Schwarzenegger, Legislators Close to Budget Deal

Gov. Arnold Schwarzenegger and legislative leaders were scheduled to resume talks Wednesday on a fix to California's massive budget deficit, as Democrats said they wanted to vote on a proposal by week's end.

Democrats and Republicans indicated they were close to a compromise but noted that a few key details had to be worked out before they could agree on the plan to deal with a shortfall pegged at $42 billion through June 2010.

"They're closing on a few key details. There is not an agreement at this point," said Schwarzenegger's spokesman, Aaron McLear.

The newest information came after the Sacramento Bee reported that legislators had reached a tentative deal on closing the gap.

Friday will mark the 100th day since the governor called a special session to deal with the state's fiscal crisis. California has halted thousands of infrastructure projects, put a hold on tax refund checks and delayed payments to state contractors.

The Schwarzenegger administration also has instituted twice-a-month furloughs for some 200,000 state employees and has said it will begin the layoff process if no deal is reached by the end of the week.

Lawmakers have been at odds over how to close the gap. Democrats want tax increases with minimal cuts to social services while Republicans want a spending cap and business-friendly provisions in exchange for tax increases.

While few details are available about the points being negotiated, tax increases are expected to be part of the mix.

Elements of a potential budget package call for temporarily increasing the state sales tax by 1 percent, raising the fee for licensing vehicles to 1.15 percent and raising the personal income tax across the board.

In exchange, a Republican-sought spending cap would limit the amount the state can spend each year based on a predetermined formula.

Democratic leaders have said they hope to bring a budget plan to a vote this week.

The Democratic and Republican leaders of the Assembly and Senate met with Schwarzenegger Tuesday night and were schedule to meet with him again later Wednesday.

"When all four leaders left last night, they said they're getting closer but there's still more work to do," said Sabrina Lockhart, spokeswoman for the Republican caucus in the Senate. "Nothing has changed this morning."

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