In a rare joint session of the Assembly and state Senate, the treasurer and controller, along with the senior fiscal advisors to the Legislature and Gov. Arnold Schwarzenegger's administration, depicted the dismal consequences of a continued budget impasse between legislative Democrats and Republicans.

It's also true, however, that the longer the stalemate continues, the less effective pending tax and spending cut proposals become, thereby heightening the crisis – and that's not counting additional billions of deficit that state officials now believe are certain to appear next year.

"As unpalatable as tax increases or further program cuts may appear, neither is as toxic to the state's fiscal health as doing nothing," said state Controller Chiang. "Failure to act threatens our ability to respond to natural disasters, our ability to provide life preserving care to the elderly and the ill, and our ability to protect our communities from crime."

State controller John Chiang told lawmakers Monday that the state could run out of money by March, be unable to borrow and might be forced to issue the equivalent of IOUs.

SAN FRANCISCO, Dec 5 (Reuters) - California is on track to run out of cash in February or March and faces a $15 billion cash shortage by the end of its fiscal year in June unless officials plug an $11.2 billion budget gap, according to the state's budget director.