California Governor Arnold Schwarzenegger on Monday resumed thorny negotiations with lawmakers in the latest attempt to solve the state's multi-billion-dollar budget crisis.

"A view of the California State Capitol in Sacramento, California. California Governor Arnold Schwarzenegger on Monday resumed thorny negotiations with lawmakers in the latest attempt to solve the state's multi-billion-dollar budget crisis."

A spokeswoman for Schwarzenegger said the Republican Governor had begun talks with legislators at the state capitol in Sacramento amid optimism that feuding factions may be nearing a deal to break the deadlock.

California has been paralyzed by a 26-billion-dollar deficit that has forced the cash-strapped state to pay bills with IOUs and left Schwarzenegger threatening spending cuts to public services to narrow the shortfall.

Prior to the resumption of talks Monday, lawmakers expressed optimism that a deal to narrow the gap may be in sight.

"I am hopeful this week's... meetings will be productive and we will be able to present a bipartisan proposal to our members and to the public this week," California Assembly Minority Leader Sam Blakeslee said in a statement.

"Some very hard choices will have to be made but inaction ensures our problems only grow worse," the Republican added in remarks emailed to AFP.

California's budget stalemate comes less than five months after marathon negotiations resulted in tax increases and spending cuts to eradicate a 42-billion-dollar hole in the budget.

Since then, California's deficit has spiraled as soaring unemployment and one of the worst home foreclosure crises in the United States have sent state revenues plummeting to levels not seen since the 1990s.

Schwarzenegger has proposed narrowing the deficit by implementing sharp spending cuts while vowing to veto any budget tabled by Democrats that includes tax increases.