California invest in experts mean they know of no time in recent ancient history when the state has sought an emergency credit of this magnitude from the federal government. Stated income.

The government of California is the biggest of several governments nationwide that are being locked out of the shackles market-place by the wide-ranging credit crunch. If the voice is unable to access the cash, direction officials say, payments to schools and other administration entities could quickly be suspended and form employees could be laid off. Plans by several circumstance and local governments to touch in recent days have been upended by the trustworthiness freeze.

New Mexico was laboured to put off a $500-million bond sale, Massachusetts had to pluck the plug halfway into a $400-million offering, and Maine is light of canceling thoroughfare projects that were to be funded with bonds. California resource experts guess they know of no time in late-model history when the state has sought an predicament loan of this magnitude from the federal government. The only other such loose was in 1975, they said, when the federal sway lent New York City bundle to shun bankruptcy. "Absent a clear result to this financial crisis," Schwarzenegger wrote in a note Thursday evening e-mailed to Paulson, "California and other states may be unqualified to gain the necessary level of financing to proclaim government operations and may be phoney to turn to the federal treasury for short-term financing." The letter, obtained by The Times, came on the brink of a signify by the House of Representatives on a $700-billion liberate package, but it was too soon to recall how the package would choose the nation's paralyzed credit markets.

The Senate approved the misnamed let go bill Wednesday night. A pinch Schwarzenegger assistant followed up the letter with a call to the Treasury secretary Thursday night. Treasury Department officials could not be reached for comment. It's normal for California to draw billions of dollars at the beget of the budgetary year to swell its coffers until the usual flood of sales duty receipts comes in after Christmas and takings tax receipts get somewhere in the spring. "California is so large that our pocket cash-flow needs exceed the without a scratch budget of some states," Schwarzenegger wrote.

The bills needs to be in the state's bank computation by Oct. 28 to be obtainable to fund a scheduled $3-billion pay to more than 1,000 school districts. Said Matt David, Schwarzenegger's communications director: "California faces the possibility of a matchless assail created by the pecuniary crisis' effect on liquidity, lower-than-anticipated revenues currently coming into the state, and our past budget. The governor is winsome steps to order for this layout to ensure that the state can transform critical payments.

" But those payments won't be on the horizon if the state can't do plan borrowing. For now, "the window is shut, and if it stays shut, we are in strong trouble," said an distribution official, who asked not to be identified, citing the subtle talks with Washington. Quick arrangement of the saving check by the House of Representatives today and a signature by President Bush could instil more simoleons into the international financial system and give California to borrow at a reasonable engagement rate, the official said. But there are no guarantees that the mercantile recovery aim before Congress will succeed, said California Treasurer Bill Lockyer, who has been working with Schwarzenegger to confine the phase solvent. Asking the federal ministry for a accommodation "is one option on the table," said Tom Dresslar, a spokesman for Lockyer.

The treasurer, he added, is working with highest fiscal advisors on a on danger plan to sell short-term indebtedness notes to the U.S. government. Lockyer believes that such a sketch is both realizable and legal, Dresslar said.
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"I don't deem we have ever gone to the feds," said Fred Silva, superior pecuniary policy advisor with California Forward, a confirm budget think tank. Silva said the closest California came may have been in the days after the 1994 Northridge earthquake, when at the call for of the state, Washington sped up payment of federal funds that the declare was owed. State officials now concern they clock a implied money danger worse than California confronted in 2003, in the irrefutable days of Schwarzenegger's predecessor, Gov. Gray Davis. At that time, the sheer lessen of constitution revenue in the middle of a budget year fake officials to pay a distribute of banks a premium of hundreds of millions of dollars for what amounted to an up-market "payday loan.

" Even that option, provision officials say, would not be to hand during the stylish credit drought. They nearly if Congress does not approve a bailout lay out -- and maybe even if it does -- there will be no lenders handy to provide the state with the ready money it needs, regardless of the premium the shape is willing to pay. "We difficulty to go as wide as possible to try to decide buyers at reasonable rates," said Robert Fayer, an attorney advising the situation on its planned $7-billion chains sale.

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