Gov. Arnold Schwarzenegger, meeting Thursday to discuss the state budget with legislative leaders, abandoned a proposal to borrow money from the California Public Employees' Retirement System to balance the spending plan.

Calif. Gov. Arnold Schwarzenegger, right, thanks Lt. Gov. Abel Maldonado, left, at a news conference at the site of a pipeline explosion in San Bruno, Calif., Wednesday, Sept. 15, 2010 that exploded last Thursday.

"The governor told the leaders that we're not going to do that," said Schwarzenegger spokesman Aaron McLear. "It's just not the responsible thing to do."

Schwarzenegger officials floated the idea last month of borrowing $2 billion in the current fiscal year from the pension fund as an advance against future savings from pension reductions he's seeking.

But CalPERS officials expressed significant concerns about such a maneuver. California's largest public employees' union also weighed in against it.

Randall Cheek, legislative advocate at Local 1000 of the Service Employees International Union, told the CalPERS governing board Wednesday that the loan was "more of a $2 billion theft."

The governor and Democratic and Republican legislative leaders huddled for about three hours Thursday in an effort to hammer out a long-delayed budget deal and bridge a $19 billion deficit. They plan to meet again today.

Senate President Pro Tem Darrell Steinberg, D-Sacramento, expressed some optimism that legislators could quickly reach a deal by as early as today.

"We're hopeful to be done (by Friday) or the weekend," Steinberg said.

Republican legislative leaders did not speak to reporters after the meeting.

McLear, however, said Democrat and Republican leaders hadn't made substantial process and blamed legislators for "not doing their job."

Schwarzenegger returned Wednesday from a six-day trip to Asia 77 days after the legal deadline for passing a budget had passed.

"No major breakthroughs at all," McLear said. "Just kind of working through all the issues."

McLear and Steinberg agreed that the impasse revolves around how much in cuts to make. Steinberg added that the governor first needs to finish collective bargaining agreements with state employee unions.