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Gov. Jerry Brown has dropped a lawsuit filed by former Gov. Arnold Schwarzenegger that asserted his right to impose a minimum wage order on state workers during a budget stalemate.

Brown's Department of Personnel Administration filed the stipulation for the suit's dismissal on Monday in Sacramento Superior Court. Schwarzenegger sued Controller John Chiang, a Democrat, in August 2008 when Chiang resisted the former Republican governor's efforts to chop state worker pay to the federal minimum of $6.55 an hour.

Chiang argued that the state had enough cash to pay workers and argued that a 2003 state Supreme Court decision did not require pay cuts when there is no state budget. The controller also argued that the state's outdated payroll system -- designed in 1951 -- couldn't comply with the order to cut wages and avoid violating various labor laws.

"I am pleased and thankful that Governor Brown saw this litigation as a frivolous waste of hard-earned tax dollars that should be dedicated to fixing our schools, protecting our communities and rebuilding our infrastructure," Chiang said in a statement.

Chiang contended that the 2008 pay cut order "would not have saved the state one penny" and would have "exposed" the state to lawsuits while imposing financial hardship on families.

Schwarzenegger's order, widely viewed as a pressure tactic to obtain concessions during tough budget talks, had exempted about 37,000 state workers in six bargaining units that had struck tentative deals with the administration.

Workers in six other unions still negotiating over pension and pay deals were not exempted from the minimum-wage order. Schwarzenegger argued that a 2003 state Supreme Court decision gave the administration legal grounds -- during a budget impasse -- to cut pay to the federal hourly minimum and restore pay after a budget's passage.


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