SACRAMENTO, Calif.–The battle continues between Gov. Arnold Schwarzenegger and State Controller John Chiang over paying 200,000 state employees the federal minimum wage of $7.25 for the month of July.

In the latest salvo, Sacramento County Superior Court Judge Patrick Marlette rejected Gov. Schwarzenegger’s request to force Chiang to pay state employees the federal minimum wage.

The rejection by Marlette means that there will be a status hearing on July 26 and eventually a full hearing in August. However, Chiang has said he would issue full pay, unless the legal process went against him before July 22, the cutoff to send payroll to the check printer.

“I am pleased the court ruling today spared taxpayers and California’s economy from further harm,” said Chiang in a statement.

“Every time the governor and legislature fail to get a budget deal done, California taxpayers suffer.

Playing games with a 40-year-old payroll system does nothing to bridge the budget gap, but could make it worse by exposing California taxpayers to millions, if not billions, of dollars in penalties and fines for violating federal and state labor and contract laws.”

This is the second time Gov. Schwarzenegger has tried to use this kind of tactic to close a state budget shortfall. Back in 2008, Chiang also refused to comply with a court order, reasoning that the state’s computers couldn’t process paying half of its workers at minimum wage.

However, Schwarzenegger won the lawsuit, but by then the 2008-09 budget had already passed.

In July, Chiang lost a similar legal skirmish again with a court ruling that it was legal to pay state employees federal minimum wage until a budget is passed. However, Chiang sued back attacking the governor’s order and stating that it would be impossible to comply with the order due to the legality of it.