Report: Schwarzenegger to seek federal bailout on threat of deep cuts

California Gov. Arnold Schwarzenegger (R) plans to ask for billions of dollars in federal assistance to help buoy his cash-strapped state government, according to a report released Thursday.

California state officials and lobbyists familiar with the plan told the Los Angeles Times that if the federal government does not provide $8 billion in aid, Schwarzenegger will threaten to make deep cuts in or eliminate the state's main welfare program, a large healthcare program for the disabled and elderly poor and two tax breaks for large corporations recently approved by the State Legislature.

California now faces a $20 billion budget deficit after state lawmakers and Schwarzenegger closed $60 billion in shortfalls this year.


The steep deficits have been caused by record declines in tax revenues. Over the summer, the state was issued IOUs to pay its bills after running low on cash.

Along with the federal aid, the governor is expected to call for large reductions in struggling mass transit programs and renew his push to expand offshore oil drilling.