Arnold Schwarzenegger, California’s governor, has told the federal government that upheaval in the credit markets could leave his state in need of an emergency $7bn loan to pay for public services such as law enforcement, hospitals and firefighting.

California taps the credit markets around this time every year to raise “revenue anticipation notes”, which tide it over until tax revenues arrive in spring. But with credit markets frozen, it does not expect to raise sufficient funds from investors this year, leaving it short of cash. It needs the money by the end of October.

In a letter, Mr Schwarzenegger said: “Absent a clear resolution to this financial crisis” the state “may be forced to turn to the Federal Treasury for short-term financing”.

He added: “The economic fallout from this national credit crisis continues to drain state coffers, making it even more difficult to weather the continuation of frozen credit markets for any length of time.”

Tom Dresslar, spokesman for the California Treasurer’s office, said the short-term bond financing was “typically a routine matter” for the state. “We do this every year,” he said. “But nothing is typical about 2008. We have this economic meltdown, the credit markets are frozen . . . The situation has to change”.

California’s difficulties come as other states are grappling with the prospect of falling tax revenues as the economy slows. Earlier this year, Moody’s changed its outlook on US state finances to negative based on anticipated lower tax revenues.

“What looked like a manageable economic slowdown for states now seems to be picking up momentum and could get a lot more severe,” said Robert Kurtter, managing director in Moody’s US public finance group.

Mr Kurtter said states under pressure included Florida and Nevada, hit by the housing downturn, and New York and New Jersey, which are grappling with cuts in the financial sector.

At least $12bn-$15bn in municipal bond issues have been postponed since mid-September, said Matt Fabian, managing director at Municipal Market Advisors, a research firm.