Outdated technology in payroll system foils Schwarzenegger’s minimum wage order for workers

Old technology foils Schwarzenegger’s wage order

SACRAMENTO, Calif. — As the Terminator, Arnold Schwarzenegger was the technology of the future, feared by humans. As governor, he’s being foiled by the technology of the past.

For the second time in two years, Schwarzenegger has ordered most state workers’ pay cut to the federal minimum wage because lawmakers missed their deadline to fix the state’s $19 billion budget deficit. The Legislature’s failure to act has left the state without a spending plan as the new fiscal year begins.

A state appellate court ruled in Schwarzenegger’s favor Friday, but the state controller, who issues state paychecks, says he can’t comply. One reason given by Controller John Chiang, a Democrat elected in 2006: The state’s computer system can’t handle the technological challenge of restating paychecks to the federal minimum of $7.25 an hour.

Chiang cited Friday’s ruling by the 3rd District Court of Appeals, which said “unfeasibility” would excuse him from complying with Schwarzenegger’s minimum wage order. He said a fix to the state’s computerized payroll system won’t be ready until October 2012.

Meanwhile, more than 200,000 state workers remain in limbo about the size of their July paychecks while Chiang asks the court for guidance on how to proceed. If wages are indeed cut to $7.25 an hour, employees will be reimbursed once a budget is signed.

John Harrigan, who served as a division chief for the state’s payroll services from 1980 to 2006, said upgrading the system would be complicated, time-consuming and expensive. He said it could be done, but not without violating the federal Fair Labor Standards Act and substantially altering the payroll process.

“It’s not something that you can take lightly and do overnight,” said Harrigan, who also served as chief deputy controller from 2000 to 2002. “You have all the collective bargaining for civil servants and (state universities) that have to be taken into consideration. … It’s very complicated. It would take considerable effort.”

The state’s payroll system was designed more than 60 years ago and was last revamped in 1970, Hallye Jordan, state controller’s office spokeswoman, said in an e-mail.

A report by the nonpartisan legislative analyst’s office said an overhaul of the state’s computerized payroll system was proposed by the controller’s office in 2004. A year later, the Legislature approved $130 million for the effort, called the 21st Century Project.

Work to complete the project has been postponed by the controller’s office repeatedly over the past several years, said Lynelle Jolley, spokeswoman for the governor’s Department of Personnel Administration.

“They had various setbacks that only they can explain,” she said.

Harrigan said he was involved with the 21st Century Project when it was conceived in the late 1990s. He said the state fired the vendor executing the project in 2008 because the company went bankrupt.

As the project dragged on, the state has had fewer experts on hand who could thoroughly understand the programming languages used to design the system.

“There’s been a knowledge loss with people retiring,” Harrigan said.

Even so, he said changing the system to pay state workers the federal minimum wage could be accomplished by the programmers currently on staff.

Implementing the minimum wage change would take six to nine months, in part because the Legislature would have to pass a bill to modify the computer system or collect additional data, said Nick Dedier, former chief information officer for the state Department of Justice.

Asked if the administration agreed that the payroll system could not handle the change, Schwarzenegger spokesman Aaron McLear cited the 2009 lower court ruling in the governor’s favor. In part, it said the controller’s office “has not made a sufficient factual showing of impossibility …”

When asked whether it would be technically possible for the controller to follow the order, the state’s chief information officer said it does not have oversight of the system. In an e-mail, spokesman Bill Maile said the office had not assessed the system and is ready to help the controller comply with the order if asked.

The controller’s chief of staff, Collin Wong-Martinusen, said in a letter to the governor’s office Friday that the administration is well aware of the problems with the state’s payroll system because it has been working closely with the controller to modernize it.

“The new payroll system will have the capacity to address the state’s current and future business needs, including the lawful reduction of wages in the absence of a budget,” he wrote. “If you have solutions to the identified challenges, it would be in the State’s best interest that you share them.”

A spokesman for state Sen. Tony Strickland, the Republican nominee for controller who is challenging Chiang this fall, said he was in Portland, Ore., on Friday and unavailable for comment. His campaign manager, Chris Wangsaporn, did not return a call seeking comment.

Republican gubernatorial nominee Meg Whitman, who is campaigning on a proposal to make state government more efficient by updating its technology, did not respond to requests for comment Friday. She acknowledges the problem with California’s payroll system in her policy booklet but does not offer a specific solution.

With all the difficulties that would be involved, some technical experts seem perplexed that the governor wants to go through with the order.

“The state isn’t saving any money on paying them minimum wage, because they ultimately have to make them whole,” Harrigan said. “So what’s the point?”

The average state employee makes $65,000 annually, according to the state Department of Personnel Administration. A cut to minimum wage would mean state workers would make the equivalent of $15,000 a year.

In its letter to Schwarzenegger, the controller’s office said it would take at least six months to reinstate workers’ full pay once a budget is passed.

Associated Press Writers Judy Lin and Juliet Williams contributed to this report.