What started this morning as an unusually unified effort by the Assembly to prevent the state from being forced to issue IOUs next week ended this afternoon with a bitterly divided Senate rejecting the plan.

On votes of 69-0, 54-0 and 69-0, the Assembly approved three bills designed to free up cash by cutting school spending and delaying some payments to schools and local government agencies.

But all three bills failed to gain the necessary two-thirds approval in the Senate. No Republican senators voted for any of the measures, and several Democratic senators did not vote on one or all of them.

The legislative failure to once again address at least part of the state's budget troubles came a day after state Controller John Chiang warned he would have to issue IOUs next week if lawmakers and Gov. Arnold Schwarzenegger didn't come up with a plan to close the deficit.

The idea behind passing the bills was to buy the state time while legislators and Schwarzenegger negotiated on a comprehensive solution. But Republican state senators, after meeting with the governor in his office, refused to go along.

"This is the second day of this exercise," said Senate GOP leader Dennis Hollingsworth of Murrieta. "Yesterday we were here debating an $11 billion fix for a $24 billion problem. Today we're debating a $5 billion fix for a $24 billion problem. ... This does not solve the problem. ... There is no point in continuing the second day of a political exercise."

Hollingsworth's reference was to an effort Wednesday by Democratic legislators to pass a bill containing $11.4 billion in spending cuts for the fiscal years that end next Tuesday and begin next Wednesday. No GOP legislators supported the effort, on the grounds they cuts weren't deep enough.

Senate President Darrell Steinberg, D-Sacramento, pointed out that if Republicans had backed the proposals of the last two days, lawmakers would be two-thirds of the way toward closing a $24 billion deficit.

"We have not seen a plan from the minority party that gets us to $24 billion," Steinberg said. "You have the opportunity today to prevent the people of our state from being subjected to IOUs."

The partisan nastiness in the Senate was in deep contrast to the comity exhibited in the Assembly.

"These are very difficult cuts for Republicans and Democrats alike," said Assembly GOP leader Sam Blakeslee of San Luis Obispo. "I am heartened that Republicans and Democrats are working collegially, conscientiously and professionally to devise solutions to this difficult problem. It's an important first step."

But even if Democrats could have mustered the two-thirds approval needed to get the package through the Senate, Schwarzenegger had made it clear he would veto anything short of a complete solution.

"Since the first day we began working to solve this $24 billion deficit, I have been clear: The legislature must solve the entire deficit, must make the hard decisions now, and must not ask California taxpayers to foot the bill," the governor said in a prepared statement. "The current proposal in the Legislature amounts to nothing more than a piecemeal proposal and a second day of drills and if passed, I will veto it because it doesn't solve the problem."

Two of the bills approved by the Assembly would defer payments that would have been due to all levels of the public education system and cities and counties for road repair until later in the fiscal year that starts July 1, or the 2010-2011 fiscal year, as well as cut deeper into state spending for schools in the fiscal year that ends next Tuesday.

The third bill redrafts a measure legislators passed earlier this year that would transfer money from regional redevelopment agencies to the state. In April, Sacramento Superior Court Judge Lloyd Connelly ruled the cash grab was unconstitutional because the redevelopment money wouldn't necessarily be used by the state within the redevelopment agencies' areas. The bill passed by the Assembly today would require that the funds be used in school districts that at least partially overlap the redevelopment areas.

Legislative staff said the trio of bills would raise a total of about $4.5 billion. That could be enough to delay the issuance of IOUs through July and August.

Wednesday, while a divided Legislature was rejecting a bill that would have made $11 billion in spending cuts, state Controller John Chiang warned that absent some solution to the state's budget deficit, he would be force to issue IOUs -- formally called registered warrants -- to pay most of the state's bills starting next Thursday.

The warrants are needed, Chiang said, because he must set enough money aside to make constitutionally required cash payments to schools and holders of California bonds and other financial paper. State employees would also receive their regular paychecks.

Chiang and state Treasurer Bill Lockyer issued a joint statement today, urging legislators and the governor to approve the bills as the best way to head off IOUs.

"It's true the measures before the Legislature do not solve the entire problem," they said. "But they do solve our most urgent problem. Failure to act will expose taxpayers to substantial, long-term damage. There is no need to hold these measures hostage pending a full budget settlement. Their enactment is inevitable, and quick approval of these payment deferrals and reductions will provide sufficient cash to avoid issuing IOUs starting July 2."

State officials got more bad news today when Fitch Ratings, a bond rating agency, announced it was downgrading California's credit rating another notch. The drop in what is already the nation's lowest bond rating could cost millions more in higher interest rates on state bonds. A spokesman for Lockyer said the drop would not affect the soundness of the state's paper.

"There is no likelihood we are going to default on our debt service payments, regardless of our credit rating," said Lockyer spokesman Tom Dresslar. "We will maintain our spotless record when it comes to paying investors on time and in full."

Call The Bee's Steve Wiegand, (916) 321-1076.