WASHINGTON – California's cash crunch appears ready to land on the steps of the U.S. Capitol.

In coming weeks, Congress is expected to debate whether to take the unprecedented step of guaranteeing the state's emergency borrowing on a short-term basis.

"California faces a tremendous budget deficit and cash flow crisis, which requires immediate attention," said Democratic Rep. Doris Matsui of Sacramento. "There is no panacea for addressing California's budget issues at the federal level. However, it's time for the federal government to step in and temporarily guarantee bonds until the economy improves."

Matsui is working on a bill with Democratic Rep. Barney Frank of Massachusetts, the chairman of the House Financial Services Committee.

Proponents say they're not asking Washington for a bailout, merely trying to lower the state's borrowing costs by having the federal government back its loans.

Critics say it would be a drastic mistake that would jeopardize the federal government's AAA credit rating, noting that California ranks as the worst credit risk among the 50 states.

"That's never been done, and I think it's never been done for good reason," said Republican Rep. Dan Lungren of Gold River.

He said the federal government can't afford to back bonds for every state, adding: "If California does it, other states are going to be standing in line, with New York right behind them."

Lungren predicted the request will face an uphill fight in Congress and said it raises serious questions of accountability. "How does the state put its house in order if they can fall back on the federal government to fill the gap?"

Republican Rep. Tom McClintock of California's 4th District said he is "adamantly opposed" to the idea and predicted the state would default on a bond for the first time in its history.

"The reason they can't get a loan guarantee is because nobody in his right mind believes they're going to repay the money, so why should the federal government do it?" he asked.

But McClintock said he wouldn't be surprised if it passes the Democratic-led Congress: "I've noticed recently that the more fiscally irresponsible the proposal, the faster it seems to pass the Congress, so I would expect it's got an excellent prospect."

If the request is approved, Orange County Treasurer Chriss Street said, the federal government "will inevitably become the lender of last resort for all government entities in California and across the United States."

The issue is coming to a head as California prepares to vote Tuesday on six ballot measures, three of which will have a direct effect on the size of the deficit Gov. Arnold Schwarzenegger now estimates at $15.4 billion – $21.3 billion if the measures fail.

Either way, the state may need as much as $23 billion to pay its bills, beginning July 1.

While the federal legislation has yet to be introduced, members of Congress already are wrestling with how far to go to help cash-strapped states and local units of government.

In February, Congress passed a $787 billion economic stimulus bill that's expected to send nearly $50 billion to the state. But most of that money is targeted to specific programs, such as road projects and education, and cannot be used to fill the state's budget shortfall.

Two California House Democrats, Reps. Anna Eshoo of Atherton and Jackie Speier of Hillsborough, want Congress to provide federal aid for governmental entities that lost money when financial giant Lehman Brothers went bankrupt last year.

They want to pass a bill that would force the federal government to use money from the $700 billion Troubled Assets Relief Program to reimburse taxpayer losses.

Frank is sympathetic, noting that San Mateo County lost $155 million when Lehman shut down.

He said the county would have lost nothing if it had invested with American International Group because the Bush administration decided to bail out AIG investors while doing nothing for Lehman investors.

"There is no principle of any sort that can justify that result," said Frank. "And our job is to try and see if it can be dealt with."

But offering any kind of help to states, counties and cities just months after Congress passed its huge stimulus bill could be a tough sell.

"I believe the American people are in a state of bailout fatigue," said Rep. Spencer Bachus of Alabama, the top-ranking Republican on Frank's committee.

He said it was a mistake for the federal government to help AIG investors, and that it would be another mistake to bail out investors of Lehman Brothers.

Republican Rep. Jeb Hensarling of Texas said the U.S. debt load is already soaring and noted that American investors have lost more than $11 trillion since the market peaked.

He said "bailouts beget bailouts, which beget more bailouts" and that Congress can't bail out everyone.

"Who hasn't lost and who isn't hurting in this economy?" Hensarling asked.

Call Rob Hotakainen, McClatchy Washington Bureau, (202) 383-0009.