White House to California: You're On Your Own

The White House Tuesday dashed hopes that the federal government would help California overcome a mammoth budget crisis that has brought the state dangerously close to an economic meltdown, saying California will have to solve the problem on its own.

AP

"It's obviously not an easy time for the state of California," White House spokesman Robert Gibbs told a briefing when asked if the administration would provide emergency financing for the state.

"We'll continue to monitor the challenges that they have, but this budgetary problem unfortunately is one that they're going to have to solve," Gibbs said.

Gov. Arnold Schwarzenegger's Communications Director Matt David said in a statement Tuesday that the governor doesn't expect any additional help from the government.

"We are in complete agreement with the White House that California should be solving its budgetary problems on its own," David said. "Governor Schwarzenegger has stressed time and again that we need to get our own fiscal house in order and that's exactly what he has proposed to do."

California's revenues are plunging amid recession, rising unemployment and the prolonged housing crisis, and the state is unable to borrow its way out of its immediate financial trouble by issuing debt because of its budget gap.

It will run out of cash within weeks if it does not balance its books, according to State Controller John Chiang, who estimated last week California was "less than 50 days away from a meltdown of state government."

Standard & Poor's ratings agency on Monday put $67.1 billion worth of California's debt on alert for a possible ratings cut because the state may run out of cash by the end of July.

One potential rescuer has been the federal government, and for nearly a year California Treasurer Bill Lockyer has pressured the U.S. Congress and the president to help the state with debt markets.

While U.S. Treasury Secretary Timothy Geithner said this spring the administration was looking into assisting California and other states, it has yet to offer any help beyond that included for all states in the $787 billion economic stimulus plan passed in February.

"Obviously many states throughout the country because of the slowdown in our economy find themselves with severe budgetary constraints," Gibbs said. "The president believed and addressed part of this in the recovery and reinvestment plan by ensuring the largest amount of fiscal relief that we've seen move to states in the history of our country."

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Gibbs said he didn't "know the degree to which we've analyzed each of California's individual (budget) cuts."

This is not the first time a U.S. President has closed the federal wallet to a struggling state or city.

In 1975 the New York Daily News ran the headline "Ford to city: drop dead," when then President Gerald Ford denied assistance to New York City that would have kept the U.S. financial capital from filing bankruptcy.

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