California Governor Arnold Schwarzenegger has moved to end a budget crisis by sacking 22,000 state workers and ordering pay cuts for 200,000.
The state faces a budget deficit of more than $US15 billion and legislators are struggling to agree a spending plan.
The cuts will save $US100 million a month and are designed to put pressure on politicians to end the budget crisis.
California is one of the largest economies in the world. The BBC reports some 30 American states face budget deficits caused by rising costs and falling revenues in a slumping economy, but the deficit in California is by far the largest.
However, state financial controller John Chiang, a Democrat, has vowed not to implement the pay cuts, saying to do so could risk legal action.
He sent a letter to Mr Schwarzenegger on Thursday saying he would defy the order and issue employees their regular salaries.