California is almost out of cash, Gov. Arnold Schwarzenegger warned the Treasury Department yesterday, and may need an emergency loan of up to $7 billion from the federal government, the Los Angeles Times reports. California is the largest of several states locked out of the bond market by the credit crunch, and officials said that payments to schools and government agencies could be cut off.
Since credit began drying up this year, New Mexico has put off a $500-million debt sale, Massachusetts halted a $400-million bond offering, and Maine is struggling with bond-funded road projects. California needs the money by October 28 to make a $3-billion payment to school districts. It’s unclear how today’s House vote on the $700 billion rescue will affect frozen credit markets in the immediate-term.