Facing "disaster" Schwarzenegger calls California fiscal emergency

Dec 2, 2008, 4:05 GMT

San Francisco - Saying that California was facing a 'fiscal disaster,' Governor Arnold Schwarzenegger on Monday declared a 'fiscal emergency' in the richest and most popular state in the US.

The declaration allowed the former movie star to force a special session of the legislature to address the California's massive projected budget deficit - 11.2 billion dollars this year, and as much as 28 billion billion dollars over the next 18 months.

'Without immediate action our state is headed for a fiscal disaster,' said Schwarzenegger. 'We must act now to address the current year revenue shortfall of 11.2 billion dollars, and we must implement an economic stimulus package to help retain and create jobs.'

Schwarzenegger has already failed in one attempt to address the state's rapidly deteriorating financial situation, when legislators last month rejected his package of spending cuts and a temporary hike in the state sales tax. He proposed a 10-dollar tax on every barrel of oil drilled in the state and a tax of 5 cents on every alcoholic drink sold in the state.

Under the terms of the fiscal emergency, legislators will be barred from conducting any other work unless they pass a plan to plug the shortfall within 45 days.

Schwarzenegger pushed through the fiscal emergency law in 2004, a year after he ousted his Democratic predecessor in a recall special election.

Schwarzenegger's election campaign at the time focused on the state's gloomy economic position, which saw a 6-billion-dollar deficit in the aftermath of the recession in 2001. Now California is facing a much harder hit by the US recession and the plunge in real- estate prices that has decimated the state's tax base.