The governor won one Friday: The San Francisco appeals court ruled that state Controller John Chiang cannot restore correctional officers to full pay for the time they work -- despite the fact an Alameda judge ruled in December that the "self-directed" furloughs at prisons violate labor law. The debate will continue: The CCPOA has until Thursday to file more arguments.

For a brief round-up of some pertinent state worker issues, see this morning's State Worker blog: A food-for-thought letter on the mathematics of the governor's proposed pay cut; the controversy over Controller John Chiang's vow to pay correctional officers; Assembly committee approval to allow BOE workers to move; the $500,000-plus payments, so far, to one law firm to fight the furlough lawsuits.

ACSS will respond strongly to the governor's Jan. 8 letter to state employees in which he outlines his new program to cut state workers' compensation. The furloughs will go away, as planned, but in its place state workers will lose 5 percent of their salary to a pay cut and another 5 percent to retirement contributions. Layoffs also are possible. For a statement from ACSS President Arlene Espinoza, go here.

ACSS President Arlene Espinoza was one of 13 signers on a letter to (then)-Asembly Speaker Karen Bass and Senate President Pro Tem Darrell Steinberg supporting AB 1125. The bill, by Ed Hernandez, calls for the state to pay state workers their full salaries if there is no budget in place by the June 15 deadline. Without this bill, the governor could reduce state workers' pay to federal minimum wage until the budget passes. Read the bill here.

In the wake of its latest trouble – scary elevators – the head of BOE has persuaded legislators to co-author a bill authorizing his agency to leave its building for a safer one. The BOE building has been plagued with leaks, floods, mold and falling windows. A Sacramento Bee story is here. The proposed bill, AB151, is here.

State workers are calling the governor's proposal to trade furloughs for pay cuts a "terrible deal."

Declaring a budget emergency, Gov. Schwarzenegger today proposed ending the furloughs June 30 as planned but trading them for a combination of cuts that add up to 10 percent: a permanent 5 percent pay cut and another 5 percent toward retirement benefits. The latter move would double the amount state workers contribute toward their retirement. The proposal means state employees would get some immediate relief -- 10 percent cut instead of the current 14.2 percent -- but could lose a small amount of their retirement income. Departments also are being asked to cut their personnel budgets by 5 percent. Sacramento Bee story here. The text (and video) of the governor's speech are here. Senate President Pro Tem Darrell Steinberg's response to the governor's speech is here.

The Capitol Weekly gives a sneak preview of how the governor might target state workers in his budget speech tomorrow. Whatever his plan, the article says, state workers will "continue to feel the squeeze." Some rumors: The furlough will end but may be replaced by layoffs and a 5 percent pay cut. The pay cuts would affect retirement contributions and ultimate pensions. The governor cannot cut pay; that step requires bargaining agreements. The state budget shortage for the next 18 months is estimated to be nearly $21 billion.

Here are a few more links to information related to Gov. Schwarzenegger's state of the state speech this morning: governor's press release; a statement on the governor's tax and pension reform plan; governor's jobs and economy plan.

In his final state of the state speech today, Gov. Schwarzenegger urged lawmakers to reform the state pension system, creating a two-tier system that would change only for new hires. Pensions for current employees could not "legally and morally" be changed, he said. He also proposed a constitutional guarantee California would never spend more money on prisons than schools and said he supported a simple majority, rather than two-thirds, vote to pass a budget. Read a Sacramento Bee story here. The governor is expected to present his budget on Jan. 8.

From its Web site, SEIU Local 1000 gives its reaction to the ruling Thursday that the governor's furloughs are illegal.

State unions fear the governor may order massive layoffs in the wake of court rulings that the furloughs were illegal. A Sacramento Bee editorial says the possibility of layoffs means "there's no reason to celebrate" the ruling.

The State Worker column this morning speculates on ways the governor could retract his plan to extend furloughs for state workers. Some are less fanciful than others.

In breaking news, The Sacramento Bee is reporting that the governor's 2010 budget plan will keep furloughs for state workers and include layoff options and perhaps shifting some general fund workers into positions financed with other revenues. Senate President Pro Tem Darrell Steinberg said he hopes to "curtain the number of furlough days and shift the burden of cost savings away from state employees." Gov. Schwarzenegger will present his budget plan the first week of January. (This link was updated to an expanded story Dec. 24.)

Updated story from The Sacramento Bee: An Alameda Superior Court judge has ruled the furloughs are illegal for state correctional officers whose pay is reduced but who have to wait to take their time off. The CCPOA had argued that the furloughs violated a labor law that stipulates compensation at 24/7 facilities be paid within a given pay cycle. The decision doesn't invalidate the furloughs but requires the officers be paid back wages. Three other furlough cases are awaiting decision.