statement indicating that he will ask the courts to decide whether it is feasible to comply with the DPA's latest payroll directive.