SACRAMENTO (AP) -- A state panel that oversees loans for public works projects voted Wednesday to stop financing nearly all construction in California, halting nearly $4 billion in loans for everything from freeways to schools.
The three-member Pooled Money Investment Board voted Wednesday not to lend money for an estimated 2,000 infrastructure projects statewide, saying the state's finances are so grim California can no longer afford to fund them.
"We don't have the money to loan, so we're stopping the projects," said state Treasurer Bill Lockyer.
Lockyer had warned the state Legislature last week that the unprecedented halt in funding would be necessary if lawmakers did not immediately address a $14 billion deficit in the fiscal year that ends in June. The hole is forecast to grow to $42 billion over the next 18 months.
Republicans and Democcrats have remained locked in a stalemate over the budget deficit for 42 days.
California is expected to run out of operating cash in February. That means any money currently in the pooled fund could be needed to shore up the state's finances.
Lockyer estimated previously that the frozen projects could cost California 200,000 jobs and eliminate $12.5 billion in private sector revenue in every part of the state. Officials were still calculating the effect of Wednesday's decision.
Controller John Chiang, a member of the board, noted that the decision came as state officials had hoped to spur the economy through more infrastructure investment, not less.
"This is only going to tear into the heart of California's recovery efforts," he said.
Schwarzenegger's finance director, Michael Genest, the third board member, said he would ask the governor to start freezing any projects that are under his control.
The board agreed to meet again in early January to possibly provide about $500 million to keep the neediest projects going.