California can't pay the bills

SACRAMENTO, Oct. 3 (UPI) -- California may need an emergency loan of up to $7 billion from the federal government to fund day-to-day operations, Gov. Arnold Schwarzenegger warned.

Schwarzenegger's warning comes as the U.S. financial markets are in crisis and the state's government is unable to access short-term loans it usually relies on to remain solvent, the Los Angeles Times reported Friday.

California is the biggest of several state governments that are frozen out of the bond market by the global credit crisis, the Times said. If the state can't access cash, payments to schools and other entities could be suspended and state employees could be furloughed, state officials said.

"Absent a clear resolution to this financial crisis, California and other states may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the federal treasury for short-term financing," Schwarzenegger wrote Thursday in an e-mail to U.S. Treasury Secretary Henry Paulson.

Among other things, money must be in state accounts by Oct. 28 to be available for a scheduled $3 billion payment to more than 1,000 school districts, state officials said.