By STEVE LAWRENCE (AP)
1:30 PM 7/18 -- SACRAMENTO, Calif. — California officials hope to reach a deal Sunday on how to erase a $26.3 billion budget deficit that has forced the state to issue IOUs for the first time in nearly 20 years.
Legislative leaders said they made "huge progress" Friday night in talks in the governor's office and plan to meet again Sunday night in hopes of finalizing an agreement.
A deal would clear the way for votes later in the week in the state Legislature.
"I expect by Sunday night that we are likely to have an agreement," Senate President Pro Tem Darrell Steinberg, D-Sacramento, said after the Friday night session ended.
A spokesman for Gov. Arnold Schwarzenegger, Aaron McLear, said negotiators were "certainly in a position where we could close this very quickly ... but we still have some issues to work out."
They include how much to set aside in an emergency reserve fund, how much to borrow from local governments and whether to guarantee that schools will always be repaid lost funds when the economy sours.
McLear said staff members were trying to work out some details on Saturday.
California has had a series of budget shortfalls in recent years. The latest comes only 4 1/2 months after lawmakers and the governor ended months of negotiations over how to close a previous $42 billion deficit. The state's deteriorating economy and voters' rejection in May of a series of budget-balancing proposals created more red ink.
Lack of a budget agreement and a drop in state revenue has forced California to issue IOUs for the first time since 1992 to cover bills from thousands of state vendors. Some banks have stopped honoring the IOUs, adding to the difficulties state suppliers face in getting paid.
Lawmakers are trying to iron out the state's latest budget woes as members of California's largest state employee union, Service Employees International Union Local 1000, consider giving their leaders the authority to call a strike.
The SEIU announced Friday that it was sending out ballots to its members asking for authorization for workplace actions that could include a walkout.
SEIU members are angry over the prospect of wage cuts or being forced to take a fourth unpaid furlough day off a month because of the state's budget problems. They're also upset that Republican lawmakers blocked ratification of a new contract that would have limited them to only one furlough day per month.
The local represents 95,000 of the more than 200,000 state workers.
A spokesman for the union, Jim Zamora, said the vote would go ahead regardless of what happens with budget negotiations.
"If a budget is passed, our leadership will evaluate the situation and decide what's next," he said Saturday.