All eyes now turn to Gov. Arnold Schwarzenegger to cut $700 million as part of the deal that got the minimum two Republican votes needed to pass the budget for the fiscal year that began July 1. The governor is expected to make his vetoes and sign the budget within days.

Although the administration has not publicly released a two-page list of cuts, Republican and Democratic leaders have been briefed and received assurances the governor will not harm priority issues such as law enforcement, education and a tax break for property owners to preserve agricultural and open-space land.

I'll tell you that the governor will cut some things I don't like. But for the most part, most of the vetoes are not going to be a surprise to us," Assembly Speaker Fabian Núñez said after the Senate voted 27-12 at about 1 p.m. Tuesday.

In the end, the general fund spending plan was nearly identical to the version passed by the Assembly a month ago with no new taxes, a $3.4 billion reserve and $2.5 billion in early debt payments. As the Senate voted, the Assembly also approved the changes.

The budget directs $1.3 billion away from public transit, which advocates say will force transit agencies to cut services and increase fares. Democrats say they are hoping to replenish those funds with bond money, but critics say that move would undermine the intent of voters.

In addition to Schwarzenegger's promise to cut $700 million using his line-item veto authority, Republicans won amendments protecting infrastructure bonds from being entangled in greenhouse gas emissions lawsuits.

With the budget albatross removed from the Capitol, Schwarzenegger and legislative leaders are now free to take up other issues sidelined by the impasse, such as health care, water storage and redistricting.

"I am pleased that the Legislature has passed a responsible budget that protects California's priorities and keeps our economy strong," the Republican governor said in a statement.

He added: "I am confident that lawmakers can move forward to reach bipartisan consensus on the other important challenges facing our state in coming weeks, especially fixing California's broken redistricting system and strengthening our state's water future."

State Controller John Chiang on Tuesday immediately began urging state agencies and departments to prioritize backlogged claims to ensure nursing homes, day care operators, community colleges and small businesses get paid as soon as the governor signs the budget. During the delay, the state was unable to release certain funds.

The controller will have 15 days to process claims once a budget is enacted; however, Chiang hopes to reduce that time to seven to 10 days, and in some cases as little as one to three days.

Senate Minority Leader Dick Ackerman and Sen. Abel Maldonado, R-Santa Maria, ultimately provided the Republican votes needed in the Democratic-controlled Legislature for a two-thirds vote after the GOP caucus held back for weeks demanding more program cuts and protection of infrastructure bonds from greenhouse gas lawsuits.

Ackerman said Republicans achieved many of the priorities set in January, including a budget that does not plan to spend any more than the state takes in during the year.

"Nobody's going to be happy with every single budget but we met the priorities we wanted so we put up the minimum number of votes," said the Irvine senator.

Other Republican senators acknowledged success on many of their fiscal demands, but they continued to cite worries about next year's budget, which is projected to carry a $5 billion deficit.

Sen. Jim Battin, R-Palm Desert, said the budget continues to rely on shaky assumptions, including revenue from Indian gambling. It also fails to consider additional costs such as $300 million in increased wages to correctional peace officers.

Leaders thought they had reached a deal Monday, but both houses adjourned before taking action after Ackerman expressed concern over unresolved issues.

In the final 24 hours of negotiations, Sen. Dave Cogdill, R-Modesto, said the Governor's Office offered more specific cuts to reach $700 million in line-item vetoes. And Democrats agreed to add levee projects to an earlier demand to place a moratorium on greenhouse gas lawsuits for transportation bonds.

After the vote, Senate President Pro Tem Don Perata lashed out at Republicans for the delay, suggesting some GOP senators took pleasure in the weeks-long delay. He said he was dismayed to learn that a faction of Senate Republicans were "yukking it up that they had blocked once again a budget deal" while having drinks and smoking cigars at Chops restaurant across the street from the Capitol on Monday night. "To take glee and delight over people who are suffering because the state had not passed a budget, that is very troubling," Perata said. "And I think it's not just troubling today. I think it's going to be a harbinger for the future."

Cogdill, who was among the group dining at Chops, called Perata's comments "disingenuous" because Republicans had offered to appropriate funding for vital services while the budget was still being worked out. Democrats, however, shelved the proposal on the argument it would allow Republicans to delay negotiations further.

Cogdill said the group was having dinner while waiting for the four legislative leaders and the governor to hammer out a deal during a "Big Five" meeting.

"At that point there wasn't anything to be done. We were waiting for them to get their work done," Cogdill said.

Perata said he believed the budget was partially stalled by a Republican caucus power struggle. Ackerman, who is termed out in 2008, has faced challenges before. Now Cogdill, George Runner of Lancaster and Dennis Hollingsworth of Temecula have been named as potential successors.

"Dick Ackerman is a good man to work with," Perata said. "Unfortunately, I believe, the caucus did him in."

Núñez and Perata have expressed interest in changing the two-thirds vote requirement for passing the budget.

But Assembly Republican leader Mike Villines said the requirement is critical for the minority party. He would like to see spending priorities set for good and bad budget years instead.

The compromise reached Tuesday protects road and levee projects funded by bonds passed last year from lawsuits through 2009 -- after the state Air Resources Board adopts new regulations to comply with a new law to reduce greenhouse gas emissions by 25 percent by 2020.

Perata and environmentalists say the provisions actually strengthen greenhouse gases as an environmental issue.

Maldonado, the other GOP senator to vote for the budget, thanked Ackerman for sticking to his guns and getting all the Republican caucus had been seeking.

"As Yogi Berra once said, "It's déjà vu all over again,' " Maldonado mused wryly, only to be topped by Perata, who also quoted the legendary baseball player and master of malapropism.

Perata said: "And when you get to the fork in the road, take it."

By Judy Lin, Sacramento Bee, 8/21/07