Calif. runs out of money in 1 week

SACRAMENTO State leaders are back from the presidential inauguration and other political events. So it's back to job one: the budget crisis.

It is the 78th day of the stalemate and the pressure is really mounting. California will not be able to pay all of its bills come Feb. 1. Only an agreement can prevent what Governor Schwarzenegger has called a "financial Armageddon." A lot is at stake for government services and the people who run them.

"The pressure should be on. The pressure should be on. And if they can't solve it, they ought to be ashamed of themselves," said Yvonne Walker, SEIU (Service Employees International Union) Local president.

The squeeze is coming from as far as the East Coast. Wall Street is threatening to give California the worst credit rating of any state in the country because of its budget mess. Bond money is what finances most of the state's public works projects. A downgrade from Moody's Investors Service, which provides those credit ratings, would hamper the state's ability to borrow that money. It would also signal to investors that the Golden State is a shaky investment.

"In soccer matches, referees carry two cards. One is a yellow card, which is a warning. And the second one is a red card, which is an expulsion," said H.D. Palmer, California Finance Department. "What Moody's did by this action is basically pulled a yellow card on the state of California."

Closer to home, Republicans are also feeling the heat. They are now finally talking taxes. If they can get permanent state spending restraints, some are willing to buck their "No New Taxes" pledge in order to stop California from going into insolvency.

"I'm not going to let people get IOUs instead of tax refunds ... Having people in old age homes being kicked out , having school doors closed and having state workers being laid off by the thousands because we decided to do nothing," said Assemblyman Anthony Adams (R-Hesperia). "Now is the time for action, and we have to step up and do what's right."

The state has never been in this situation, so it is uncertain what California will do when the cash is gone.

State leaders will meet again on Friday.



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