State Senate President Don Perata told ABC7 a compromise has been reached, and the senate will vote on the plan Friday morning.
The deal reportedly includes a temporary one cent sales tax increase supported by Governor Schwarzenegger.
The tax increase has been a sticking point for lawmakers, who are trying to figure out how to close a $15 billion shortfall.
The governor's office told ABC7 they have not seen the details yet and will not comment on the prospect of a deal until they do.
As of Thursday, the budget was 59 days overdue.