The governor of California, Arnold Schwarzenegger, has unveiled deep spending cuts aimed at containing the state's $20bn (£12.5bn) budget deficit, BBC reported.
Spending on health, welfare, transport and the environment is to be reduced.
Mr Schwarzenegger acknowledged that the cuts would be painful, but said there was no conceivable way to avoid them.
California's economy has been hit by the global downturn. Unemployment is the third highest in the US and the state's tax revenue has plummeted.
'Hardest decisions'
The BBC's Peter Bowes in Los Angeles says that, in his final year in office, this was not the budget Mr Schwarzenegger wanted.
He was elected on a pledge to fix California's economy, but it has gone from bad to worse, our correspondent says.
Now the governor proposed an $82bn budget that would take the state's spending back to the levels of six years ago. It represents a cut of $3.1bn from last year's budget, and is $20bn less than three years ago.
"Tough times still lie ahead," Mr Schwarzenegger said.
"These are the hardest decisions, the hardest decisions a governor must make. Yet there's simply no conceivable way to avoid more cuts and more pain," he added.
Less money will be spent on prisons, health services, transport and environmental programmes, but education will not see cuts.
In recent years, student protests erupted throughout California when cuts were made to the budgets of schools and colleges.
The governor's plan includes measures to boost the economy, including a $500m programme to train 140,000 workers and create 100,000 jobs.
He will also seek to raise funds by rolling back corporate tax breaks, expanding oil drilling off the coast of Santa Barbara to provide $140m for parks, and demanding more money from the federal government.