The battle is on.

State Controller John Chiang filed suit Wednesday to block Gov. Arnold Schwarzenegger from cutting pay for most state workers to the federal minimum wage during the current budget impasse.

The action places California's Republican governor and one of the state's highest-ranking Democrats at loggerheads on a high-stakes issue affecting nearly 200,000 state workers.

Two key state worker labor unions, the Service Employees International Union 1000 and Professional Engineers in California Government, vowed Wednesday to join with Chiang in his challenge.

Schwarzenegger contends that the state constitution and a 2003 California Supreme Court decision require him, absent a state budget, to cut employee pay to the federal minimum.

Chiang's suit, filed in Sacramento Superior Court, argues that the governor's letter ordering minimum wage is legally deficient and seeks a court order deeming it invalid.

The controller argues that he is being forced to choose between violating Schwarzenegger's order or violating various federal and state laws.

"The plan puts tremendous risk on state taxpayers because if labor laws are violated, the damages could cost Californians billions," said Jacob Roper, a spokesman for Chiang.

Aaron McLear, Schwarzenegger's spokesman, accused Chiang of trying to sidestep his legal obligation.

"Californians expect their leaders to do their jobs, not grasp at flimsy excuses to skirt the law," he said.

Chiang's action was a cross complaint to a lawsuit filed Tuesday by Schwarzenegger to force compliance with his order.

Schwarzenegger filed a second complaint Wednesday, this one seeking temporary compliance until the competing suits can be resolved.

The governor's minimum-wage order would reduce the salaries of most state workers to $7.25 per hour, with most managers and supervising receiving $455 per week. Lost pay would be reimbursed when a budget is signed.

The order would not apply to state agencies that are subject to continuous appropriations, such as the California Public Employees' Retirement System, the state's pension system.

Schwarzenegger has provided an exemption for 37,000 workers in six labor unions that recently reached tentative agreement on new contracts.

A legislative appropriation would be needed to pay full salaries for the six unions, representing doctors, Highway Patrol officers, firefighters, psychiatric technicians, equipment operators, and health and social service professionals.

Employees not covered by federal minimum-wage laws, such as teachers and attorneys, would receive no pay at all under the governor's order. The governor, legislators and their aides are precluded by state law from receiving any pay until a budget is signed.

The 3rd District Court of Appeal ruled last week that the governor has authority to cut employee pay to the federal minimum during a budget impasse.

Chiang's lawsuit focused on alleged deficiencies in the letter ordering the pay cut, saying it failed to:

• Exempt state workers who are covered by a collective bargaining agreement and, thus, can have their pay cut only by the Legislature.

• Consider limitations of the state's antiquated payroll system.

• Provide guidance on how to pay employees whose salaries are continuously appropriated and not dependent upon passage of a budget.

• Exempt employees of the state Department of Corrections and Rehabilitation who are under the authority of a federal receiver and the U.S. District Court.

• Provide instructions on how to handle deductions such as federal income tax, state disability insurance and state retirement contributions.

• Provide a way to accurately determine which state employees have worked overtime in a given month and, therefore, are entitled to full salary during that pay period.

Chiang has vowed not to cut salaries until "final resolution" by the courts.

For checks to be issued Aug. 1, the cutoff date is July 20, so "we don't anticipate cutting pay to minimum wage unless a final court ruling instructs us to," Chiang said through a spokeswoman this week.

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