CALIFORNIA Governor Arnold Schwarzenegger has compared his state's financial crisis to that of Greece and called for scrapping the state welfare system to close a $19.1 billion budget gap.
He said the US state, with an economy that ranks as the eighth largest in the world, faced the same budget deficit crisis as eurozone countries such as Greece, Spain and Ireland.
California's government has been forced to cut $12.4 bn in spending over the remainder of this fiscal year and the next, Schwarzenegger revealed yesterday.
He said: "You see what is happening in Greece, you see what is happening in Ireland, you see what is happening in Spain now. We are left with nothing but tough choices."
Democrats and Republicans, who must muster a two-thirds majority to pass a budget, are likely to ignore many of his suggestions in a debate which could drag on for months.
Democratic State Senate President Darrell Steinberg said his party, which controls both chambers of the legislature, could not support Schwarzenegger.
"The cuts are absolutely unacceptable," Steinberg said, adding that instead of slashing spending Schwarzenegger should delay business tax breaks.
Republican Assemblyman Jim Nielsen, the vice chair of the budget committee, said both sides felt the "absolute imperative" for immediate action and praised the governor's decision not to push for new taxes.
Investors have scooped up recent offerings of California debt with high yields, convinced by state payment guarantees. But the financial crisis has resulted in schools cutting teachers, social services drying up and state employees facing redundancy.
The spending cuts in Schwarzenegger's proposed $83.4 billion 2010-2011 budget include eliminating the CalWORKS welfare program and many child care programs and cutting funding for local mental health services by 60 per cent.
California's budget deficit had been estimated at $19.9 bn at the beginning of the year.
Outside the event, protesters denounced Schwarzenegger's deficit plan, chanting "Shame on you". Handicapped activists said they feared losing caregivers funded by the state.
"I might as well just die," said Carmen Rivera-Hendrickson, who uses a wheelchair and relies on daily in-home health care.