The governor's office ordered the pay cut after the Thursday deadline passed for a new state budget, saying the wage cut was mandated by law, the San Francisco Chronicle reported.
"Regrettably, we must take the steps ... to adjust wages and salaries during this budget impasse," Debbie Endsley, director of the Department of Personnel Administration, wrote in a letter to Controller John Chiang.
Chiang called the move "political tricks" and said he would not comply until the courts make a final ruling.
"Because of the limits of the state's payroll system, there is no way that his order can be accomplished without violating the state Constitution and the federal Fair Labor Standards Act," Chiang said. "In short, his demands will do nothing to solve the budget deficit, but will hurt taxpayers by exposing the state to billions of dollars in penalties for those violations."
Assembly Speaker John Perez said he was "deeply disappointed" by Schwarzenegger's order.
"Using working families as leverage is not the kind of leadership we need to get through this budget process."
About 200,000 employees could be affected, the Chronicle said.