SACRAMENTO – The Senate Democratic leader said yesterday that avoiding a budget deadlock and state-issued IOUs may come down to one thing – votes for a half-cent sales tax increase from Republicans who oppose a tax hike.

The remark came as the Assembly speaker, also a Democrat, was meeting with business groups to see if they can suggest steps to improve the business climate that might produce a budget package Republican lawmakers will support.

A two-house committee that began meeting Wednesday night will work through the weekend with the goal of producing a budget as soon as Sunday night, or more likely later next week.

The plan is to bring a budget up for a vote in the Assembly and Senate by the seldom-met constitutional deadline of June 15 for sending a new budget to the governor, two weeks before the new fiscal year begins on July 1.

State Controller Steve Westly said the state is on track to borrow $11 billion by June 18. He repeated a warning that a lengthy budget deadlock will prevent additional borrowing needed to avoid a "cash crisis" and IOUs.

But while urging the Legislature to set aside partisan differences and pass a budget, the controller may have eased pressure somewhat by revising an estimate that the state would run out of cash in 30 to 60 days without a new budget.

"We believe this $11 billion will carry us through August," said Westly. "But that is not a long time from now."

Borrowing the $11 billion, which must be repaid by next June, is expected to cost the state about $250 million in interest and fees, including $84 million for a repayment guarantee from banks that helped give the loan a "tier 1" credit rating.

Last year, the Senate passed a budget shortly before the new fiscal year began on July 1. But after a record deadlock, the Assembly did not pass the budget until early September, when it was scheduled to adjourn for the year.

The Legislature is not scheduled to adjourn this year until Sept. 12.

What may be emerging as the major sticking point is whether an unprecedented $10.7 billion bond to close part of a record budget gap is paid off over five years by a tax increase or by dedicating existing taxes.

Gov. Gray Davis, a Democrat, has proposed that the bond be paid off with a half-cent increase in the sales tax, which is currently 73/4 cents for each $1 of a purchase in San Diego County.

"I think at some point we are going to be down to a vote," said Senate President Pro Tempore John Burton, D-San Francisco, when asked if a budget agreement can be reached without a tax increase.

"If we vote for a half-cent sales tax, and that is all that separates us, to pay for the rollover of the current debt, we can go home," said Burton. "If we don't vote for it, the state can go broke. That's kind of the two options."

Assembly Speaker Herb Wesson, D-Culver City, said he is talking to business representatives in search of a complete budget solution, even closing the $7.9 billion gap expected to open next year under the governor's plan.

"I am sitting at the table with them," said the speaker, "receiving their input to see if any of their discussions can be incorporated in a plan that might break this logjam."