By Jim Christie

SACRAMENTO, Calif., Oct 1 (Reuters) - A top California
lawmaker said on Friday the state's leaders had reached a final
agreement on closing a $19.1 billion deficit to balance the
state budget, ending a record stalemate over a spending plan.

Senate President Pro Tem Darrell Steinberg announced the
deal Friday evening following closed-door negotiations with
other top lawmakers and Governor Arnold Schwarzenegger in the
governor's office in the state capital of Sacramento and 93
days after California's fiscal year began on July 1.

Steinberg described the agreement as "comprehensive" and
said he planned for the legislature to be able to vote on it
next Thursday. He did not provide details on the deal.

"We all stepped up," said Steinberg, a Democrat, flanked by
Republican leaders of the legislature's minority.

Details of the agreement, which both chambers of the
legislature must approve before reaching Schwarzenegger for his
signature, would be released on Wednesday, said Aaron McLear, a
spokesman for the Republican governor.

McLear, however, said there would be no tax increases in
the budget plan.

Schwarzenegger and Republicans had sought steep spending
cuts as the primary tool to balance the state's books and had
ruled out tax increases. Democrats who control legislature
urged cuts, some tax increases and raising revenue by delaying
corporate tax breaks.

ELECTION LOOMS

The agreement came as California entered the fourth month
of its fiscal year without a spending plan in place and with
the November election looming. Its top contest in California is
the governor's race pitting Democrat Jerry Brown, the state
attorney general and a former governor, and Republican Meg
Whitman, the former chief executive of eBay Inc.

Schwarzenegger cannot run again for governor because of
term limits.

Analysts expect the next governor will face similar budget
challenges as California's revenues have slumped due to turmoil
in financial, mortgage and housing markets, and because of the
state's double-digit unemployment rate. These have combined to
slash revenue from personal income taxes, California's main
source of revenue.

Friday's agreement came as California voters tell pollsters
they have little confidence in their state leaders. That should
spur lawmakers to endorse the budget agreement, said Jack
Pitney, a professor of government at Claremont McKenna College.

"It's a bad dream and they want to get it over," Pitney
said.

Lawmakers were supposed to have approved a budget plan for
the current fiscal year in mid-June for Schwarzenegger to have
signed it by the start of the year on July 1.

Another incentive for a speedy budget are IOUs the state
controller has been planning, said Pitney: "At that point
people would start to take notice in a way they hadn't before."

California's finances have been under increasing strain
without a state budget in place, raising the prospect that
State Controller John Chiang will issue IOUs to preserve the
state's cash for priority payments as he did last year.

Chiang has said he may issue IOUs early this month. If he
does, it would be only the third time California has resorted
to that dramatic tactic since the Great Depression.

Among the state's priority bills are payments to investors
holding the state's debt, a major reason the budget battle has
not raised concerns in the U.S. municipal debt market.

California is the nation's biggest issuer of muni debt and
State Treasurer Bill Lockyer wants to begin selling short-term
debt as soon as possible. To do that he needs a budget in place
to issue revenue anticipation notes, to raise money for
California's cash-flow needs, and, later, general obligation
bonds.

Lockyer is also seeking a $5 billion short-term loan from a
group of Wall Street investment firms for California, which has
the lowest credit rating of any U.S. state.

(Editing by Jonathan Thatcher)