Mandatory Two-Day Vacation

In mid-December 2008, Gov. Arnold Schwarzenegger issued an executive order, mandating all California state employees take two “vacation” days off every month.

Sounds great, right?

The only problem is that the two vacation days will be unpaid. It is estimated that more than 200,000 state employees will be affected.

According to reports, the state employees affected will be those who are funded by the special and general fund. Already, two unions are suing the governor. But exactly how big of an impact could such an “unpaid furlough” make on the ailing state budget?

It could actually make a difference, surprisingly, but perhaps more in a Franklin Roosevelt-esque way: the psychological feeling of knowing that your elected leader is trying to assuage your fears, is nearly as important as the elected leader making an actual difference. And more surprisingly, this is not an experiment with no end: it is slated to last for 15 months.

Executive Order S-16-08, delivered on December 19, 2008 effectively states that California is in a financial emergency, and drastic action needs to be taken immediately. According to the Office of the Governor, “without action to address the fiscal crisis, the Controller, Treasurer and Department of Finance expect the state to run out of cash in February.” Since the budget is expected to come up about $42 billion short this year, the Department of Personnel Administration (DPA) has been directed “to adopt a plan that would go into effect in February to implement a furlough of state employees and supervisors for two days per month and to work with state agencies and departments to initiate layoffs and other position reduction and program efficiency measures to achieve General Fund savings of up to 10 percent.” The Office of the Governor compared the state budget to a family’s budget, noting that the “state government cannot be exempt from similar belt tightening.”

The Executive Order explains that two days before the order was officially made, “unprecedented action” was taken by the California Pooled Money Investment Board, to “halt lending money for an estimated 2,000 infrastructure projects as a result of the cash crisis.” It is assumed that if drastic action were not taken, payroll deadlines could be missed in 2009. So really, it makes more sense to ask workers to take a minimal pay cut, to ensure that they remain paid at all. Assuming that all estimates are reasonably accurate, the governor ordered a mandatory two-day unpaid vacation, or furlough, for many state employees, explaining that a “furlough will reduce current spending and immediately improve the State’s ability to meet its obligations to pay for essential services of the State so as not to jeopardize its residents’ health and safety in the current and next fiscal year.”

Though every state employee is not being paid at the same rate, it is interesting to ponder exactly how much of a financial difference this Executive Order could make. If, for example, of the approximately 200,000 state employees who will be affected, 25,000 make $20 per hour, and work 8 hours per day, if they are asked to take two days per month off, that could save $8 million per month. Not a bad savings, especially considering many state employees may make upwards of this hourly rate, and there are more than 200,000 workers whose two-day furloughs could add up to millions or billions of dollars in savings for the state.

Schwarzenegger’s plan may also be argued as one that may make both a psychological impact and financial impact. When telling state employees that he is doing this for their benefit, not just to save a few dollars, he takes a wise and interesting approach. People may grumble, but it’s still better to have a job with two fewer workdays per month, than to have no job at all.