Suit filed against California controller

Gov. Arnold Schwarzenegger and California’s top payroll official are headed for a court fight over the governor’s attempt to cut the pay of about 175,000 state employees until lawmakers approve a budget.

A lawsuit against state Controller John Chiang was filed Monday in Sacramento County Superior Court. The suit says the state Constitution and several sections of law prohibit the state from paying full wages without approval of a budget.

The controller, a Democrat whose office is responsible for paying state employees, has balked at carrying out the Republican governor’s July 31 executive order cutting employees’ pay until a budget for the fiscal year that began July 1 is approved. Lawmakers are divided over how to close a $15.2 billion deficit.

Schwarzenegger directed that the pay of nearly 140,000 rank-and-file employees be cut to the federal minimum wage of $6.55 an hour. About 30,000 management employees would be paid $455 a week, and another 8,000 workers, mostly doctors and attorneys, would get nothing. All those workers would get the remainder of their normal paychecks after the budget is approved.

Chiang said he was confident the court would agree with him that it was impossible to alter the pay of so many state employees in a short period of time.

Washington

Most corporations avoid income tax

Unlike the rest of us, most U.S. corporations and foreign companies doing business in the United States pay no federal income tax, according to a new report from Congress.

The study by the Government Accountability Office, expected to be released today, said two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, and about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.

Collectively, the companies reported trillions of dollars in sales, according to GAO’s estimate.

The GAO study did not investigate why corporations weren’t paying federal income taxes or corporate taxes and it did not identify any corporations by name. It said companies may escape paying such taxes because of operating losses or tax credits.