Business

California 'fiscal emergency' declared

Arnold Schwarzenegger
Image caption Mr Schwarzenegger said California faced a "fiscal meltdown"

California governor Arnold Schwarzenegger has declared a fiscal state of emergency, putting pressure on lawmakers to pass a state budget that is now more than a month overdue.

California's economy, which is the eighth largest in the world, faces a budget deficit of $19bn (£12bn).

Mr Schwarzenegger said that without a budget in place the state's government would run out of cash by October.

He also ordered most state employees to take three days unpaid leave a month.

Earlier this month, the governor ordered 200,000 state workers to be paid the minimum wage because no budget had been passed.

'Fiscal meltdown'

The "furlough Friday", which will start in August, requires state workers to take three Fridays off a month until a new budget is enacted.

In July 2009, Mr Schwarzenegger also declared a fiscal emergency to address the state's deficit. That also included the furlough Friday, which ran until June 2010.

Employees in agencies involving public safety, including the California Highway Patrol and the Department of Fire and Forestry Protection, and in revenue generation, such as the Franchise Tax Board, are exempt.

"Without a budget in place that addresses our $19bn deficit, every day brings California closer to a fiscal meltdown," Mr Schwarzenegger said in a statement.

"Our cash situation leaves me no choice but to once again furlough state workers until the legislature produces a budget I can sign."

Analysts say it could be several more weeks until a budget is agreed.

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