Despite a flurry of last-minute proposals and skirmishes, the Legislature failed to approve a state budget on the last day of the fiscal year Monday, setting the stage for what could be a prolonged standoff.

"I want to apologize to Californians for not being able to come to a budget agreement by the close of business today," Assembly Speaker Herb Wesson said before adjourning the house Monday evening -- more than five hours before the midnight deadline.

Assembly Republicans, challenged last week by Democrats to show how they would balance the budget, released a proposal that they said would cover the $38 billion shortfall with no new taxes.

But that plan won't go to the Assembly until Wednesday. Democrats said after a preliminary assessment that it would result in severe cuts likely to outrage the public, including a move to delay kindergarten for some children. Other aspects of the plan just don't add up, they said.

Still, both sides said that the proposal helped to clarify their differences for negotiations to come.

Senate Republicans, meanwhile, presented two dozen budget amendments late Monday. They ranged from deeper cuts to the state payroll to eliminating state funding for the Fair Employment and Housing Commission, which handles discrimination complaints.

The biggest savings -- $1.2 billion -- would come from eliminating two cost-of-living adjustments in grants to the aged, blind and disabled.

Those amendments will likely be considered Wednesday or Thursday.

Even after both houses of the Legislature had gone home for the night Monday, Gov. Gray Davis predicted that one of the two houses would pass a budget by the end of the week, with the other following a couple of weeks later.

"We owe it to the people of this state to find common ground," he said.

Davis said that he believed the differences between Senate Republicans and Democrats are "narrowing."

"The key, and the missing ingredient, is a way to finance the current-year deficit. If that can be done, I think all other disputes can be resolved," the Democratic governor said

Wesson acknowledged that the public's frustration is likely to soar now that lawmakers have blown their deadline.

"I share that frustration," he said. "We on the Democratic side of the Assembly have done just about everything we can to push the ball forward."

At a news conference earlier in the day announcing the Assembly Republican proposal, Assemblyman John Campbell, R-Irvine, said the two sides have now staked out their positions.

"We've all made our points," he said. "And now we're hoping that this becomes not a drill but a blueprint for something that we can at least start."

In recent years, the start of the fiscal year has become the season of parliamentary exercises in which each side tries to force the other into uncomfortable or untenable positions.

This year, with a deficit of historic proportions and a raft of negative consequences for not passing a budget, both parties have said they want to get beyond drills to substantive negotiation.

But they remain far apart on substance. Democrats say some tax increases are needed to balance cuts to vital state services. A half-cent sales tax increase would be dedicated to paying off $10.7 billion of the deficit over five years.

Republicans, while endorsing the idea of deficit financing, say it should be paid off with existing revenue. They say the budget should be balanced with cuts, so that taxpayers don't have to foot the bill for runaway spending in recent years.

The Assembly Republican plan, for instance, would save $600 million by increasing the age, by a few months, at which children are eligible to enter kindergarten.

Campbell said studies have shown that children can be harmed by starting kindergarten too early.

But Democrats said that more than 100,000 children would have to wait longer to attend kindergarten, slowing their academic progress and posing a hardship to families who struggle to pay for child care.

"That's a huge downside," said Assemblyman Darrell Steinberg, D-Sacramento. " ... We need to be starting the education for all children, but especially those from disadvantaged backgrounds, earlier rather than later."

Democrats also questioned whether the Republican proposal to cut state operations by 15 percent across the board would result in inmates being released early from prison.

Republicans said that won't happen.

"It's yet another unfortunate scare tactic that obfuscates the truth at this 11th hour," said Peter DeMarco, a spokesman for Assembly Republican leader Dave Cox of Fair Oaks.

The Assembly Republican budget plan rejects tripling the vehicle license fee. Davis' Department of Finance announced last week that the hike had been automatically triggered by the state's fiscal woes.

Also on Monday, the Howard Jarvis Taxpayers Association announced that it was filing suit to block the increase.

As the state limps into the 2003-04 fiscal year without a spending plan, the ill effects will start to be felt.

State Controller Steve Westly warned last week that he would have to stop making payments to community colleges this month. State workers would eventually see their pay cut temporarily to the state minimum wage. Vendors who provide the state goods and services won't be paid for anything they do starting today.

"An on-time budget is very important," Steinberg said. "We need to work around the clock this week to do our very best to get this done this week. Is that really possible? I don't believe so unless there is some give on the revenue side."