Tight credit has put California’s state budget into a bit of a pickle, with funding for the government’s day-to-day operations drying up faster than Sarah Palin’s popularity. A sign of trouble is a letter — leaked Friday — from Gov. Arnold Schwarzenegger to U.S. Treasury Secretary Henry Paulson that warned of a potential emergency request for a $7-billion loan within the coming weeks.

The L.A. Times:

California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry M. Paulson on Thursday that the state might need an emergency loan of as much as $7 billion from the federal government within weeks.

The warning comes as California is close to running out of cash to fund day-to-day government operations and is unable to access routine short-term loans that it typically relies on to remain solvent.

The state of California is the biggest of several governments nationwide that are being locked out of the bond market by the global credit crunch. If the state is unable to access the cash, administration officials say, payments to schools and other government entities could quickly be suspended and state employees could be laid off.

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#arnold schwarzenegger#budget#california#credit#crisis#funding#government#henry paulson#state#treasury