The Los Angeles Times reported that the Golden State is seeking to borrow $7 billion to meet its expenses. However, despite the bailout, the state still might be forced to borrow billions of dollars from the federal government so it can pay its bills and cover its payroll.

"California is not out of the woods yet," Gov. Arnold Schwarzenegger said Friday in San Diego, adding that securing short-term financing "will be difficult ... there are big challenges ahead of us."

California is the biggest of several state governments that are frozen out of the bond market by the global credit crisis, the Times said. If the state can't access cash, payments to schools and other entities could be suspended and state employees could be furloughed, state officials said.

"Absent a clear resolution to this financial crisis, California and other states may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the federal treasury for short-term financing," Schwarzenegger wrote Thursday in an e-mail to U.S. Treasury Secretary Henry Paulson.