

California, home to what is estimated to be the world’s tenth largest economy is on the verge of financial collapse. Yesterday, Governor Arnold Schwarzenegger, with California’s chief accountant warned lawmakers that they would have until the fifteenth of this month to reverse the state’s financial woes. If California cannot close the budget deficit by then, state Controller John Chiang estimates the state will run out of cash by the end of July.



The Golden State faces a deficit of $24 billion, which if remains unbridged, will cause California to make severe cuts to its state funded programs. Schwarzenegger said in his speech yesterday “Our wallet is empty. Our bank is closed. Our credit is dried up,” urging lawmakers to pass a balanced budget plan by the June 15th deadline so the state might be able to access short term loans during a tight credit market. He also proposed several budget reductions, specifically a $5.2 billion cut in funding to public schools, laying off 5,000 state employees, and reducing the pay of some 200,000 others. The Governor also proposed eliminating financial welfare for half a million California families and ending health care coverage for one million low income children. He further suggested that 220 state parks should be closed to bridge the budget gap. Schwarzenegger acknowledged that he wasn’t happy about the severe cuts, but said the state’s financial situation left little other choice, stating “California's day of reckoning is here.”



California traditionally must take loans in the summer to cover the state’s budget until the second half of the year when most of it’s revenue is generated, but this year banks are slow to lend the state money due to it’s unbalanced budget and the struggling U.S. economy. If lawmakers are unable to pass a revised budget sheet, Californian’s could see a repeat of last winter when the state had to delay payment to welfare recipients, private contractors, and local governments to keep the state's finances afloat.



Assumedly, many are outraged at the proposed cuts and the potential for friends or family to laid off or underfunded. Though, in many ways it’s just a sign of the times, when one of the United States’ most populated and richest states is on the verge of financial collapse, unless it is able act quickly in order to borrow back some of the money we already gave the banks.



Full list of Proposed Budget Cuts



Full Schwarzenegger Budget Address