Arnold Schwarzenegger, the California governor, has told US Treasury Secretary Henry Paulson that the most populous state may need to turn to the federal government for short-term financing as a $7 billion sale of notes may be foiled by weak credit markets.

A planned $7 billion issue of revenue anticipation notes that would tide the state over until it receives expected fees or other income is in peril, the state treasurer has said.

Mr Schwarzenegger has warned that California might have to delay payments to teachers and other workers, and in the letter he added that California is not alone.

“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,” Mr Schwarzenegger said in a letter to Paulson.

“The economic fallout from this national credit crisis continues to drain state tax coffers, making it even more difficult to weather the continuation of frozen credit markets for any length of time,” Mr Schwarzenegger said, adding he supports a federal emergency financial rescue plan that was passed this evening.

A growing list of public officials in California are calling for federal action to help bolster financial markets for a number of reasons beyond concerns about access to debt markets.

Many fear state financial assistance to local governments may need to be cut while local sales tax and property tax revenues are sagging.

Additionally, many are concerned about the financial condition of public pension funds.

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