California is among the states in urgent need of money. If they will not receive money quickly, they will not be able to run day-to-day government operations anymore, Schwarzenegger writes in a letter obtained by LA Times.
After Wall Street has been greatly affected, it's about to hit the people now. The sub-prime mortgage crisis that forced many people to leave their homes resulted in lower government tax incomes, resulting in a crisis on all governmental levels.
Schwarzenegger to U.S.: State may need $7-billion loan
In a letter obtained by The Times, the governor warns that tight credit has dried up funds California routinely relies on and it may have to seek emergency aid within weeks.
By Marc Lifsher and Evan Halper, Los Angeles Times Staff Writers
October 3, 2008
SACRAMENTO -- California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry M. Paulson on Thursday that the state might need an emergency loan of as much as $7 billion from the federal government within weeks.
The warning comes as California is close to running out of cash to fund day-to-day government operations and is unable to access routine short-term loans that it typically relies on to remain solvent.
The state of California is the biggest of several governments nationwide that are being locked out of the bond market by the global credit crunch. If the state is unable to access the cash, administration officials say, payments to schools and other government entities could quickly be suspended and state employees could be laid off.
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California finance experts say they know of no time in recent history when the state has sought an emergency loan of this magnitude from the federal government. The only other such rescue was in 1975, they said, when the federal government lent New York City money to avoid bankruptcy.
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The cash needs to be in the state's bank account by Oct. 28 to be available to fund a scheduled $3-billion payment to more than 1,000 school districts.
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But those payments won't be forthcoming if the state can't do routine borrowing. For now, "the window is shut, and if it stays shut, we are in deep trouble," said an administration official, who asked not to be identified, citing the sensitive talks with Washington.
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"I don't think we have ever gone to the feds," said Fred Silva, senior fiscal policy advisor with California Forward, a state budget think tank.
www.latimes.com
(visit the link for the full news article)
[edit on 3-10-2008 by Mdv2]
