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SACRAMENTO, CA-California Gov. Arnold Schwarzenegger Thursday warned Treasury Secretary Henry M. Paulson that the state could be asking for an emergency loan of as much as $7 billion from the federal government by the end of the month. Other states are going to end up in the same situation, he added.

"California and a number of other state and local governments have been unable to secure financing for bond offerings and for the routine cash flow used to make critical payments to schools, local governments and law enforcement," Schwarzenegger said in his letter to Paulson. "While some states may be able to absorb a delay or obtain high-interest financing through private banks, California is so large that our short-term cash flow needs exceed the entire budget of some states."

The state expects to issue some $7 billion in revenue anticipation notes for short-term cash flow purposes in a matter of days, but may not be able to sell them, the governor said. "Absent a clear resolution to this financial crisis that restores confidence and liquidity to the credit markets, California and other states may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the Federal Treasury for short-term financing," he concluded.