In a stunning setback for Arnold Schwarzenegger’s state-employee mandatory furlough policy, an Alameda County Superior Court judge has ruled the furloughs illegal, since they were implemented under a state of emergency that no longer exists.

In a ruling handed down late Thursday, Judge Frank Roesch said the governor’s reliance on provisions of the state’s Emergency Services Act to order mandatory furloughs was flawed and illegal, saying "the emergency necessitating them was the failure of the Legislature to pass the budgets" yet the administration continued the furloughs even after the budgets were passed.

Roesch also said that the furlough plan has "interfered with the objectives of agencies" whose activities were funded with special funds, not general fund revenues, including the processing of Social Security disability reviews.

These are employees whose salaries (and the benefits they administer) are funded by federal money or state set-asides and therefore are not subject to the general fund’s being held up by the legislature — but Arnold furloughed them anyway and refused to hear appeals. This slowed disability reviews as well as processing of special federal assistance administered by state employees. In some cases, it has led to reduced federal payments to the state, an absurd situation when the Governor is asking the federal government for more than eight Billion dollars in emergency budget-balancing assistance.

The governor’s controversial executive order used his emergency powers to impose twice-monthly furloughs on more than 200,000 state workers in February when the general fund was sloshing in $40 billion of red ink. He added a third "Furlough Friday" in July to cover a portion of what was then a $24 billion budget hole.

The administration had said the policy was expected to save $2.2 billion in payroll costs this fiscal year.

This ruling, which Schwarzenegger spokesman Aaron McLean says will be appealed, shows that, at least for the moment, the Governator can’t balance the budget on the paychecks of state employees and the citizens they serve, in many cases the least fortunate among us.

Think about it for a moment: most people work 20 days in a month, so twice-monthly unpaid furlough days mean a ten percent cut in pay, at a time when benefits costs are increasing, energy costs are volatile, and child care costs are increasing. Other jobs are scarce, especially part-time jobs you might use to backstop such a furlough, since so many other Californians are fighting for them too.

This is a win for workers over Arnold. Happy New Year, California state employees! It’s great to see the good guys win one!