Lawmakers have failed to compromise on cutting programs and raising taxes to close the budget deficit and they missed a self-imposed, end-of-January deadline. The budget stalemate has dragged on for nearly three months and the impact is widespread.
Staffers worked through much of the weekend on legislative language to resolve some key issues.
Meanwhile, California can't afford to pay many of its bills. The state may have to delay salaries to state workers and taxpayer refunds.
Starting Monday, California will have to send IOUs to taxpayers instead of their refund checks.
State workers are being forced to take two days off a month without pay. The furloughs are set to begin on Friday for 238,000 workers. On Monday, unions will likely ask an appellate court to stop or delay the furloughs from taking effect.
Funding for most public works projects has stopped. California will have to freeze payments to programs for the elderly and disabled and for child care. Cal grants for college students will be delayed 30 days.
Gov. Schwarzenegger says he's trying to cut costs to make government more efficient.
"We've consolidated some of the departments to improve on our idea, where we can save 2 to 4 billion dollars over the next five years," said Gov. Schwarzenegger. "And to also look at some of the boards and commissions that cost us a lot of money."
A budget deal may include a sales tax hike and higher vehicle licensing fees.
The Associated Press contributed to this report.
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