California governor Brown freezes state hiring (Reuters)

SAN FRANCISCO (Reuters) – California Governor Jerry Brown ordered a hiring freeze on Tuesday across the state's government to help cut costs in the face of a budget gap of at least $25 billion.

The budget deficit of the nation's most populous state is closely tracked in financial markets. California is the biggest issuer of U.S. municipal debt, and is of concern in Washington as some in Congress have discussed crafting legislation to allow states to declare bankruptcy to ease their fiscal woes.

The U.S. economy may be recovering but state and local governments still face weak revenue due to the recession, housing and financial market slumps, hesitant consumer spending and high unemployment.

Brown's order applies to vacant, seasonal, full-time and part-time positions and will save $363 million in operational costs in the next fiscal year beginning in July, Brown's office said.

"The hiring freeze will be in effect until agencies and departments prove that they can achieve these savings," Brown, sworn in last month, said in the statement.

It was the latest move by the 72-year-old Democrat to trim state spending on his own as he seeks approval from lawmakers for his budget plan.

It includes proposals for $12.5 billion in spending cuts and calls on the legislature to put a ballot measure to voters in June to extend tax increases scheduled to expire this year.

Democrats, who control the legislature, are expected to support Brown's cuts to help win Republican votes needed to advance a measure to the ballot.

The tax extensions, spending cuts and other moves would close a budget gap Brown estimated last month in his budget plan at $25.4 billion through mid-2012.

That deficit may swell to more than $27 billion after Brown canceled a plan to sell state buildings and if his proposal for creating a nearly $1 billion reserve survives budget talks with lawmakers.

In addition to the hiring freeze, Brown has ordered sharp reductions in mobile phones for state employees and in the state's vehicle fleet.

To further underscore frugality, Brown recently took a commercial passenger flight -- coach and without entourage -- to Southern California to urge business groups to support a referendum on tax extensions.

(Reporting by Jim Christie; Editing by Xavier Briand)

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Wisconsin governor aims to curb state worker unions (Reuters)

MADISON, Wisconsin (Reuters) – Wisconsin's new Republican governor on Friday proposed sharply curtailing the bargaining rights of public employee unions and other cost-saving measures to rein in the state's budget deficit.

Governor Scott Walker said he will ask the Republican-controlled legislature to pass his "budget repair bill" next week. He said it aims to bring stability to government finances and stave off employee layoffs.

"The last thing we need is any more people on unemployment," Walker said at a news conference.

The proposal drew criticism from Democrats in the state, which has a $137 million budget deficit in the fiscal year ending June 30 and larger deficits to come.

"If Republicans get their way, workers will no longer be able to negotiate over the hours they work, the safety conditions they labor under or the health insurance and retirement benefits they and their families depend on," Senate Democratic Leader Mark Miller said in a statement.

The proposal includes limiting state employee wage increases to the rate of inflation unless approved in a voter referendum. Public employees -- other than police, fire, and inspectors -- would lose many bargaining rights and could opt out of paying union dues after current contracts expire, with dues no longer collected automatically.

State workers will have to increase contributions to their pensions to 5.8 percent of salary, and double contributions to health insurance premiums to 12.6 percent of salary. Wisconsin's unfunded pension liability is $252.6 million, according to Moody's Investors Service.

The plan calls for raising appropriations for prisons and the Medicaid program, which is underfunded by $153 million, while making changes to the health insurance program for the poor. It also calls for selling the state's heating plants.

Walker's plan also would allow the state to push principal payments due March 15 on its general obligation bonds into future years to gain $165 million through a debt refinancing. That money would help cover a court-ordered payment to the Injured Patients and Families Compensation Fund and payments under the state's tax reciprocity program with Minnesota.

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State employee unions made $100 million in concessions in December to ease the budgetary strain, said Bryan Kennedy, president of the state chapter of the American Federation of Teachers. But Walker's response has been "to eviscerate our most basic rights" and "end labor peace in Wisconsin."

Leading Republican lawmakers say workers have to share the pain of shoring up the state's unsustainable financial problems -- a projected $2.9 billion biennial budget deficit for fiscal 2012 and 2013. This year's budget totals $12.7 billion.

"Anything short of making the tough decisions that are necessary to balance our budget and rein in spending is going to leave our state bankrupt, and the livelihood and well-being of Wisconsin will depend on the swift and decisive action we'll be taking over the next week," state House Majority Leader Scott Suder said.

A growing number of deficit-ridden states have tried to curb expenses by going after public employee union contracts and pensions. Wall Street rating agencies and investors in the $2.8 trillion municipal bond market are increasingly focusing on the cost of employee benefits like pensions as they weigh the credit-worthiness of state and local government debt.

Walker's plan to eliminate all bargaining rights of public sector workers except for a limited discussion of wages is draconian, according to one legal expert.

"Not only is this inconsistent with international human rights law, which recognizes a right to collectively bargain with one's employer, but it also flies in the face of decades of cooperation between the labor movement and the government in Wisconsin," Marquette University law professor Paul Secunda said.

(Additional reporting by Karen Pierog and John Rondy, Writing by Andrew Stern, Editing by Dan Grebler)

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