With this legal decision, the Governor's plan goes into effect next week.
The judge said the governor had the authority to order the unpaid vacations, even though two employee unions tried to stop it.
The ruling affects at least 230,000 state workers, and it will save the state as much as $1.4 billion.
It's too early to tell how Californians will feel the reduced services as a result of the state worker's cut back. But many will need to use the DMV and the Unemployment offices.
Throughout California which employs 238,000 people, state workers talked about nothing else, but the judge's ruling that gives Governor Schwarzenegger's furlough plan the green light beginning next week.
Most state offices would close down every first and third Friday, forcing public employees to take what amounts to a 10 percent pay cut.
"I don't know where I'm going to be able to cut back. I clip coupons as it is, I shop at garage sales, I shop off clearance racks. I don't know what else I could do," said state worker Robert Kersch.
Judge Patrick Marlette ruled that in these extraordinary economic times, a governor does have the authority to make budget moves that would help California cut its expenses in an emergency.
"I can't help but recognize, as we all do, the huge impact this will have on state workers," said Sacramento Superior Court Judge Patrick Marlette.
State workers have been very vocal about the furlough plan, saying their labor contracts specify 40-hour work weeks. The reduced hours are supposed to save California $1.4 billion dollars through June 2010.
"I don't think that they should try to balance the budget on the backs of state workers," said state worker David McKinney.
The furloughs are scheduled to begin on February 6th.
State Controller John Chiang, who disagreed with the plan, now says he must follow the judge's decision and adjust paychecks.
Governor Schwarzenegger had warned the alternative was worst if the ruling went against him.
"Our recommendation was furloughs, where everyone takes a little haircut. Rather than laying people off. That's the last thing I want to do," said Gov. Schwarzenegger on January 28, 2009.
The unions aren't wasting any time. They'll file for an injunction in the next day or so to prevent furloughs from taking effect, as they try to appeal the decision.