Californian Governor Arnold Schwarzenegger has declared a fiscal state of emergency, telling most state employees to take three days of unpaid leave each month until a new budget is enacted.
Schwarzenegger said the state, which faces a budget deficit of $19bn, is on the verge of a "fiscal meltdown" and could be forced to issue IOUs starting in August to avert a new cash crisis.
"Our cash situation leaves me no choice but to once again furlough state workers until the legislature produces a budget I can sign," he said in a statement.
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He said the state has already taken "extraordinary measures to conserve cash," such as deferring payments to schools and other local governments but that the crisis was deepening with no state budget for the 2010-2011 fiscal year expected soon.
The "furlough Friday" starting in August requires state employees to take three Fridays per month off without pay until the state gets a new budget and the state's finance officials certify that it has enough cash to meet its obligations.
Exempt from this are employees in agencies involving public safety, including the California Highway Patrol and Department of Fire and Forestry Protection; and in revenue generation, including the Franchise Tax Board, which collects tax receipts.
With the most populous US state hit hard by the economic crisis and lower tax revenues, Schwarzenegger earlier this year proposed a budget that would call for spending cuts of 12.4 billion dollars and sharply reduce funding for services designed to help the state's poor.
Schwarzenegger said the cuts were necessary to close a huge projected deficit for the fiscal year starting July 1.
The former actor-turned governor has refused to raise taxes to narrow the shortfall and described his proposed cuts to spending as "painful" but essential.
A budget crisis last year pushed California, which would have the world's eighth largest economy if it were a country, to the brink of bankruptcy, sending the state's credit-rating plunging and forcing it to start paying bills with IOUs.
Analysts and legislators say California's seemingly eternal fiscal gridlock is a consequence of the state's constitution, which requires a two-thirds majority to pass a budget or raise taxes
