California Budget Vote on Hold as Talks Progress

* Lawmakers will miss Thursday target for budget vote

* Budget talks between Brown, Republicans need more time

* Republicans oppose tax increases in budget plan

By Jim Christie

SAN FRANCISCO (Reuters) - California lawmakers may delay a vote on a state budget plan until Monday, aides said, in a sign that talks between Democratic Governor Jerry Brown and Republicans are progressing.

Brown had hoped the Democratic-led legislature would vote on a budget on Thursday but Republicans remain opposed to the tax hikes included in the plan. The delay suggests there is still room for compromise, although no guarantee.

California's budget talks are among the most closely watched of any U.S. state because it has been burdened with dramatic shortfalls in recent years due to slumping revenue.

This year's budget fight is getting added attention as shaky state finances have weighed on the U.S. municipal debt market and become a top issue in Washington.

Brown needs a few Republicans to sign on to tax increases to open the door to a budget vote, but that is no easy task.

"Republicans believe reforms that force government to live within its means need to be at the center of discussions and that there is still time to debate a sensible spending plan that does not include taxes," state Assembly Republican Leader Connie Conway's spokeswoman said.

She said Assembly members were leaving the state capital of Sacramento to return to their districts for the weekend.

A spokesman for the Assembly's speaker said the chamber's members had been put "on call" through the weekend to return to work should there be a breakthrough in budget talks. State senators also were put on call, a spokesman for Senate President Pro Tem Darrell Steinberg said.

The timing of a vote is seen as hinging on talks between Brown and five Republican senators who are pushing plans for a spending cap, a state pension system similar to the U.S. government's, authority for private contractors to provide public services and tax reforms.

Brown in January proposed a budget plan to tackle the state deficit of more than $25 billion through mid-2012 with roughly equal parts spending cuts and tax increases.

Democrats are reluctantly accepting the cuts, which Republicans favor. But Republicans are balking at tax increases that Democrats support.

The governor would put the question of tax increases to voters in June with a measure asking them to extend tax hikes that expire this year. He needs a two-thirds vote of the legislature to put a measure on the ballot, meaning he must secure a handful of Republican votes.

Without money generated by a tax measure, Brown says the state budget would be balanced solely with spending cuts. That would require deep cuts to popular education and public safety spending on top of the deep cuts to health and welfare spending in Brown's budget plan. (Reporting by Jim Christie; editing by John Whitesides)