In a letter sent on Thursday to Henry Paulson, the US Treasury Secretary, Mr Schwarzenegger, California's governor, made clear that his state was running out of money because its usual borrowing channels had suddenly closed.
The US government has not been called on to make such a large emergency loan since New York City borrowed $2.3 billion " equivalent to $9.4 billion today " to stave off bankruptcy in 1975.
Mr Schwarzenegger wrote: "The economic fallout from this national credit crisis continues to drain state tax coffers, making it even more difficult to weather the continuation of frozen credit markets for any length of time."
NY economy could be biggest loser
By Daniel Massey
Published: September 29, 2008 - 5:09 pm
The continued mayhem on Wall Street prompted the state comptroller to issue a revised estimate of Wall Street job losses Monday, raising his projection by 60% to 40,000 jobs.
And that was before the House of Representatives rejected the $700 billion federal bailout plan.
New York State Comptroller Thomas DiNapoli said the financial turmoil could cost the state up to $3.5 billion in tax revenues by March 2010.
“The fallout from the Wall Street crisis is starting to hit the state hard,” he said. “This is a warning bell.”
They need to start laying off people, but I don't see that happening - even next year when revenue will fall even more.
Am I missing something here? Wasn't CA's governor recalled because of these same types of economic issues? And didn't Arnold campaign on a platform of setting things right?
Ex-governor to GOP: Fight Schwarzenegger recall
By JULIET WILLIAMS " Sep 27, 2008
ANAHEIM, Calif. (AP) " Former Gov. Pete Wilson urged his fellow Republicans on Saturday not to make light of a recall drive against Gov. Arnold Schwarzenegger.
He told delegates at the California Republican Party's fall convention that they should take the threat from the state prison guards union seriously, even if it isn't likely to succeed.
"I hope that I don't have to tell you what an ill-considered idea that is. We did it once; we did not do it lightly," he said, referring to the 2003 recall of former Gov. Gray Davis, a Democrat, an election that sent Schwarzenegger to Sacramento. "It is something that should not be taken lightly. It is an extreme measure."
A conservative wing of the state GOP had planned to vote later Saturday on whether to endorse the recall campaign but instead decided to further investigate the effort first.
In his lunchtime speech to about 250 delegates, Wilson did not directly address the rift between the politically moderate Schwarzenegger and others in his party. Schwarzenegger also avoided the topic during brief remarks to about 300 party members and supporters Friday night.
The governor's unpopularity with the most conservative Republicans grew this summer after he proposed a temporary increase in the state's sales tax to help close what was then a $15.2 billion deficit. Wilson was critical of the tax plan, as were Republicans in the Legislature who successfully fought the effort.
That proposal particularly rankled rank-and-file Republicans, leading to Saturday's consideration of the recall.
"I think the governor has done everything possible to deserve a recall," said Tom Hudson, the California Republican Assembly's national committeeman. "He's been as bad or worse than Davis."
But the group's vice president, Karen England, said the group needs to figure out how serious the union is about a campaign, how much money it has to fund a recall and who could run as a replacement candidate in such an election.
Schwarzenegger spokeswoman Julie Soderlund said the governor doesn't believe the conservative group will side with the union in the end.
"It's the prison guard union trying to intimidate Gov. Schwarzenegger into the same sweetheart contract Gov. Davis gave them," she said.
In another slap to the governor, the state party's board of directors made its frustration with him official Saturday by adopting a resolution praising legislative Republicans for "refusing to raise taxes and standing against the growth of government."
"We encourage Governor Schwarzenegger to stand with our Republican legislators in the future," the motion said.
Soderlund said the governor agrees a tax increase is the worst possible option.
The California Correctional Peace Officers Association filed formal notice this month of its effort to recall Schwarzenegger. The union criticized Schwarzenegger for what it called "catastrophic leadership failings and inept management" since he took office.
One of the motivations for recalling Davis was his deal giving prison guards a 37 percent pay raise after he had accepted $2.6 million in campaign donations from the union.
Schwarzenegger has not taken money from the prison guards and has called its recall drive a political ploy designed to pressure him to give into the union's demands during contract negotiations. The guards union has been without a contract for two years.
After his address, Wilson told reporters that there will always be disagreements with a governor, but that a recall should be reserved for "serious dereliction of duty."
"It's something that you do on a really extreme provocation," he said.
I agree! Government spending needs to be curbed, and we've got way too many
government workers wasting our tax dollars.