The nearly $100 billion budget plan approved Tuesday now goes to Davis, who said he will sign it Thursday. Analysts say the Democrat, who faces a historic recall election in October, could get a boost in the polls with a budget plan in place.
The proposal avoids raising sales and income taxes, but counts on a $4 billion annual car tax increase that state officials triggered earlier this year and the elimination of a tax break for manufacturers.
"It's not pretty but it could have been a whole lot uglier," Davis said.
Republican Leader Dave Cox said his party was "able to get a budget that didn't increase taxes for Californians. It was a victory for our side."
Davis wasn't about to argue.
"Let them claim victory," Davis said in a telephone interview with The Associated Press. "Clearly the Republicans' footprint is all over this budget."
After more than 27 hours of negotiations, the budget bill passed 56-22. That was enough to give the proposal the two-thirds majority required to pass. It came a few days after the effort to recall Davis qualified for a special election this fall.
The budget trims the state's record deficit that could have mushroomed to nearly $40 billion by next July, Davis said. Instead, the shortfall will be about $8 billion by next summer.
The governor said he will appoint a task force of business and financial experts to make recommendations to the state on how to fill that gap.
The proposal largely protects education funding for the next year. Public health and human service programs also are expected to be maintained at the same levels as last year.
But lawmakers could not agree on imposing deeper cuts or raising more revenue through taxes, so they delayed for at least a year a decision on how to deal with part of the deficit that could reach $8 billion.
Speaker Herb Wesson, a Democrat, apologized to Californians for failing to pass a budget sooner and said the compromise would cause heartache and hurt.
"This is a bittersweet moment for me. I'm glad we've climbed this mountain," Wesson said. "But I'm very saddened by the millions of people we will affect by not moving forward on this budget on a balanced approach."
Because spending has far outpaced tax collections in a slumping economy the past two years, officials forecast earlier this year that California taxpayers would face a $38.2 billion deficit by next July if aggressive steps were not taken.
Democrats, who hold big majorities in both houses but need Republican help to muster budget-approving two-thirds votes, wanted a half-cent sales tax to help close the budget gap. Republicans said the gap could be closed using existing revenues and deep cuts.
The Senate approved the compromise Sunday night and sent it to the Assembly, which took it up at noon Monday. Negotiations continued through the night, breaking a 26½-hour continuous session record set in 1963 during an education dispute.