Gov. Arnold Schwarzenegger says he is hoping to have a deal with lawmakers by the end of the day to close California's $26.3 billion budget shortfall.
The governor cautioned reporters during a Wednesday news conference that several difficult issues still must be resolved. Negotiations are scheduled to resume later in the afternoon.
To save cash, California has been forced to issue IOUs to thousands of state vendors, and Schwarzenegger has imposed three furlough days a month. The state's credit rating has been sinking steadily as the negotiations over balancing the budget drag on.
Meanwhile, advocates for social services are protesting against cuts and proposed reforms outside the Capitol. They pleaded with the governor to spare programs they say are vital to seniors, low-income families and the disabled.