SAN FRANCISCO - California lawmakers passed a deal to fix the state's multi-billion-dollar budget deficit on Friday, approving a package of wide-ranging spending cuts after a marathon legislative session.

A near 20-hour hearing on 30 bills designed to close the state's 26.3 billion dollar budget shortfall reached its climax shortly after 3:00 pm (2200 GMT) when the California Assembly approved the measure.

The deal now awaits the approval of Governor Arnold Schwarzenegger, who had clashed with legislators repeatedly this year in effort to agree a budget.

"These are difficult economic times that demand courage from elected officials, including those in the legislature," Schwarzenegger said after both chambers of the California legislature approved the deal.

"Both Republicans and Democrats stepped up to the challenge, and I want to thank the legislative leaders and the entire legislature for passing this difficult but necessary budget solution that cuts state spending, reforms government so that it runs more efficiently and does not raise taxes."

The proposed budget, agreed on Monday after arduous bi-partisan negotiations, has attracted howls of protest across California for its brutal 15-billion-dollar cuts to services such as education and health care.

Democratic lawmakers have defended the spending cuts as a necessary evil due to an unprecedented drop in revenues caused by the recession, which has fueled soaring unemployment and skyrocketing home foreclosures.

The budget crisis had pushed California, which would have the world's eighth largest economy if it were a country, to the brink of bankruptcy, sending the state's credit-rating plunging and forcing it to start paying bills with IOUs.

Most of the cuts outlined in the budget were approved, although a deeply controversial measure to allow drilling for oil off the coast of Santa Barbara, which would have generated revenues of 100 million dollars, was axed.

Speaking before the final approval was sealed on Friday, Schwarzenegger warned that the likelihood of further falls in state revenues could see a fresh budget crisis in a few months time.

"We're not out of the waters yet," Schwarzenegger said in an interview with the MSNBC network. "There still could be further drops in revenues. We could be back within six months to make more cuts that are necessary.

"But we have steered away from the iceberg. We're coming out of it and we're going to rebuild California as quickly as possible to get our economy back."

Schwarzenegger later rejected suggestions that the recent fiscal problems represented the beginning of the end of California's fabled reputation as a golden land of opportunity.

"I believe that California has gone through difficult moments and will go through difficult moments in the future," Schwarzenegger told reporters.

"But California always comes back and I think that as an immigrant I can tell you that there is nothing happening here that will make people shy away and not want to come to California."

Analysts and legislators say California's seemingly eternal fiscal gridlock is a consequence of the state's constitution, which requires a two-thirds majority to pass a budget or raise taxes.

California is only one of three states to require such a margin in its legislature to pass a budget.

"The two-thirds requirement does not allow a real discussion about revenue and I think the people are saying enough is enough," Democratic Senate President Darrell Steinberg said Thursday.

"After this is over, whatever time we are able to buy we're going to work to fix what we know is broken about this system."