California declares 'state of fiscal emergency'

The governor of California, Arnold Schwarzenegger, has declared a fiscal state of emergency as lawmakers stall on delivery of a state budget, now more than a month overdue.

Schwarzenegger said without a budget in place, the world's eighth largest economy will run out of cash by October.

In an attempt to shore up the looming budget deficit of $19bn (£12bn) most state employees have been ordered to take three unpaid Fridays work leave per month.

Only employees in agencies involving public safety are exempt from "furlough Friday" which is due to start in August and will continue until a new budget is enacted.

Earlier this month, the governor ordered 200,000 state workers to be paid the minimum wage, again because no budget had been passed.

In July 2009, Schwarzenegger also declared a fiscal emergency to address the state's deficit. That also included the furlough Friday, which ran to June 2010.

"Without a budget in place that addresses our $19bn deficit, every day brings California closer to a fiscal meltdown," Schwarzenegger said in a statement.

"Our cash situation leaves me no choice but to once again furlough state workers until the legislature produces a budget I can sign."

Analysts say it could be several more weeks until a budget is agreed.