State Controller John Chiang has been at the center of a two-year battle with Gov. Arnold Schwarzenegger over whether state workers' pay should be withheld to the minimum allowed under federal law during a legislative budget stalemate.

Schwarzenegger and Chiang agree that state law allows for this, because without a budget there's no money appropriated for payroll. But Chiang says executing the law is logistically impossible and fraught with legal peril because of federal labor law.

The state's chief financial officer visited The Bee's Capitol Bureau on Wednesday. Here's part of the conversation:

So why can't you simply comply with the governor's minimum wage order?

The (payroll) system was designed in 1951. It was not designed to take down the wages to minimum wage if you had political failure and then (had to) restore the pay.

You've said it violates federal law because of the inability to restore full wages if someone works overtime.

That's on the front end. Then on the back end, it would be the resumption of regular pay (once a budget is in place). Federal law says if a person works overtime, then they are entitled to their full pay. ... If you don't make that full payment during that pay period, you're in violation of labor law.

You've said state pay law needs to be changed, too.

One of the changes that would be required is a legal change. ... The current law in California requires we pay everybody by the end of the month. (To do that) we ... cut off payroll about 10 days in advance so we can start processing all the checks. ...

The actual time worked isn't given to the state controller's office until the next month. So we have no sense of whether people have taken personal leave, sick leave or worked overtime.

So then the adjustment is made on the following month's check?

That's right.

Why couldn't you just do that with the minimum wage?

We would try to make that adjustment for the next month, but we won't get it all right. You still have to make all those technical corrections. ... However, if we make the adjustment the next month, that would be a violation of federal labor law. They're not getting that overtime for that pay period that was worked.

How is that different from what you said would happen with minimum wage? If you work overtime at the end of this month, you won't be paid for it until your Sept. 1 paycheck. Isn't that a violation?

That hasn't been called a violation. I'd have to check with the lawyers on the technicalities.

Some workers get paid in the middle of the month, and the deadline for their payroll passed July 9. Does that mean the deadline (for that group) has passed?

It depends on what the judge decides. Bottom line, I will comply with a court order. I don't violate the law. Our issue with the governor's pay order is that it's vague.

If the judge on Friday says you lose, the governor wins, is that it? Is that the end of the road?

We'll see what the decision says.

You might appeal?

We might appeal, we might not appeal. ... I don't know the scope of what (the judge) will cover.

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Call Jon Ortiz, Bee Capitol Bureau, (916) 321-1043.

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