Top Democratic and Republican leaders met with Gov. Schwarzenegger in an attempt to break the deadlock.
Both the governor and lawmakers are saying that it has been the most productive meeting of the so-called "Big Five" leadership, in weeks.
"Now the important thing to do is to iron this out and to have a budget as quickly as possible," Schwarzenegger said. "I think this is the responsible thing to do, it's what the tax payers deserve and it's what they expected us to do."
"I would say it was the most positive, constructive negotiation we have had in weeks, so I am encouraged so I am encouraged, I am going to go upstairs for an hour and then we'll come back down," State Senate President Sen. Darrell Steinberg said.
Those comments were made during a break in the negotiations -- aimed at closing a budget shortfall now estimated at $26.3 billion.