In a memo sent Wednesday to state agency and department heads, Debbie Endsley, director of the governor's Department of Personnel Administration, said Schwarzenegger might also order more furloughs of state workers if no budget agreement is reached, the Los Angeles Times reported.
"The Governor retains the right and authority to order furloughs if necessary to address a fiscal and cash crisis," the memo said.
The fiscal year begins July 1. Democrats have yet to agree on a budget plan among themselves and Republican lawmakers have lined up behind the governor's call to cut state spending by billions of dollars, the newspaper said.
Schwarzenegger ordered state workers' pay reduced to minimum wage during a 2008 budget standoff but California Controller John Chiang refused to implement the cut. The 3rd District Court of Appeals is considering a lower court ruling against Chiang in that case, the Times reported.
Endsley's memo said state employee paychecks for the July pay period would reflect the lower pay rate but workers would have their regular rates restored and would be entitled to back pay once a new budget is adopted.