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A year ago, California dealt with its budget crisis by handing out hundreds of thousands of IOUs to contractors and taxpayers. This year, it’s threatening to cut state workers’ wages to the bone.

Most of California’s 240,000 state employees could see their salaries temporarily cut to the federal minimum wage because government officials can’t reach agreement on a new fiscal-year budget for the financially troubled state.

It’s the latest manifestation of state budget dysfunction, and workers have found themselves caught in the crossfire as the state’s Republican governor, Arnold Schwarzenegger, tussles with the Democrat-led legislature.

With no end in sight to the impasse, Schwarzenegger’s administration last week moved to to cut 200,000 state workers’ wages to $7.25 an hour unless a budget is reached soon.

The salary reductions would cut across all job types and pay scales — from a lifeguard who makes $16 an hour to an accountant who nets $6,000 a month. The average California state worker’s salary was $65,484 last year.

Affected workers would receive back pay when the budget is passed. But state employees have already gotten the short end of the stick. Some have been forced to accept furloughs that have decreased their salaries by an average of 14%.

To help close the $19.1 billion budget shortfall for the fiscal year that began July 1, Republican lawmakers have proposed severe cuts to state social services such as welfare and Medicare, instead of hiking taxes.

By contrast, Democrats oppose the program cuts and instead want tax increases on industries like oil production. They have also proposed a delay to some corporate tax breaks.

Workers will at least receive minimum wage thanks to a 2003 California Supreme Court ruling, which said the state can withhold salaries during budget impasses as long as it complies with federal law payday loans. (Read ‘Stimulus: The big bang is over.’)

Controller sues over cuts: State Controller John Chiang has refused to carry out the cuts, saying he would wait until he completes an appeal of another court’s ruling on a similar pay cut order from 2008.

Schwarzenegger’s office sued Chiang on Tuesday, seeking an injunction to force him to make the cuts. Chiang promptly filed a cross-complaint alleging the order violates federal and state law.

"Withholding pay from state employees until a budget is enacted does nothing to solve the budget deficit, but will only make it worse," Chiang’s office said in a separate statement. Chiang has also said the payroll computers aren’t equipped to make the pay cuts.

A spokesman for Schwarzenegger said that an appellate court ruling on Friday upheld a trial court’s decision that Chiang must enact the cuts. "That’s the law here, and despite several courts’ rulings, he’s still going to defy the law," the spokesman said.

The Service Employees International Union, the largest union of California state workers, said in a statement that the cuts will only add to the state’s budget crisis. The union claimed that it negotiated an agreement last year that would have saved the state some money, "but the governor walked away from that deal." 

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Midwest BankCentre added Alex Fennoy as senior vice president and director of community development.

Fennoy will focus on starting St. Louis-area community outreach programs for the bank in lending, investment and financial education, as well as managing traditional middle market commercial banking relationships.

He has 18 years of experience in commercial banking, most recently serving as a vice president of National City Bank.

Fennoy sits on the St. Clair County Board for the United Way, mentors with Inroads Alumni and serves as finance committee chair for the Jackie Joyner-Kersee Foundation.
He earned a bachelor’s degree in accounting from Fisk University in Nashville, Tenn.

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U.S. stocks soared Thursday, with the major indexes gaining about 3%, after Chinese officials dismissed reports that they’re reviewing their nation’s investment in European bonds amid concerns about the continent’s debt problems.

The Dow Jones industrial average (INDU) added 285 points, or 2.9%, and finished at 10,259. American Express (AXP, Fortune 500), Intel (INTC, Fortune 500) and Alcoa (AA, Fortune 500) led the advance, rising more than 5%.

The S&P 500 (SPX) index rose 35 points, or 3.3%, and the Nasdaq (COMP) composite increased 82 points, or 3.7%.

Stocks erased gains in the last hour of trade Wednesday, with the Dow finishing below 10,000 for the first time in three months, as the focus shifted from strong economic reports to lingering concerns about global economic recovery and the weakening euro.

But investors’ confidence got a boost Thursday after China’s State Administration of Foreign Exchange refuted reports that the country was reconsidering its holdings in European bonds, calling the claims "groundless."

"China has always firmly supported the EU integration process. We support the European Union and the International Monetary Fund package of financial stability measures being taken," said agency chief Yi Gang in a statement.

China holds $2.45 trillion of foreign exchange reserves, with U.S. Treasury debt and Euro zone government bonds making up key investments.

"The news out of China denying rumors that they’re going to reevaluate their European assets sparked a nice rally," said Peter Cardillo, chief market economist at Avalon Partners.

Had the rumors been true, Cardillo said the euro would have crashed and sent markets into a free fall.

"That kind of move would have been detrimental for China, too," Cardillo said. "If Europe falls apart, so will the global economy."

Although worries about Europe’s debt problems will continue, Cardillo said it’s only a matter of time before fears subside.

The CBOE Volatility index, or the VIX (VIX), Wall Street’s fear factor, sank more than 14%.

"With the facts we have now, we know Europe’s troubles will impact economic activity on a global scale, but not by much and that’s key," Cardillo said.

But markets could continue to remain volatile as investors remain jittery.

"Anytime we see moves of this kind of magnitude, even if it’s positive, investors take a little more caution," said Russel Lundeberg, chief investment officer at Barrett Capital Management. "A nervous environment keeps volatility high."

Economy: The government revised its reading on first-quarter gross domestic product (GDP), the broadest measure of U.S. economic activity, to an annual growth rate of 3%. The figure was below expectations of 3.3%, according to a consensus of economists surveyed by Briefing.com. The initial reading, released last month, was a 3.2% rate.

But the revision also showed that the rate of consumer spending has doubled since the fourth quarter of 2009, and remains consistent with the forecast for annual GDP to grow between 3% and 3 payday advance.5% in 2010, Cardillo said.

The Labor Department said filings for first-time unemployment insurance fell last week to 460,000 from a revised 474,000 the previous week. Economists were expecting claims to fall even lower, to 455,000.

Companies: Johnson & Johnson (JNJ, Fortune 500) executives told lawmakers that the widespread recall of children’s Tylenol medicines earlier this month was a precautionary measure taken against "remote" health risks. But the Food and Drug Administration is investigating reports of at least 775 serious side effects from the recalled drugs.

Johnson & Johnson’s stock was the only Dow component to slip into the red Thursday, falling 0.2%. Since the May 1 recall, the company’s shares have fell more than 7%.

BP (BP) executives also took the hot seat on Capitol Hill in ongoing testimony about the Gulf oil spill. The company’s shares soared 7% after an Oppenheimer analyst raised the stock’s rating, saying that the recent sell-off has gone too far. Shares of BP have dipped 30% since the April 20 explosion.

Apple’s (AAPL, Fortune 500) market capitalization overtook Microsoft’s (MSFT, Fortune 500) for the first time in 20 years at the close Wednesday, making it the second most valuable company in the nation after Exxon Mobil (XOM, Fortune 500). Both tech giants added about 4%.

World markets: Stocks around the world also advanced on the news from China. In Europe, the CAC 40 in France jumped 3.4%. Britain’s FTSE 100 added 3.1% and the DAX in Germany also gained 3.1%

Asian shares also finished higher. The Hang Seng in Hong Kong and Japan’s Nikkei added 1.2%. The Shanghai Composite gained 1.2%.

Dollar and commodities: The euro, which has seesawed since falling to a four-year low last week amid concerns about the region’s economic stability, rebounded against the dollar, rising 1.5% against the U.S. currency.

The greenback was down 1.3% against the British pound, but it was up 1% versus the Japanese yen.

The weaker dollar gave momentum to oil prices. Oil for July delivery rose $3.04, or 4.3%, to $74.55 a barrel.

Gold for June delivery dipped $1.50 to settle at $1,211.60 per ounce.

Bonds: Treasury prices tumbled Thursday, pushing the benchmark 10-year note’s yield up to 3.35%. Bond prices and yields move in opposite directions.

Trading volume: Market breadth was positive. On the New York Stock Exchange, winners beat losers nearly 13 to one on volume of just under 1.4 billion shares. On the Nasdaq, advancers topped decliners seven to one on volume of 2.4 billion shares.  

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The city of Glendale has put $25 million into an escrow account after the National Hockey League threatened to move the Phoenix Coyotes to another market.

The Glendale City Council approved a plan earlier this month to pay the NHL as much as $25 million in the upcoming hockey season to cover the team’s costs. The NHL owns the Coyotes, in Chapter 11 bankruptcy reorganization. The league operated the team this season but won’t do the same for the 2010-11 campaign.

The Glendale plan originally had the city government putting aside the $25 million in September, But the NHL asked that the money be in place before the end of June.

The money is in an escrow account, said Glendale city spokeswoman Julie Frisoni, while declining further comment.

NHL has given Glendale until the end of the year to find an owner who will keep the team in Arizona. Glendale officials are hopeful they can get a deal done, though negotiations with Ice Edge Holdings and Jerry Reinsdorf are not progressing. The NHL likely will move the team to Winnipeg, Manitoba, if a deal here doesn’t get done

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Gasoline prices in Florida are expected to drop again this week as crude oil prices continue their downward trend for the third straight week amid concerns that Europe’s financial crisis will worsen, AAA said.

Crude oil closed Friday at $70.04 a barrel on the New York Mercantile Exchange.

In the past few weeks, the European crisis has pushed the value of the euro down 12 percent against the dollar and is one of the major factors that has caused the price of crude to decrease. At the same time, U.S. stockpiles of crude grew for the 15th week, AAA said.

“The possibility that Europe’s financial problems will slow global demand at a time when U.S. demand is already slow to rise has investors worried,” said Jessica Brady, manager of AAA public relations no credit check payday loans. “The lack of demand can be seen in the constant increase in U.S. stockpiles of crude that are now well above 362 million barrels.

“Lower retail gasoline prices are always welcomed by consumers, and they can expect to see just that as retail prices drop again this week.”

The national average price of a gallon of self-serve regular gasoline is $2.80, while Florida’s average is $2.79, bothof which reflect a seven-cent decrease from last week.

In Orlando, a gallon of self-serve regular averages $2.70, down 9 cents from a week ago.

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This is a weekly roundup of promotions, appointments and employee accomplishments in the Birmingham metro area. For more People on the Move, check out the Birmingham Business Journal’s print edition each week. Send announcements to ccrawford@bizjournals.com.

AGRICULTURE

Shep and Rite Morris of Morris and Morris Farms in Shorter were named the Alabama Farm-City Committee’s 2010 Farm of Distinction winner. The committee is part of the Alabama Farmers Federation. Five finalists also honored were Bryan and Beverly Hughes of Tuscaloosa County, Larry and Bonita LouAllen of Lawrence County, Chase and Noelle Bradley of Monroe County, Garry and Denise Staples of St. Clair County and John and Katie Wesson of Talladega County.

INSURANCE

Allstate Insurance Co. recognized eight Birmingham-area Allstate exclusive agency owners with the Honor Ring award for high standards in customer satisfaction, customer retention and profitable business growth. They are Jim Anthony of Pelham, Mika Marcum of Warrior, Ken Massey of Alabaster, Breck Price of Birmingham, Pete Russell of Birmingham, John F. Saddler of Homewood, Jessup Standifer of Birmingham and Cindy Stuman of Pinson.

Allstate Insurance Co. recognized Allstate personal financial representatives Richard Akel and Keeley Moore, both of Birmingham, with the Chairman's Conference award for high standards in customer satisfaction, customer retention and profitable business growth. Akel and Moore are among only 6 percent of Allstate producers nationally to reach this level of achievement, based on financial services sales.

LEGAL

J. Vernon Patrick Jr., an attorney with Haskell Slaughter Young & Rediker LLC, has been recognized in the latest edition of The Global Directory of Who’s Who. Patrick has focused his practice on securities, derivative and class action litigation and other complex civil litigation for about 50 years.

MEDIA

Gregory O. Griffin Sr., chief legal counsel for the Alabama Board of Pardons and Paroles, was appointed by Gov. Bob Riley to represent the Second Congressional District on the Alabama Educational Television Commission. Ferris W. Stephens, an Alabama Assistant Attorney General, was appointed to represent the Sixth Congressional District of Alabama.

Panorama Public Relations Vice President Melanie Green and Genevieve Douglass, client services manager, will lead a team handling services for Hallman Hill townhouses and condominiums in Homewood.

REAL ESTATE

John Coleman of Graham & Co. represented GE Capital in the disposition of the former Expressions Cabinetry facility in Gadsden. The 55,000-square-foot building was purchased by United Caseworks and will continue to be used for cabinet manufacturing. Coleman also represented Thistle Properties in the acquisition of a 10,000-square-foot office warehouse off of Academy Drive in Bessemer. The building will be occupied by an automotive related company providing automotive solutions, from mechanical and controls design to fabrication and installation. The seller, Crew Development, was represented by Jack Brown, also of Graham & Co.

RETAIL

ConsignmentChic.com founder Tracy True Dismukes has been named a finalist for the National Association of Women Business Owners/Wells Fargo Trailblazer Award. Dismukes is the owner of a chain of three consignment shops called Collage Designer Consignment and Collage Plus Sizes in Birmingham. Three female business owners will be recognized with the trailblazer award based on business performance, innovation, growth and contribution to the community. Winners receive a $5,000 cash grant and will be honored at the 2010 NAWBO Annual Women’s Business Conference in Washington, D.C.

UNIVERSITIES

The University of Alabama System Board of Trustees appointed University of Alabama at Birmingham School of Health Professions faculty member Stephen N. Collier a professor emeritus. Collier first joined the faculty at UAB in 1980. He left in 1985 to serve as president of the MGH Institute of Health Professions in Boston and as dean of the College of Health Professions, professor of Health Science and director of the Center for Health Policy and Workforce Research at Towson University. Collier also served in the U.S. Navy for 24 years as an intelligence officer and retired as commander. Collier returned to UAB in 2003 and established the Office of Health Professions Education and Workforce Development to address health work force issues through research, publications, presentations and associated activities.

Lt. General Ronald L. Burgess Jr., director of the U.S. Defense Intelligence Agency, spoke at Samford University’s Brock School of Business Samford Business Network on April 6. Burgess is responsible for providing critical intelligence to U.S. forces around the world, including coalition forces in Afghanistan and Iraq, as well as to senior Department of Defense and national security leadership.

The University of Alabama System Board of Trustees appointed Hemant Kumar Tiwari to the William “Student” Sealy Gosset Endowed Professorship in Biostatistics at the University of Alabama at Birmingham. He joined UAB in 2002 and became an associate professor in 2006.

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The National Conference of Black Mayors will hold its 36th annual convention in Cincinnati, the city and the Cincinnati USA Convention & Visitors Bureau will announce Monday morning.

The convention will take place May 12-16, to coincide with Major League Baseball’s Civil Rights Game, scheduled for May 15 at Great American Ball Park.

About 700 conference members are expected to attend the convention, booking more than 1,200 room nights, according to a news release. Cincinnati Mayor Mark Mallory will host the event.

The Cincinnati Reds will meet the St. Louis Cardinals in the Saturday Civil Rights Game. Among the events surrounding the game, Major League Baseball will present its Beacon Awards to athletes Willie Mays and Billie Jean King and actor/musician/activist Harry Belafonte.

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The rate hikes are coming! The rate hikes are coming! Eventually.

Days after the Federal Reserve seemed to sound the alarm that the era of near-zero interest rates is ending, Chairman Ben Bernanke tempered those expectations a bit this week. Just because the Fed boosted the rate it charges banks, he told Congress, doesn’t mean it will move any time soon to boost broader interest rates too.

Nonetheless, it behooves investors to be ready, regardless whether rate hikes come in the second half of 2010 or next year.

Despite what some may think, moving toward higher rates will be good news in many ways. It’s an endorsement of the economy’s potential to stand on its own. It means yields from CDs as well as savings and money-market accounts at banks won’t be minuscule much longer. It could even bode well for certain types of stocks.

But higher rates are bad for bonds and may make some other holdings less appealing too. So investors should take a close look at what they own.

"It’s a wakeup call," says Larry Glazer, partner at Mayflower Advisors in Boston quick cash.

Here’s how rate hikes could affect you:

Bonds — Bonds are in line to experience the biggest fallout, because they generally move inversely to rates. When rates exceed the rate on a previously issued bond, the bond’s value on the open market drops.

Stocks — Overall market returns may be harder to come when the Fed determines it needs to raise rates to try to keep the economy from growing too fast. But stocks should still climb. Tread carefully, though. Some sectors — notably utilities, financials and materials — have been big laggards when rates rise.

Saving and borrowing — Long-suffering savers can look forward to their money growing at a decent clip again while sitting in the bank. At the same time, rising rates will make mortgages and other loans more expensive. If you’re thinking about buying a house or refinancing a current mortgage, it might be time to consider locking in those low-low rates.

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Japan’s economy probably grew at the fastest pace since the first quarter of 2008 as a global trade revival fueled demand for the nation’s exports.

Gross domestic product rose an annualized 3.6 percent in the three months ended Dec. 31, following a 1.3 percent expansion in the third quarter, according to the median forecast of 23 economists surveyed by Bloomberg News. The Cabinet Office report is due on Feb. 15 at 8:50 a.m. in Tokyo.

Nissan Motor Co. and Canon Inc. are among companies benefitting from stronger global demand as countries poured more than $2 trillion into their economies to spur growth. Those gains have failed to reach consumers at home, where wages are tumbling and household outlays have been propped up by government incentives that are starting to wear off.

“Japan may be able to stave off a double-dip recession given exports have done better than expected,” said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo. “Still, it’s questionable whether a recovery in domestic demand without the stimulus is possible and the economy is still highly dependent on overseas demand, underscoring the fragility of the recovery.”

Gains in the Nikkei 225 Stock Average stalled this year after a 19 percent advance in 2009, a reflection of concerns about the strength of the global recovery. The yen is the only currency that has gained against the dollar since Dec. 31 among 10 major currencies tracked by Bloomberg, threatening exporters’ profits.

Asia spearheaded Japan’s revival at the end of 2009. Shipments to the region surged 31 percent in December, the fastest pace in almost a decade, helping China overtake the U.S. as Japan’s largest foreign customer on an annual basis. Demand from the U.S. is also improving after the nation’s GDP expanded the most in six years last quarter.

‘More Resilient’

“The Asian economy is growing at a fast pace while the U.S. economy is picking up, a sign the global recovery is becoming more resilient,” said Yoshiki Shinke, senior economist at Dai- Ichi Life Research Institute in Tokyo.

Nissan, Japan’s third-largest carmaker, this week forecast a return to profit for the year ending March 31, citing government incentives that boosted sales in China and Japan. Canon, the world’s largest camera maker, is predicting its biggest annual profit increase in a decade amid revived global demand.

Japan’s economy expanded 0.9 percent from the previous quarter, the survey showed. Overseas shipments increased 5.3 percent in the fourth quarter from the previous three months, analysts surveyed said ay day loans. Net exports, or shipments minus imports, added 0.5 percentage point to growth.

Calculation Change

The Cabinet Office said last week that it will change the way it calculates exports and imports on a seasonally adjusted basis to account for the anomaly created by the financial crisis in 2008. The announcement prompted economists to cut their annualized GDP forecasts by about 1 percentage point.

The faster growth may not be enough to convince Prime Minister Yukio Hatoyama that the recovery is sustainable. The premier, facing upper house elections in July, is implementing a 7.2 trillion yen ($80 billion) stimulus package that his administration estimates can boost growth by about 0.7 percentage point next fiscal year.

Even if GDP is strong, “Hatoyama may compile an additional stimulus as he wants to lure voters ahead of the election, especially when his popularity is sliding,” said Susumu Kato, chief economist for Japan at Calyon Securities in Tokyo.

‘Long Way’

Central bankers aren’t confident that growth is durable. Kazuo Momma, the Bank of Japan’s top economist, this month said “there is still a long way to go” before the expansion becomes sustainable. Governor Masaaki Shirakawa and his policy board will hold a rate-setting meeting two days after the GDP report is released.

Japan’s wages slumped at a near-record pace in December, when household sentiment fell to a six-month low. In a sign that stimulus measures are fading, retail sales fell 1.2 percent in December on a seasonally adjusted basis, the largest drop a year, as customers purchased fewer cars and appliances.

Nevertheless, consumer spending probably contributed to the growth in the fourth quarter. The 0.3 percent increase predicted by economists would be a third of the pace of the previous quarter. Capital investment may rise 1.5 percent, the first positive reading in seven quarters.

Economists including Calyon’s Kato said the business investment figure may be revised down when the government updates the GDP report next month to reflect additional data.

“The domestic economy remains fundamentally weak as the positive cyclical loop between income and expenditure has yet to kick in,” said Ryutaro Kono, chief economist at BNP Paribas in Tokyo. “Although we believe the worst is over for corporate earnings, the return on capital remains so low that companies will continue to restrain labor costs for some time.”

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Drugmaker Pfizer Inc., which just bought rival Wyeth in October, said Wednesday that it would scrap testing of roughly 100 experimental drugs from their combined research operations to focus more resources on its priority areas.

New York-based Pfizer said it would continue with about 500 research projects. About 70 percent of those — and 75 percent of its late-stage research — fall within what it calls "Invest to Win" areas because of the great need for better treatments.

They are Alzheimer’s, diabetes and metabolic disorders, pain, cancer, inflammatory disorders such as rheumatoid arthritis, and mental illnesses.

Pfizer will reduce the square footage of its R&D facilities by one-third, eliminating six research sites and an unspecified number of workers.

Pfizer maintains a research facility in Chesterfield, though the company is scaling back those operations. The company announced in November that it would eliminate 600 of the 1,000 jobs at the research center and sell the property to Monsanto.

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