California's top lawmakers said on Monday they were confident an agreement with Governor Arnold Schwarzenegger on a state budget that closes a $26.3 billion deficit would be reached later in the day and voted on by the legislature on Thursday.

The government of the most populous U.S. state, which is the world's eighth-largest economy, began its fiscal year on July 1 facing the massive budget shortfall due to a plunge in revenues propelled by the recession and rising unemployment.

Assembly Speaker Karen Bass and state Senate President Darrell Steinberg emerged from a meeting with Schwarzenegger, California's celebrity Republican governor, and told reporters they were very close to an agreement to balance the state's books and expected a deal after they resume negotiations following an afternoon break.

Leaders of the legislature's Republican minority, whose votes are needed to approve a budget, also said they were confident an agreement on a spending plan was near.