Sacramento, July 29 (DPA) California Governor Arnold Schwarzenegger signed off on the state's $84.6-billion budget Tuesday, ending a months-long cash crisis that forced the most populous US state to issue vendors IOU notes instead of payments.

The former action-movie star used his veto powers to lop almost $500 million extra from the budget that had already been slashed by $15 billion to balance the books following a precipitous drop in state tax revenues.

'These are ugly cuts' and 'nothing to celebrate,' Schwarzenegger said of the new cuts to government spending including child welfare, AIDS prevention, state parks and health care for the poor.

'We cannot afford the programmes we used to be able to afford even two years ago,' he said.

Schwarzenegger said the cuts were needed to give California a $500-million-emergency reserve, much less than the $1 billion to $2 billion that the state usually puts aside.

California ran out of cash earlier this month as legislators and the governor deadlocked on ways to balance the budget, leaving the state unable to access the short-term loans it normally uses to finance its operations. As of Tuesday, the state government had issued 209,000 IOUs worth $1.1 billion.