The debt-ridden state of California will put 20 per cent of its workforce on notice of redundancy today after legislators failed last night to pass Governor Arnold Schwarzenegger's emergency budget.

Mr Schwarzenegger's spokesman said that 20,000 workers from across government would be warned that their jobs were likely to go, to meet the Governor's legal obligation to balance the state's books.

The Governor had laboriously negotiated with legislative leaders a plan to plug the state's $40 billion (£28 billion) deficit through a mixture of $14 billion in tax rises and $15 billion in spending cuts, but yesterday the state Senate failed by one vote to approve it.

"In the absence of a budget, the Governor has a responsibility to realise state savings any way he can," said Aaron McLear, Mr Schwarzenegger's spokesman.

"This is unfortunately a necessary decision."

California is the most populous state in America and has the world's eighth biggest economy. It has been getting deeper into financial trouble because its revenues have fallen dramatically as the housing market crashes, unemployment continues to rise and consumer spending dries up.

The state has already laid off its workforce for two days a month and postponed sending out tax refunds in an attempt to save money.

John Chiang, the state treasurer, has warned that he will soon be forced to stop paying state bills, halt major building projects and cease funding some services.

In an increasingly urgent game of brinkmanship with Senate leaders, Mr Schwarzenegger threatened to send the redundancy notices out last Friday, but delayed the action in the hope of approving a budget over the weekend.

Unless a budget is passed, half the latest job cuts are expected to take effect by July 1, the first day of California's next financial year, saving the state about $750 million.

Darrell Steinberg, the state Senate leader, told senators to return for a fresh vote today and vowed to lock them into the legislative chamber until a budget was approved.

“I will not allow anyone to go home to resume their lives or any kind of normal business,” Mr Steinberg said.

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