California Governor Arnold Schwarzenegger has signed an executive order to sack 22,000 state workers and reduce 200,000 to the minimum wage.
California has one of the world's largest economies, but facing a budget deficit of more than $15bn (£7.6bn) Mr Schwarzenegger is seeking to shift the costs onto public sector workers.
Most of those laid off are seasonal and part-time staff, while the 200,000 remaining state employees would have their full salaries restored when a budget was agreed, the governor said. "Today I am exercising my executive authority to avoid a full-blown crisis and keep our state moving forward," he said.
However, unions have pointed out that if implemented the plans could lead to public sector workers losing their homes as their incomes are slashed. Meanwhile, the state financial controller Mr Chiang, a Democrat, has written to the governor, a Republican, stating he will refuse to obey the order and continue to pay salaries as normal. During this party-politicking the living standards of 200,000 workers hang in the balance.