White House nixes Calif. aid request

WASHINGTON, June 16 (UPI) -- The Obama administration has turned down California's request for federal help in closing the state's yawning budget gap, sources say.

Quoting an unnamed administration official, The Washington Post reported Tuesday that U.S. Treasury Secretary Timothy Geithner and White House economists Lawrence Summers and Christina Romer have refused to consider a federal bailout for the state, which is facing a $24 billion budget deficit and is approaching what state officials call a "fiscal meltdown."

The unnamed official said the White House moved to avoid federal help for California because it would have set a precedent that would likely see other states with serious budget problems lining up for similar help. Geithner and the others, however, are continuing to watch California's financial crisis closely and haven't ruled out intervening if conditions significantly deteriorate.

The newspaper said that if happens, the White House would impose harsh conditions to shield taxpayers and make similar requests from other states unlikely, although the source did not say what those conditions might be.

Analysts say California is hamstrung by a 1978 state ballot initiative that limits property tax hikes, leaving it very dependent on the personal income tax, which accounts for half of the state's revenue.