SACRAMENTO, Calif. – The California Assembly approved an overdue state budget early Friday, but the squabbling isn’t over yet. The deal would give tax credits to movie studios, tech firms and others, and the Senate’s leader hates it.

The tax-relief package _ the state’s first since 2001 _ was a key compromise for Assembly Republicans to end their standoff over the state’s $145 billion budget.

Senate President Pro Tem Don Perata said he was dismayed by the Assembly deal, especially because the state already had removed $185 million worth of tax credits for teachers.

“How could you now throw them over for Hollywood movie moguls and multinational corporations?” Perata wrote in a letter to Assembly Speaker Fabian Nunez.

Some Democratic tax analysts warned that the five special tax credits the Assembly approved could cost the state more than $600 million a year in lost income.

Republican supporters argued the credits would boost investment in California, attract business and ultimately buoy state finances.

The Senate was already at an impasse over the budget plan, and Perata said the added tax credits would just complicate matters further. The budget must be approved by a two-thirds vote in both chambers, which means at least a few Republicans must join the Democratic majority.

California’s spending plan was due July 1, the start of the new fiscal year.

The lack of a state budget has meant hundreds of legislative employees and the state’s vendors have not been paid. Unlike other states where budget deadlocks have led to state shutdowns and employee furloughs, though, California rules require that the vast majority of the government’s civil servants must be paid even without a budget in place.

Since the tax credits are in a separate bill, the Senate could still pass the budget without them. The chamber was expected to meet Friday afternoon.

Schwarzenegger on Thursday canceled plans to attend the Hollywood memorial service of film industry lobbyist Jack Valenti so he could be at the Capitol.

Beyond the tax credits, the proposed budget would reduce the state’s projected deficit beyond the budget Schwarzenegger proposed in May and add to the state’s reserves, said the Assembly’s chief budget negotiator, Democrat John Laird. It also fully funds education, law enforcement and other priorities without raising taxes or adding social programs, he said.

A service of the Associated Press(AP)