Not even fiscal crisis trumps partisan politics in California, where lawmakers remained sharply divided on a budget rescue plan Friday with time running out in this year's session.

With California facing a projected two-year, $27.8 billion budget shortfall, Democrats and Republicans continued to fight over whether tax increases would make things better or worse.

Gov. Arnold Schwarzenegger and legislative leaders met Friday and were expected to discuss a tripling of the state's vehicle license tax in return for about $4 billion in cuts this budget year and placement of a rigid spending cap on a future ballot.

When the session ended two hours later, the deadlock continued. Participants were tight-lipped about details, but neither Democrats nor Republicans were optimistic that a deal was imminent – and both faced flak from party interests.

"There certainly isn't any agreement," Senate Republican leader Dave Cogdill said.

The two-year legislative session officially ends at midnight Nov. 30, but leaders are demanding that any action be taken before Thanksgiving.

The marriage of car tax with spending cap is an alternative for portions of a much wider-ranging rescue plan in which Schwarzenegger has proposed a temporary 1.5-cent sales tax increase, new levies on some services and activities, and deep cuts in education and social services.

"Everybody knows what the differences are in ideology and approach," incoming Senate President Pro Tem Darrell Steinberg said of the partisan split over taxes and cuts.

Assembly Speaker Karen Bass, who was in Atlanta on Friday but participated in negotiations by phone, said she is hopeful of a breakthrough this weekend.

It won't be easy, however.

To strike a deal pairing a higher car tax with deep program cuts and a spending cap, Republicans would have to back down on their rigid no-new-taxes stand and Democrats would have to accept budget cuts that they abhor.

Placing a spending cap before voters also poses political peril: Democrats would risk offending labor unions that help bankroll their causes, and Republicans would risk making concessions now in return for a ballot measure that might be defeated.

Schwarzenegger would have to switch gears, too.

One of Schwarzenegger's first acts as governor, in 2003, was to cut the state's vehicle license fee to 0.65 percent from the controversial 2 percent approved by his predecessor, Gray Davis.

Aaron McLear, Schwarzenegger's spokesman, said that although the governor has not proposed increasing the vehicle license fee to bridge the current budget gap, he is willing to discuss that or other revenue-raising measures if the Legislature reaches consensus.

"Politics doesn't come into play for the governor," McLear said. "His focus is trying to solve this budget crisis as quickly as possible and doing what's right."

John J. Pitney Jr., government professor at Claremont McKenna College, said a deal pairing a car tax hike with a spending cap might be possible precisely because it is so difficult for either party to swallow.

"There's no solution that leaves anybody in a good position," Pitney said. "An increase in the vehicle license fee is the worst possible outcome – except for all the others."

Jaime Regalado, executive director of the Edmund G. "Pat" Brown Institute of Public Affairs at California State University, Los Angeles, said both parties are caught in a political vise.

"Everybody's at risk," he said. "But everybody has to do something."

Assemblyman Anthony Adams, R-Hesperia, said there is no way that GOP lawmakers could support raising the car tax after helping to recall Davis for approving an identical increase.

"It would be political suicide," Adams said.

Adams said it also makes no sense for Republicans to cut a budget deal now that assumes voters would approve a hard spending cap, a ballot measure that unions could spend millions to defeat.

"Why would we place something on the ballot that we can be about 99 percent certain will fail?" he asked. "That's a waste of taxpayer money on top of it."

Other GOP legislators say a spending-cap deal might be possible if combined with budget cuts and changes to make government less costly, such as allowing more use of outside contractors.

Labor unions and education groups oppose deep spending cuts and contend that a hard spending cap would perpetuate mediocrity by barring the state from improving services once the economy improves.

"It would be imposing today's priorities on tomorrow's Californians," said Rick Pratt, assistant executive director of the California School Boards Association.

If no agreement is reached before the legislative session ends, new efforts can be launched to ease the crisis after freshmen lawmakers are sworn in Dec. 1.

Call Jim Sanders, Bee Capitol Bureau, (916) 326-5538.