Via Cryptogon/San Francisco Chronicle

Gov. Arnold Schwarzenegger plans next week to slash the pay of more than 200,000 state workers to the federal minimum of $6.55 per hour to help ease the state’s budget crisis, according to a draft executive order obtained by The Chronicle on Wednesday.

The governor also will order an end to overtime pay for all but critical services, a freeze on state hiring and the immediate layoff of nearly 22,000 temporary, seasonal and student workers.

“As a result of the late state budget, there is a real and substantial risk that the state will have insufficient cash to pay for state expenditures,” the executive order states.

Schwarzenegger’s staff would neither confirm nor deny that the governor plans to issue the executive order, but sources said he could take action as early as Monday. The state, facing a projected $17.2 billion budget deficit for the fiscal year that began July 1, has not approved a budget.

“The governor is looking at a number of different options to ensure that the state does not run out of cash,” said Aaron McLear, a spokesman for the governor.

But administration officials, who asked to remain anonymous, said that about 200,000 of the state’s 245,000 workers, both hourly and salaried, will see their pay trimmed back to the federal minimum wage of $6.55 an hour, saving the state up to $1.2 billion a month. Dropping the temporary and short-time workers will save an additional $28.5 million each month.

While the layoffs could be made immediately, the pay cuts might not be completed until mid- or late August.

The proposed pay cut for hourly employees would take their wages well below the state minimum wage of $8 an hour. But a 2003 California Supreme Court decision allows the state to chop workers’ pay to the federal minimum when a state budget has not been enacted.