SACRAMENTO — Democratic leaders emerged from late-night budget negotiations Tuesday to announce they were closing in on a final agreement on how to address the state's $26.3-billion deficit.
They said they planned to complete their work by morning.
"We are prepared to be here all night," said Assembly Speaker Karen Bass (D-Los Angeles). "I don't think there is anything that would make negotiations shut down at this point."
Senate leader Darrell Steinberg (D-Sacramento) said, "Everyone is highly motivated to get this done and get this done tonight."
The legislative leaders refused to discuss details of the negotiations.
Gov. Arnold Schwarzenegger did not address reporters camped outside his office, but his staff cautioned that although talks were progressing, predictions of an impending deal might be premature.
"There are still some very difficult decisions to make," said Schwarzenegger spokesman Aaron McLear.
"The governor has said that as soon as the leaders are ready to make the cuts necessary to balance our budget, we could be done very quickly. There are still some very difficult decisions to make."
Legislative staffers involved in the confidential talks said the leaders had resolved the most contentious issue in negotiations -- education cuts.
The influential California Teachers Assn. has been running television advertisements to pressure them not to suspend voter-approved funding formulas that guarantee schools a set amount of money each year. Fiscal experts have been struggling for days to find a way to cut billions of dollars from schools.
Democrats and Republicans agree that such cuts are essential to wiping out the deficit without suspending the Proposition 98 funding formulas. Legislative and administrative fiscal staffers appeared to have worked out a complex scheme that could avoid a suspension.
Staffers involved in the talks said the legislative leaders and the governor have agreed on how to solve all but $400 million of the deficit. The governor is pushing to close that last portion of the deficit with more cuts in social service and healthcare programs, while Democrats are angling to blunt the effect on those programs by achieving the savings through accounting shifts and expense deferrals.
Any final deal is expected to include some of the sharpest cutbacks in government services the state has experienced. Programs that have not been cut deeply in years are likely to shrink considerably, with tens of thousands of Californians losing access to programs they have relied on. Some programs may be wiped out entirely. Large numbers of low-income Californians receiving healthcare through the Medi-Cal program are expected to be moved into managed care, and thousands of seniors who receive home healthcare would lose it.