The newspaper said the wage cut to $6.55 per hour was part of a draft executive order Gov. Arnold Schwarzenegger plans to issue next week. The state minimum wage is $8 per hour.

The Republican governor also is expected to order a freeze on state hiring, an end to all but critical overtime and the layoff of 22,000 temporary and seasonal workers, the newspaper said.

"As a result of the late state budget, there is a real and substantial risk that the state will have insufficient cash to pay for state expenditures," the executive order states.

California has been without a budget since its fiscal year began July 1. State lawmakers have been unable to resolve the state's projected $17 billion budget deficit.

The idea of balancing the budget by cutting wages for the lowest-paid workers didn't resonate with state labor officials.

"Holding state workers hostage is not a fair way to get to a budget agreement," said Emily Clayton, policy coordinator for the California Labor Federation.