SACRAMENTO (AP) _ With the state budget overdue and California’s cash flow drying up, Gov. Arnold Schwarzenegger said Tuesday that he expects Democrats and Republicans to reach a compromise quickly and bring him a spending plan by next week.

The governor also raised the bar for negotiations. Schwarzenegger said he will not agree to any budget deal that fails to include long-term reforms to help the state ride out rocky economic times.

“I will not sign a budget that doesn’t have budget reform in it, because otherwise I could not keep the promise to the people of California. I told them in 2003 that we are going to become more fiscally responsible and that we are going to go and to start living within our means,” Schwarzenegger told The Associated Press in a telephone interview.

“Now here we are in an economic slowdown, and again we don’t have that rainy day fund set aside.”

The Republican governor has chastised legislative leaders for not moving more swiftly to address the state’s $15.2 billion budget shortfall. They missed the June 15 constitutional deadline to pass a budget, and California is now more than three weeks into its fiscal year.

Schwarzenegger is seeking a 5 percent cap on annual spending increases and favors putting any additional revenue into a rainy day fund. He wants to set aside $2 billion in the current fiscal year.

He also has floated a proposal to borrow against future lottery earnings to address this year’s financial crisis and boost state coffers by an estimated $15 billion over three years. But the plan would require voter approval in November and even more borrowing to bridge the gap until that money materialized.

Schwarzenegger has hosted several meetings with the four legislative leaders — two from each party — and says everyone’s ideas are up for discussion. But Republicans have remained steadfast against any tax increases, while Democrats have proposed $8.2 billion in new taxes to address the deficit.

All have said they are working to meet an Aug. 1 deadline. Without a spending plan in place by then, the state will have to start negotiating on expensive loans to address a cash shortfall that will affect state coffers by the end of September.

“This is extremely expensive,” Schwarzenegger said. “In today’s financial market, it’s very hard to get the money. I think we’re going to pay through the nose.”

The governor’s finance spokesman, H.D. Palmer, said the short-term loans would cost the state “several hundred million dollars” more if there is no spending plan in place.

Following a meeting with legislative leaders on Monday, Senate President Pro Tem Don Perata said he planned to put a budget plan up for a vote of the Legislature next week.

He did not say the proposal would have the support of Republicans, whose votes are needed to reach the two-thirds majority required to pass it.

“We told the governor we’re going to work, the four of us, until we come up with a solution or until we have to act to make sure by Aug. 1 we have ... put one on his desk,” Perata, D-Oakland, said Monday.

Perata’s spokeswoman, Lynda Gledhill, confirmed Tuesday that Democrats plan to put a budget up for a vote even if they do not have Republican support.

Republican leaders, meanwhile, reaffirmed their position that the state must figure out a way to bring spending in line with revenue.

“At the end of the day, the budget the governor signs needs to have real reforms. It has to be responsible and include the reforms we want to see, and it cannot do further damage to an already fragile economy,” said Eileen Ricker, a spokeswoman for Senate Minority Leader Dave Cogdill, R-Modesto.

Democrats oppose a firm cap on spending but have said they could support establishing a rainy day fund.

“We’ve put together a responsible, gimmick-free budget that’s balanced and protects our schools. Democrats are for real budget reform, but we’re not going to sacrifice our schools and the safety net in the process,” Assembly Speaker Karen Bass, D-Los Angeles, said in a statement.

Both parties have said they’re willing to consider Schwarzenegger’s lottery proposal, but that it likely will not help with this year’s deficit.

The idea of using Schwarzenegger’s lottery plan to prop up the state budget is risky: The state would sell bonds to investment firms based on future revenue, which it hopes to increase through better marketing and more games.

The proposal also relies on voter approval in November.

Schwarzenegger said lawmakers are considering borrowing from transportation and other special funds to cover the shortfall until lottery revenue materializes next year — assuming it does. Democratic leaders last week denied they are contemplating such a move.

The leaders did not meet Tuesday, as Schwarzenegger held private meetings in Los Angeles.

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Gov. Arnold Schwarzenegger gestures as he discusses the new California School Finder website during a Capitol news conference in Sacramento, Calif., Wednesday, July 16, 2008. The website, created in a partnership with Microsoft and Google, will allow parents to compare schools by looking at data such as graduation rates and Academic Performance Index scores.(AP Photo/Rich Pedroncelli