SACRAMENTO – Despite deep fiscal trouble, a $98.9 billion budget approved by the Senate Sunday night holds overall spending at about the same level as last year and may contain a small increase.

The budget was stalled in the Assembly last night as leaders jockeyed over how many votes each party would put up for a plan neither side likes – mainly because of the amount of spending cuts.

Republicans complained that the Senate, which adjourned until Aug. 18, dumped a "take-it-or-leave-it" plan on the lower house that does not contain enough cuts.

"That is not a Republican budget," said Assembly GOP Leader Dave Cox of Fair Oaks. "That is a Senate Democratic budget, not a Republican Assembly budget."

Democrats, being urged to act quickly by Gov. Gray Davis, who faces a recall election Oct. 7, complained that the budget cuts too deeply and does not contain tax increases that would reduce the deficit next year.

A deadlock has left the state without a budget since the new fiscal year began July 1. The toll of unpaid bills is mounting, and a Wall Street rating agency lowered the state's credit rating three notches last week.

The budget negotiated by Senate leaders does not close the gap between revenue and spending that has continued for several years. With Republicans blocking taxes and Democrats opposing cuts, the budget plan relies on borrowing.

Two unprecedented bonds that would be paid off over five years – a $10.7 billion deficit bond and a $1.85 billion pension-obligation bond – would close part of the record $38 billion budget gap.

The Davis administration used a 5-year-old law to triple the vehicle license fee on Oct. 1, costing the average motorist $158 and raising $4.2 billion in new revenue for the state. A lawsuit contests the increase.

And yet, the nonpartisan Legislative Analyst says the Senate budget would result in a $7.9 billion budget gap next year.

Under the Senate budget, spending in the general fund that pays for most state programs drops from $78.1 billion for last fiscal year to $70.8 billion this year, a reduction of $7.3 billion.

But much of the reduction results from the vehicle license fee increase, which would be used to make a payment to local government previously made by the state, which "backfilled" local government's revenue loss when the state cut the tax.

Other reductions would result from not making a $500 million payment to the teachers' pension fund, using nearly $2 billion in federal funds, and obtaining $930 million from a Medi-Cal accounting change.

"Spending would be pretty much flat," said Brad Williams of the Legislative Analyst's Office, "and probably would go up a little bit."

However, state costs increase each year because of factors such as inflation, federal requirements for spending and court orders. Failure to meet the increased costs is regarded as a spending cut.

So, even though overall state spending may remain relatively unchanged under the Senate budget, failure to keep pace with growing needs is regarded as a painful reduction by many legislators.

Davis said in January that he would not sign a new budget that did not contain "structural reform," an overhaul to match spending with revenue and reduce the wild swings between state surpluses and deficits.

His proposal for a budget based on an $8 billion tax increase and deep cuts in health and welfare spending was regarded by Legislative Analyst Liz Hill as a "credible" plan to close the ongoing budget gap.

But after the proposal was opposed by both Democrats and Republicans, Davis returned with a revised plan in May that included massive borrowing with the $10.7 billion deficit bond.