'Without immediate action our state is headed for a fiscal disaster,' said Mr Schwarzenegger in a statement.

California, with a population of 38 million, would be the world's sixth largest economy if it were an independent country.

'We must act now to address the current year revenue shortfall of US$11.2 billion (S$17.1 billion) and we must implement an economic stimulus package to help retain and create jobs, keep Californians in their homes and fix the state's Unemployment Insurance Fund,' Mr Schwarzenegger said at a Los Angeles press conference.

The call comes on the day that an economic panel declared that the United States has been in recession since December 2007, and two months after the California budget was approved after 85 days of crisis between Mr Schwarzenegger and the state assembly.

At the time, the agreement seemed to temporarily solve the question of the state's budget deficit.

But since then 'the dramatic deterioration in revenue projections since the signing of 2008 Budget Act presents an extraordinary situation which, combined with the volatility of our tax system, creates a revenue problem', the governor's office said in a statement.

Over the next 18 months, 'preliminary estimates ... show the budget deficit reaching a staggering US$28 billion', the statement read. -- AFP