Arnold Schwarzenegger, the governor of California, last week declared another fiscal emergency in the state as it again scrambles to cover its multi-billion-dollar budget deficit.
California, which would be one of the world’s 10 largest economies were it a country, has suffered many difficulties passing budgets throughout the financial crisis.
The state budget, which is five weeks overdue, will need to close a $19 billion (£12 billion) shortfall, equivalent to 22% of the last $85 billion budget. The problems are threatening California’s credit rating. Though already weak, it has managed to keep its investment grade status with the rating agencies to date. (article continues below)
It is another area of concern for economic policymakers in America. The minutes of the Federal Reserve’s recent policy meeting showed increasing concern about the risks to economic growth.
GDP forecasts for the year ahead have been trimmed and employment and housing data have been weak.