California needs cash, and it needs it fast.

Gov. Arnold Schwarzenegger sent an alarming letter to U.S. Treasury Secretary Hank Paulson on Thursday that said his state might need an emergency loan of as much as $7 billion from the federal government within weeks to continue operations.

The Los Angeles Times reports that California is close to running out of cash to fund day-to-day government operations and can’t access its usual short-term loans that it relies on to remain solvent.

"The credit crisis has frozen investment and commerce, forcing businesses and families to stop purchasing goods and services," Schwarzenegger wrote in the letter. "This has resulted in tens of thousands of lost jobs and billions of dollars in lost tax revenue to the state."

Click here to read the letter, obtained by the LA Times.

California is the biggest of several state governments across the U.S. that are being locked out of the bond market by the global credit crunch. If the state can’t access cash, officials say, payments to schools and other government entities could quickly be suspended and state employees could be laid off.

The LA Times says plans by several state and local governments to borrow in recent days have been halted by the credit freeze. New Mexico had to postpone a $500-million bond sale, while Maine is considering canceling road projects that were to be funded with bonds.

The Associated Press reports that Florida hasn’t been able to borrow money for nearly three weeks, so it can’t issue bonds for schools, roads or programs to purchase environmentally sensitive land. But that isn’t yet causing too many problems for the state.

"It’s not creating a problem for us currently," Ben Watkins, director of the division of the state’s Division of Bond Finance, told Gov. Charlie Crist and members of the Florida Cabinet. "But if this goes on for an extended period of time we will be challenged to have access to the credit markets."

The New Orleans Times-Picayune reports on how the credit crunch could also stall projects that have been approved for tax-free borrowing through a program authorized by Congress to jump-start business activity in south Louisiana after the 2005 hurricanes.

Meanwhile, The New York Times also reports on how Silicon Valley’s high-tech entrepreneurs, investors and executives are now wondering when – not if – the financial chaos will hurt the innovative region.

The effects are already being felt from San Francisco to San Jose. Apple this week lost 16.3 percent of its value as investors figured consumers wouldn’t pay for expensive gadgets this holiday season, while shares in Yahoo! and eBay are at their lowest levels in years.

"Funding will tighten up. We are certainly going to see some ripple effects," Ron Conway, a venture capitalist who has invested in hundreds of Web start-ups, told the Times.

Start-ups that have less than six months of cash in the bank "better reduce costs," Conway said.