California Nears Financial “Meltdown,” Schwarzenegger Threatens To Shut Down Government

California’s government is 50 days away from a financial “meltdown” if Governor Arnold Schwarzenegger and lawmakers fail to close the $24.3 billion budget gap. But Schwarzenegger would rather see the government screech to halt than agree to a high-interest loan.

Controller John Chiang warned of the coming crisis Wednesday:

Underscoring the severity of California’s cash crisis, Controller John Chiang, who has previously warned the state’s government risks running out of cash without a budget deal, said revenues in May fell by $1.14 billon, or 17.7 percent, from a year earlier.
Additionally, the revenues of the government of the most populous U.S. state fell short of estimates in Schwarzenegger’s budget plan by $827 million, Chiang said.

He warned California’s state government is speeding toward a financial disaster unless officials act urgently to balance its books.

“Without immediate solutions from the governor and legislature, we are less than 50 days away from a meltdown of state government,” Chiang said in a statement.

Schwarzenegger told the L.A. Times that a government shutdown might encourage legislators to get make deep cuts they have resisted.

State finance officials say California coffers will be empty in late July unless the projected $24-billion budget shortfall is resolved quickly. Schwarzenegger said that emergency borrowing would be too expensive and that his threat to block it was necessary to prod lawmakers into swift action.
A loan would only “give them another reason why we don’t have to do it now,” the governor said. “What we need to do is just to basically cut off all the funding and just let them have a taste of what it is like when the state comes to a shutdown — grinding halt.”

“Do they want to protect the workers that provide the services, or do they want to protect the people that get those services?” Schwarzenegger said. “The choice is up to them.”