The head of
Senate President Pro Tem Darrell Steinberg made the announcement to reporters in Sacramento surrounded by three other senior California legislators.
California has been without a spending plan since the new budget year began on July 1.
Steinberg said that legislators will return next week to finalize their "comprehensive agreement," and could hold votes on Thursday.
"These are very difficult circumstances in difficult times," Steinberg said, according to The Sacramento Bee. "Not a lot of celebrating. But we all stepped up and did the work we had to do."
California will likely be forced to cut back public spending to bridge its massive budget deficit.
In mid-May Schwarzenegger unveiled plans to plug the deficit by slashing billions of dollars worth of funding for services designed to help the state's poor.
His budget proposal called for 12.4 billion dollars in spending cuts, including the elimination of California's welfare-to-work program and virtually all child care for low income families.
Schwarzenegger's proposed spending cuts would also eliminate 60 percent of funding for community mental health, and low income families would also lose access to state-subsidized day care for children.
California, the most populous and wealthiest US state, was hit hard by the housing crisis.
Analysts and legislators say California's seemingly eternal fiscal gridlock is a consequence of the state's constitution, which requires a two-thirds majority to pass a budget or raise taxes.
Schwarzenegger has refused to raise taxes to narrow the shortfall and described the proposed cuts to spending as "painful" but essential.
A budget crisis last year pushed California, which would have the world's eighth largest economy if it were a country, to the brink of bankruptcy, sending the state's credit-rating plunging and forcing it to start paying bills with IOUs.
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