A spokesman for State Controller John Chiang said Chiang would not act on an order to defer payments to state workers, the Los Angeles Times reported Thursday.
The order, which Gov. Arnold Schwarzenegger was expected to sign, says payments above the federal minimum wage of $6.55 an hour would be held back until a new state budget is in place.
All pay withheld would be paid back in the next check after a budget was passed, the Times reported.
Officials said California needs a budget in place in order to borrow billions of dollars required to keep the state going.
Some reacted angrily to the proposal.
"The governor is turning a budget crisis into a catastrophe," said Yvonne Walker, president of Service Employees International Union Local 1000.
"We are in the middle of a housing crisis, and people are losing their mortgages," she said. "Are they going to issue a notice to mortgage companies that employees will just catch up later?"