The big news out of the Golden State today is that, due to the arrival of the new fiscal year without a budget in place,  Governor Arnold Schwarzenegger has ordered pay cuts for most of the state’s 200,000 employees to minimum wage levels of $7.25 per hour. Details are in this report from the San Francisco Chronicle.

State workers who experience pay cuts would be reimbursed once a state budget is in place. Most state employees are paid monthly at the end of the month, so if a budget is in place before the end of July, they would not receive a reduced paycheck.

Administration officials maintain they are required by law to reduce worker pay in the absence of a budget.

In a letter to Controller John Chiang, Debbie Endsley, the director of the Department of Personnel Administration wrote, “Today is July 1, 2010, and there is no state budget. Regrettably, we must take the steps … to adjust wages and salaries during this budget impasse.”

The administration made a similar order in 2008, but Schwarzenegger waited until the end of July to do so. Chiang defied that order and was sued by Schwarzenegger, but the budget impasse was resolved before a judge made a ruling in favor of the governor.

Chiang appealed the judge’s decision and oral arguments were heard last week. A subsequent decision could still be appealed to the state Supreme Court. The administration has argued that it is bound by law to slash pay to the federal minimum wage without a spending plan in place, while Chiang has countered that doing so is actually a violation of the law.

What looks to be the lack of federal money flowing to the states by a Congress now wary of adding to the national debt ahead of the November elections will no doubt make this year’s budget a bit more difficult to square than would otherwise be the case.