California governor Arnold Schwarzenegger says pink slips will be sent out to workers on Tuesday if lawmakers fail to reach a budget deal.
The worldwide recession, which originated in the United States, has for the first time in American history driven an entire state into bankruptcy.
In late December, California's chief financial officer warned that the 'The Golden State' would run out of money within two months.
State controller John Chiang explained that California had been forced to spend billions of dollars more each month without collecting enough taxes due to its budget crisis and would thus have an empty kitty in late February.
The crisis had prompted California to seek job cuts, but Gov. Schwarzenegger had been postponing layoffs, hoping that lawmakers would approve a package to close the projected $42-billion budget gap.
Three days of negotiations in a legislative session on Capitol Hill failed to provide the state with a new budget.
A single Republican vote is holding the budget from passing with a two-thirds majority, Schwarzenegger spokesman Aaron McLear told CNN late Monday.
The office of Gov. Arnold Schwarzenegger has announced that it would send pink slips out to 20,000 state workers on Tuesday if the budget package fails to gain approval.
"The governor has a responsibility to do everything he can to cut government spending," McLear said.
The spokesman also called lawmakers to action, saying he "understands how difficult these decisions are, which is why the legislators need to pass a budget as quickly as possible."
According to McLear, layoffs can take about six months to implement -- due to union contracts and other required steps -- but would save the state $750 million a year.
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