The economic crisis, which has now reached global proportions, is taking its toll on the United States. The latest state hit by the crisis has been announced to be California.

Yesterday, the California Governor himself, Arnold Schwarzenegger, declared fiscal emergency on Friday. Upon issuing this statement, lawmakers were called into a special session, where they were supposed to solve the issues with the state’s weakening finances. In addition, state officials were ordered to prepare to lay off employees and send most of them on unpaid leaves, in an attempt to cut costs.

 

These two actions enterprised by the Governor are further proof that there is a significant escalation in the budget battle that has been going on during the last weeks in Sacramento. The revenues in the capital of the most populous US state and the world’s eighth-largest economy have been falling harder and faster than everyone expected.

As the latest reports have shown, it seems that California’s state government is now facing a budget shortfall of over $40 billion over the current and also the up-coming fiscal years. Apparently, California is on track to run out of cash as soon as February 2009.

 

The California legislature, led by Democrats, approved an $18 million budget package, which was later on vetoed by Schwarzenegger, who is a Republican, as he wants lawmakers to address not only the state’s budget gap, but also the easing of regulations that would speed up construction projects in an attempt to stimulate California’s economy.