Cash-strapped California forces unpaid leave on workers

Cash-strapped California forces unpaid leave on workers San Francisco  - More than 200,000 state workers were forced to take unpaid leave Friday, in a bid by California Governor Arnold Schwarzenegger to preserve the state's rapidly dwindling cash reserves.

Schwarzenegger's order requires the state employees to take two Fridays off without pay every month, a move that is designed to save some 1.4 billion dollars through June 2010, the end of the next fiscal year.

California is struggling to deal with a projected 42-billion- dollar budget shortfall over the next two years, even as a standoff between Democratic and Republican lawmakers means that the state has no official budget.

Earlier in the week the state started issuing IOU vouchers instead of cheques to preserve its cash, which could run out by the end of the month unless a budget is passed.

The massive US state has been hard hit by the recession, which has seen housing prices plunge and revenues dry up. Issuing state bonds is also tough given the paralysis in the credit markets and a credit downgrade because of the lack of a budget.

Attempts to bridge the gap through a combination of spending cuts and tax hikes have been stymied by Republican legislators who reject any new taxes. (dpa)