No progress on California's $26 billion shortfall

updated 4:55 p.m. ET July 7, 2009

SACRAMENTO, Calif. - Negotiations aimed at closing California's $26.3 billion deficit remain frozen after a top Democratic lawmaker walked away from talks on Monday.

No formal discussions had been scheduled for Tuesday. It was not clear when Assembly Speaker Karen Bass, a Democrat from Los Angeles, will return.

She refused to participate in talks Monday, expressing frustration over Gov. Arnold Schwarzenegger's demands to reform welfare, in-home supportive services and state pensions.

The governor is demanding the Legislature make eligibility and benefit changes to CalWORKS and other social programs as part of closing the state deficit.

Friday marks the last day several major banks will cash IOUs that the state began issuing last week, putting added pressure on the governor and lawmakers to reach a deal.

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