Schwarzenegger presses Obama on stimulus measures

SAN FRANCISCO (Reuters) - California has nearly $44 billion in infrastructure projects ready to start and capable of creating nearly 800,000 jobs, Gov. Arnold Schwarzenegger told President-elect Barack Obama in a letter on Tuesday in which he urged a "substantial federal stimulus program."

Obama officials and Democrats in Congress have been discussing economic stimulus legislation authorizing up to $775 billion over two years to help the U.S. economy recover from recession. Some governors have pressed for around $1 trillion in spending while many Republicans are talking about $500 billion.

California, the most populous U.S. state, is suffering from a spike in unemployment and a sharp slowdown in its economy, which has slashed its revenues and put the state's government at risk of running out of cash within weeks. The state's financial situation is so dire that its Pooled Money Investment Board last month halted $3.8 billion in loans for public works so the state could use the money to pay for vital services.

California is one of many states with wish-lists for the incoming Obama administration of public works projects, many ready to break ground if funding is provided, intended to spur job growth.

California would normally sell bonds to help finance such projects, but the biggest U.S. issuer of public debt is finding little interest among investors amid competition from U.S. Treasury debt and because the state's budget deficit through mid-2010 will swell to a projected $40 billion unless Schwarzenegger and lawmakers reach a compromise on bringing the state's books into balance.

According to Schwarzenegger's letter, California is prepared to launch

* $11.8 billion in energy and energy efficiency projects;

* $11 billion in investment in road, transit and rail construction;

* $4 billion in health care investment, including $1.4 billion in health care information technology;

* $8.5 billion in water and sewer projects;

* $1.1 billion in school construction, including broad band access and career technical education projects;

* More than $5 billion in airport, park, public safety and other public works.

"In addition, I urge you to take the following steps to speed delivery of even more projects," California's Republican governor said in his letter to the Democratic president-elect.

Those proposed measures include waiving or simplifying U.S. environmental regulations for transportation projects, increasing federal flood mitigation funds with a focus on levees and encouraging infrastructure partnerships between public agencies and private parties.

Schwarzenegger also asked for financial help to cover rising public health caseloads and the $1.6 billion cost for retrofitting an estimated 160,000 trucks in California so they comply with the state's landmark legislation that aims to cut greenhouse gas emissions.

Additionally, he urged tax credits for renewable energy projects and called for clarifying U.S. policies on developing renewable energy and transmission projects on federal lands.

Schwarzenegger also pressed for action on the housing downturn. "Any economic stimulus you consider should also include measures to stabilize the housing market," he said.

"We believe that lower mortgage rates, increased access to credit for qualified buyers and widespread loan modifications are the most powerful tools in that regard, and California stands ready to help your administration move this agenda forward."

(Editing by Andrea Ricci)