"There is absolutely no time to waste," Schwarzenegger said. "We must solve this deficit now or we will run out of cash."
He said he was not making an idle threat.
"I don't have to shut down state government, because when (legislators) don't produce a budget on time, we will run out of cash and therefore our government will shut down by itself," he said.
Schwarzenegger said that after June 15, "every day of inaction jeopardizes our state's solvency and our ability to pay schools and teachers and keep hospitals and ERs open."
Schwarzenegger said state revenue is down 27 percent from last year, contributing to a $24 billion spending shortfall.
To balance the budget, Schwarzenegger has called for huge cuts to education and health and human services, the early release of prisoners, selling off state properties and slashing university funding.
The governor has also proposed that the state temporarily shift $2 billion in property tax revenue away from municipalities.
According to city officials, Schwarzenegger's plan to borrow money designated for local governments would cost San Diego $36 million in property tax revenue and another $24 million in gasoline tax revenues over the next fiscal year, which begins July 1.
Under Schwarzenegger's proposal, the county would lose about $70 million in funding.
During his speech, Schwarzenegger said the plan to shift money away from municipalities is "not a 100 percent thing."
"My Republican colleagues have already said they don't like that idea of borrowing from local government," Schwarzenegger said. "My Democratic friends have also said they don't like to borrow from local government. So, if both parties don't like to borrow from local government, of course we will not borrow from local government."
Schwarzenegger said if money is borrowed from municipalities, "we want to work with local governments so that we can figure out a way so no one does have to get laid off and that you can borrow against that money and our promise to pay you back."
The governor's remarks were made before a crowd of local government officials, laborers and school children at the California Center for the Arts Escondido. The speech was part of a statewide tour by Schwarzenegger to update Californians on the status of California's budget and he seeks public support for massive cuts in spending and state programs.
The San Diego Police Department has launched an internal investigation into a program intended to reward officers for making drug arrests.
Police were involved a pursuit late Saturday that ended with a deadly officer-involved shooting in Escondido.
Two people died early Sunday morning after a high-speed chase ended in a head-on crash in North County.
A man was shot and killed by police at an officer- involved shooting in Escondido, a sheriff's lieutenant said Sunday.
An approaching winter storm is poised to open an "atmospheric river" of subtropical rain clouds on Southern California this week, but the San Diego area is expected to see just a fraction of that moisture, forecasters said Sunday.
A man threw rocks at vehicles on Interstate 5 near Imperial Beach Sunday, and threatened police with a pickaxe as he ran into a riverbed.
San Diego Sen. Toni Atkins will make history Wednesday when she becomes the first woman and first lesbian to hold the California Senate's top job.
A 16-year-old boy was allegedly drunk when he crashed his car into a stopped vehicle, pinning a motorist between two bumpers, police said Sunday.
A 27-year-old man suffered fatal injuries as the result of a "punching game'' inside of a bar Saturday morning in the Gaslamp
neighborhood of San Diego.
A large plume of smoke filled the sky in Miramar on Saturday morning after a concrete supply building went up in flames.