Arnie in California 'Armageddon' alert

California Governor Arnold Schwarzenegger has warned of "financial Armageddon" as the state faces a $41.8 billion (£28.2 billion) black hole in its finances.

The state could be out of cash by February. Previous estimates for the shortfall were $28 billion, but finances have been hit by the economic crisis.The revised shortfall estimate includes provisions for a $2 billion reserve.

Schwarzenegger earlier said the budget deficit had blown out to $14.8 billion from a previous estimate of $11.2 billion, adding: "California faces a growing financial crisis."

He urged the state's legislature to push through spending cuts and approve new revenue-raising schemes including a sales-tax increase.

"If we don't put aside our ideological differences and negotiate and solve this problem we are heading toward a financial Armageddon," he said.

Standard & Poor's lowered its rating on the state's recently issued $5 billion revenue anticipation notes in response to the new forecasts.