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SACRAMENTO (AP) ― Gov. Arnold Schwarzenegger moved to end the stalemate over a state budget Wednesday by offering a compromise spending plan that calls for a temporary 1 percent sales tax increase and additional cuts.

In the past, the governor has said he is against raising taxes. But with the budget nearly two months overdue, he said it is time to move beyond partisan ideology. He said Republicans and Democrats must find a middle ground between taxes and cuts to state programs.

California was supposed to have a budget in place by July 1, the start of the fiscal year, but lawmakers differ over how to close the $15.2 billion deficit.

"This compromise budget proposal puts our state on the road to fiscal sanity and will give California a budget that works," he said at a news conference.

Republicans have been adamant about not raising taxes, while Democrats proposed a combination of cuts and tax increases.

Schwarzenegger's latest proposal seeks $9.9 billion in cuts and a temporary sales tax increase that is projected to generate $4 billion in the current fiscal year and slightly more in the following two years. The state sales tax would then be permanently reduced by one-quarter percent below its current level after three years, Schwarzenegger said.

The state currently collects 7.25 percent in sales tax, with 1 percent of that automatically sent back to local governments. Many local entities add their own increases.

The governor's plan also includes a formula for a rainy day fund to smooth out state spending when the economy declines. Schwarzenegger said when fully funded, the rainy day fund would be 12.5 percent of the state's general fund, which is projected to be about $104 billion this year.

He also is seeking the ability for the governor to make midyear cuts when revenues are coming in below projections and what he called an economic stimulus package. That plan would expedite infrastructure spending from bonds, offer targeted tax credits to help retain jobs and offer employers flexibility in overtime laws.

Schwarzenegger also is rekindling the proposal he first floated in January to modernize the state lottery, saying the state could borrow about $5 billion in future earnings for the 2009-10 budget. After that, lottery proceeds would help pay down debt and fill the rainy day fund.

Democrats had initially proposed closing the deficit with about $7 billion in spending cuts and $8.2 billion in tax increases, mainly on the wealthy and corporations. A revised proposal brought taxes down to $6.6 billion, but that plan was shot down over the weekend by Republicans in the Assembly.

By calling for an increase in the sales tax, Schwarzenegger appears to be violating one of his core principles. He consistently has said that he would not raise taxes to solve the state's budget crisis.

"I have made it very clear that we cannot tax our way out of this problem. I do not believe in tax increases," he said in January when he declared a fiscal crisis.

He said Californians already send the state plenty of money to operate. "I don't want to go back and ask them for any tax increases. They deserve better than that," he said in January.

In May, his press office sent an e-mail to reporters, saying "the Administration is NOT considering a tax increase."

Administration officials have explained the gulf between Schwarzenegger's words and his actions by saying his sales tax proposal ultimately will turn into a tax cut. And he has repeatedly said that all options should be considered to address this year's budget crisis.

With the state's spending plan nearly two months overdue, Schwarzenegger said it's time for legislators to compromise so they can move on to other urgent state business such as resolving the state's water problems, prison reform and health care.

"I think it is key for us that we finish this year with victories and not another year where nothing gets done just because everyone is stuck in their ideology," he said.

On Tuesday, Assembly Minority Leader Mike Villines, R-Clovis, walked out of budget talks, saying he was frustrated over the repeated calls for tax increases that Republicans have said they won't support.

Schwarzenegger on Wednesday urged legislators to come out of their partisan corners or risk being in the same position six months from now.

"I keep hammering away at them every time I talk to them. Let us get together, let us work this out, don't come to the table with the same stubborn position," he said. "The Republicans came in with the mantra 'No taxes, no taxes, no taxes,' and then the Democrats came in and said 'No cuts, no cuts.' You can't continue this way."

(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)