But the state Senate session ended with a bitter partisan battle early Saturday, after Republicans blocked all bills requiring a two-thirds vote, raising doubts about whether there really is enough goodwill to reach accord on major policy issues such as water.
California lawmakers spent the last day of the regular legislative session Friday passing a flurry of bills, including legislation that would reduce the state prison population by 16,000 inmates. Lawmakers also approved the nation's most ambitious renewable-energy standards.
They fell short of their goal to upgrade the state's decades-old water system, which was expected to be the most contentious issue. The Democratic leaders of the Assembly and Senate said they would ask Gov. Arnold Schwarzenegger to call a special session so the water negotiations could continue.
"Everyone agrees that we are close and that we have made a decade's worth of progress in just a few weeks, but there is still some more work to do," Senate President Pro Tem Darrell Steinberg said in a statement.
Jeff Macedo, a spokesman for Schwarzenegger, said the governor had no immediate response.
The Democrats offered a package that would include $12 billion in bonds, half of which they said would go toward reservoirs, underground water storage and restoring the Sacramento-San Joaquin Delta, the heart of California's water-delivery system.
According to a draft of the water bills, the bonds would be divided over two elections - one next year and one in 2014. About $3 billion would be dedicated to increasing water storage, but the money would be awarded by a commission based on a competition between potential projects.
Republicans said the bills' language would make it difficult to fund new dams, a priority for the minority party. Sen. Dave Cogdill of Modesto, one of the Republicans' lead negotiators, called the Democratic package unacceptable.
"The proposals that the majority were putting up for a vote would have not added a single drop of new water in our state," he said in a statement. "Republicans agree our fragile delta needs to be fixed, but we have been clear that environmental protection should not come at the price of economic destruction."
GOP lawmakers said the legislation contained a loophole that would prevent additional dams from being built. They worry that a commission would favor underground storage.
Republicans also oppose splitting the bonds over two election cycles, saying voters should have a chance to vote on a single package intended to solve the state's water problems for years to come. They also criticized a Democratic proposal to create a new bureaucracy to oversee how farmers could use water they receive from the delta.
In a statement after the water proposal fizzled, Steinberg and Assembly Speaker Karen Bass said they remained confident the Legislature could still pass a comprehensive water package.
"Any time you have Westlands Water District and the Natural Resources Defense Council united, you know you are close and that's what we had here. That's how far we had come," said Bass, D-Los Angeles, referring to one of California's major agricultural irrigation districts and a leading environmental group.
Republican lawmakers and Schwarzenegger have been adamant that any water legislation include dedicated funding for new dams and create a process by which the state will consider building a canal to route fresh water around the environmentally sensitive delta.
It wasn't clear whether the Democratic plan being circulated Friday met the governor's criteria or whether he would agree to the calls for a special session. He already has called special sessions on education and tax reform.
Another of Schwarzenegger's priorities is a bill requiring California utilities to generate 33 percent of their power from renewable energy sources by 2020. He and some Republican lawmakers have criticized Democrats' attempts to restrict the amount of alternative power that utilities can receive from outside the state, saying it will lead to higher energy costs for California consumers.
Democrats are seeking to protect unionized jobs in California, but utilities say they need the flexibility to seek wind, solar and geothermal sources from throughout the West.
"Today is the day we start freeing ourselves from our dependence on fossil fuels," said Assemblyman Paul Krekorian, D-Burbank, shortly before the Assembly approved the measure.
Many Republican lawmakers warned that the legislation would become an economic disaster for California, leading to higher utility bills and driving more businesses out of state.
Assemblyman Chuck DeVore, R-Irvine, said California's electricity costs already are higher than the national average and would climb by 30 percent as utilities try to meet the renewable energy standard.
"This is one of the most spectacularly bad pieces of legislation I have seen in my five years in the state Assembly," he said.
It was not clear whether the governor would support the package if it included caps on the amount of out-of-state power utilities could import.
Lawmakers also finished business left over from negotiations earlier this summer to close a $26 billion budget deficit. Part of that deal called for cutting $1.2 billion from the corrections system's budget, but the Senate and Assembly disagreed over how to do that.
On Friday, the Senate approved the Assembly's version of a prison bill that will reduce the prison population by 16,000 inmates in the current fiscal year. It does so by changing parole supervision to focus on only the most violent offenders, expanding early release credits for inmates enrolled in rehabilitation programs and reducing some property crimes from felonies to misdemeanors.
Rachel Cameron, a spokeswoman for Schwarzenegger, said the governor will sign the prison bill even though he supported a plan that would have released or diverted from prison some 27,000 inmates.