By Andrew McIntosh and Steve Wiegand
amcintosh@sacbee.com
Published: Saturday, Jan. 2, 2010 – 12:00 am | Page 1A

Tens of thousands of state workers began the new year Friday unsure whether to be happy about the prospect of a bigger paycheck in 2010 – or fear the prospect of a pink slip.

The uncertainty emanates from decisions handed down Thursday in three cases challenging Gov. Arnold Schwarzenegger’s decision last year to furlough about 200,000 state workers three days a month – tantamount to a 14 percent pay cut.

Alameda Superior Court Judge Frank Roesch ruled that the governor’s “emergency” actions, designed to help stem the state’s flood of budgetary red ink, were legally flawed, although he did not address the issue of reimbursing workers for lost wages.

While the rulings were hailed by leaders of state worker unions as a positive step to end the furloughs, they also expressed fear that if the courts ultimately decide the governor lacks the legal authority to furlough them, the alternative could be worse: massive layoffs.

“I won’t even begin to guess,” said Yvonne Walker, president of Local 1000 of the Service Employees International Union, one of the unions that prevailed before Judge Roesch. “At the very least, the governor’s behavior has been unpredictable.”

Schwarzenegger administration officials have vowed to appeal the rulings and will ask that the furloughs continue until the cases are finally decided by appellate courts. More than 20 similar cases are awaiting rulings in various state courts.

Thursday’s decisions came eight days before Schwarzenegger is expected to call for an extension of the furloughs when he unveils his proposed budget for the fiscal year that starts July 1. The existing furloughs were expected to save $1.4 billion in the fiscal year that ends June 30.

Capitol sources have said that in addition to extending the furloughs, next week’s budget proposal could include increased reliance on private contractors and vendors – and layoffs. Administration officials have refused to comment on that possibility.

“Just like the private sector, we’ll be making more cuts, including cuts in state employee compensation, but have nothing to announce until Friday,” Schwarzenegger spokesman Aaron McLear told The Bee in an e-mail, refusing to elaborate.

Last February, Schwarzenegger issued 28,000 layoff warnings to state workers with the least service time. The notices expired after 120 days, and the administration did not follow through with mass terminations.

In May and June, layoff warnings were sent to a total of 7,000 employees in departments financed by the state’s general fund. But many of the targeted workers moved to other state jobs paid for with special funds – such as the state Transportation Department – and the state again avoided sweeping layoffs.

Such maneuvers may be harder to execute this time around. Legislators and Schwarzenegger face another budget gap of at least $20.7 billion over the next 18 months – and erasing $60 billion worth of deficits in 2009 has left a severely depleted fiscal first-aid kit.

In fact, the first layoffs could take place later this month, when 800 state prison teachers who were given termination notices last fall are scheduled to be let go.

Attorneys for the three unions involved in Thursday’s furlough decision said they’ll work to persuade Judge Roesch to lift the customary automatic stay applied to his rulings when appeals are filed. They’ll seek an immediate stop to furloughs for as many as 35,000 SEIU state workers, saying members are suffering irreparable financial harm.

Joan Mellies is keeping her fingers crossed.

“It’s been hell for us from start to finish,” said the 11-year veteran of the state Employment Development Department. “So I’m hopeful and fearful and angry right now.”

Mellies said the furloughs hit her family just as her husband, a construction worker, was being hit with periodic layoffs. She predicted that Schwarzenegger’s new budget would be more bad news.

To read entire story click here.