California legislators have one last chance to strike a budget deal before going home empty-handed for the holidays.
Aides for both sides said talks resumed by telephone Monday but indicated things were moving slowly. That narrows the chances of a legislative vote before the new year.
The two sides are working out details of an $18 billion package that includes a roughly even split of tax increases and spending cuts.
Schwarzenegger remains on vacation in Idaho. He has vowed to veto the Democratic plan unless it includes deeper cuts as well as fewer environmental and labor restrictions for public works projects.
California's deficit is projected to hit $42 billion over the next 18 months.
The governor is expected to release his proposed budget for the 2009-10 fiscal year in January.