SACRAMENTO — With state finances deteriorating in sync with the national economy, Gov. Arnold Schwarzenegger and legislative leaders met Wednesday to discuss how to avoid running out of money within weeks — and how to handle a looming multibillion-dollar deficit in the months to follow.

The unusual meeting, coming during the Legislature’s annual recess and in the thick of the fall election season, underscored the seriousness of the state’s financial outlook. It occurred just two weeks after the governor signed a budget, a time when state spending usually recedes to the background.

Schwarzenegger and the legislative leaders spent much of the afternoon session focused on the immediate problem of how to pay the state’s day-to-day bills. Typically at this time of the year, the state obtains short-term loans — known as revenue anticipation notes — to tide itself over until more tax revenue arrives in the spring.

But the frozen national credit market has complicated that borrowing this year. Without an infusion of several billion dollars, the state is on track to run out of money at the end of October.

Schwarzenegger and the lawmakers emerged from the roughly hour-and-a-half session confident that would not happen.

“Hopefully the credit market will loosen up and we’ll be able to get that” loan, Assembly Speaker Karen Bass, D-Los Angeles, said. “We do believe it will.”

Officials received some encouraging news on that front Wednesday, when Massachusetts successfully sold $750 million of the type of short-term bonds that California is looking to sell. Next week, the state Treasurer plans to go to the market with a $4 billion offering.

“It hopefully bodes well for us,” said Tom Dresslar, a spokesman for the California treasurer, Bill Lockyer.

As a backup, last week Schwarzenegger notified U.S. Treasury Secretary Henry Paulson that California may need an emergency $7 billion loan from the federal government. The state treasurer’s office has also recently explored borrowing money from the state retirement system or directly from banks, although that last option would probably carry a higher interest rate.

Although it’s likely the state will secure the money somehow, that’s just the beginning of its problems.

The $103.4 billion budget that Schwarzenegger signed last month is already more than $1 billion in the red, a figure that officials expect to grow to $3 billion during this fiscal year, which ends June 30. That may force lawmakers to return to Sacramento — they’re scheduled to be in recess until December — to resume the seemingly never ending battle over taxes and spending.

Schwarzenegger Wednesday held off calling a special session of the Legislature to address the budget. The governor said he and legislative leaders would continue to meet weekly to assess the state’s finances.

The recently enacted budget used a mix of accounting maneuvers and budget cuts to close a $15.2 billion deficit. Several provisions simply accelerate the collection of taxes, to boost this year’s numbers at the expense of future years. Critics said the plan did little to fix the ongoing $6 billion-$8 billion “structural” gap between spending and income.

That criticism could make a new legislative session on the budget even more contentious. During this summer’s record 85-day budget impasse, Republicans blocked attempts by Democratic legislators and Schwarzenegger to raise taxes, taking advantage of a rule requiring a two-thirds vote to raise taxes. At the same time, the majority party came under withering criticism from advocates for schools, health care and other typically Democratic constituencies for agreeing to the cuts they did.

Compounding the state’s problems is a national economy that appears to be worsening by the day. The tailspin in the stock market could be especially painful because California’s tax structure relies heavily on taxes on stock-related capital gains. Those revenues shoot up in good times but can drop precipitously in bad times.

On top of everything else, U.S. District Court Judge Thelton Henderson on Wednesday ordered the state to prepare to turn over $250 million to the federal receiver charged with improving health care in the state’s prisons. Altogether, the receiver is seeking $8 billion.

Henderson ordered state officials to spell out at a hearing later this month how and when they will transfer the $250 million down payment to the court-appointed receiver.

Contact Mike Zapler at mzapler@mercurynews.com or (916) 441-4603.