California Gov. Arnold Schwarzenegger has declared a state of fiscal emergency over the Golden State's $19 billion deficit and five-weeks-overdue budget. The state could begin issuing IOUs to creditors within a month. Reuters' Jim Christie reports:
The deficit is 22 percent of the $85 billion general fund budget the governor signed last July for the fiscal year that ended in June, highlighting how the steep drop in California's revenue due to recession, the housing slump, financial market turmoil and high unemployment have slashed its all-important personal income tax collection.
In the declaration, Schwarzenegger ordered three days off without pay per month beginning in August for tens of thousands of state employees to preserve the state's cash to pay its debt, and for essential services.
California's budget is five weeks overdue, joining New York among big states with spending plans yet to be approved, and Schwarzenegger and top lawmakers are at an impasse over how to balance the state's books.
The gubernator has declared these emergencies in the past. Calitics explains that the emergency can be invoked when budgets are overdue by more than 45 days, and can prevent Sacramento from working on other legislation until a budget gets passed. Maybe we should be in a fiscal emergency all the time.