Due to a worsening budget crisis, California will suspend tax refunds, welfare checks, student grants and other payments owed to Californians starting on Feberary 1, it was reported on Saturday.

With no budget in place the state lacks sufficient cash to pay its bills, the Los Angeles Times said, quoting remarks by state controller John Chiang.

The state had no choice but to stop making some US$3.7 billion in payments in the absence of action by Governor Arnold Schwarzenegger and lawmakers to close the state's nearly US$42- billion budget deficit, the report said.

More than half of those payments are tax refunds.

The suspended payments could be rolled into IOUs if California still lacks sufficient cash to pay its bills in March or April, the paper said.

The payments to be frozen include nearly US$2 billion in tax refunds; US$300 million in cash grants for needy families and the elderly, blind and disabled; and US$13 million in grants for college students, according to the paper.

California's budget gap was projected to reach US$41.6 billion by the middle of next year due to failure to resolve difference between Schwarzenegger and lawmakers.

The crisis has left the state with little more than a month's worth of cash in the treasury.

The state legislature is currently in the midst of serious and good faith negotiations to resolve the crisis.

Earlier this month, Schwarzenegger vetoed the US$18-billion fiscal package passed by the legislators after Democrats refused to agree to all of the spending cuts Schwarzenegger demanded, or to his requests that some environmental laws be relaxed and government construction projects be opened to private contractors.

The rejected package was intended to raise US$9.3 billion in new and increased taxes on gasoline, sales and personal income and cut schools, health and other state programs.

(Xinhua News Agency January 18, 2009)