California's Deficit May Swell to $20 Billion on Housing Slump

California's deficit could reach as high as $20 billion, nearly one-fifth of the state's budget, by July because of a slumping economy and required spending, Governor Arnold Schwarzenegger's office said.

Schwarzenegger's spokesman Aaron McLear says the gap could grow by $10 billion on top of $7.4 billion already expected for the fiscal year that begins July 1. The creation of a rainy day fund Schwarzenegger proposed in January would add another $2.8 billion to the gap.

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Schwarzenegger in January proposed a budget with a 10 percent, across-the-board spending cut. McLear said the amount may grow. Schwarzenegger in February ordered state agencies to stop hiring and scrap new equipment purchases as part of a plan to save $100 million this year.