Consumer sentiment concerns California controller

By Jim Christie

SAN FRANCISCO (Reuters) - Like other top California officials, State Controller John Chiang says the state's steep drop in revenues is shocking -- and likely to persist until the state's labor market rebounds.

That may be a while. The most populous U.S. state's unemployment rate stood at a near record 11.0 percent in April, one of the month's highest state jobless rates.

For Chiang, California's unemployment rate means fewer dollars for a state government facing a $24.3 billion budget gap for its fiscal year beginning in July and the prospect of financial "meltdown" within 50 days unless the shortfall is plugged.

"Until people feel confident about their personal financial situation, it's difficult for them to go out and spend," Chiang told Reuters in a telephone interview on Thursday.

Gov. Arnold Schwarzenegger and lawmakers look to Chiang, who serves as California's chief financial officer, for a sense of how the state's revenues and cash account are faring. For much of this year, he has reported revenues have been sliding at an alarming rate while the state was burning through its cash.

Earlier this year, Chiang postponed tax refunds to keep money in the state's coffers until Schwarzenegger and lawmakers cobbled together an agreement to balance the state's budget for the current and next fiscal years.

The agreement didn't do much good. Last month, the governor said the next fiscal year's budget gap had reopened because revenues were falling harder than expected.

Chiang dropped more bad news on the Republican governor and Democrat-led Legislature on Wednesday with his monthly revenue report, which underscored that California is in its worst cash crisis since the Great Depression.