California Governor Arnold Schwarzenegger declared a state of emergency over the state's finances on Wednesday, raising pressure on lawmakers to negotiate a state budget that is more than a month overdue and will need to close a $19 billion shortfall, reports Reuters.
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.
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.
"Without a budget in place that addresses our $19 billion budget deficit, every day of delay brings California closer to a fiscal meltdown," Schwarzenegger said in a statement.
Schwarzenegger's declaration noted State Controller John Chiang has said he could be forced to issue IOUs as early as next month because of the budget impasse.
Keep in mind that they are pretty much just playing here. That's the way it will be until muni-bond markets weaken and it becomes impossible to finance state debt even with a budget in place. The muni-bond market is the key to how bad things get.