California budget deal to end three-months stalemate

Arnold Schwarzenegger (C) on a visit to Asan, South Korea, on 15 September 2010 Mr Schwarzenegger had declared a fiscal emergency because of the budget delay

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California Governor Arnold Schwarzenegger and top lawmakers have struck a budget deal aimed at bridging the state's $19.1bn (£12.1bn) deficit, Mr Schwarzenegger says.

The agreement came as the state entered the fourth month of its fiscal year without a spending plan.

Lawmakers could vote on the deal on Thursday, said Democrat Darrel Steinberg, who heads the Senate.

Mr Schwarzenegger had declared a fiscal state of emergency in July.

Mr Schwarzeneggers's spokesperson Aaron McLear said details of the agreement would not be released until Wednesday.

But Mr McLear added that the budget plan would not include tax increases.

Democrats, who control the California legislature, had urged some tax increases and demanded the delay of corporate tax breaks to raise revenue.

Mr Schwarzenegger and Republicans had ruled out tax increases and instead advocated steep spending cuts to balance the state's books.

Pension reform was also a sticking point, with Mr Schwarzenegger wanting to roll back public employee benefits. Democrats said the administration should work towards an agreement with unions through collective bargaining.

Both chambers of the legislature have to pass the deal before Mr Schwarzenegger can sign it.

The governor had declared a fiscal state of emergency in July and ordered most state employees to take three days unpaid leave a month because of the budget delay.

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