California Gov. Arnold Schwarzenegger speaks before a crowd of farm workers and members of a Hispanic water coalition outside the Capitol in Sacramento on Friday. ((Rich Pedroncelli/Associated Press))

California Gov. Arnold Schwarzenegger was busy signing or vetoing bills Sunday, in the face of a midnight deadline to deal with all the legislation passed this summer, while he continued to press for an agreement to upgrade the state's deteriorating water system.

Schwarzenegger had delayed dealing with 703 bills and threatened to veto hundreds of them as a pressure tactic. He wanted to secure approval for a plan that would include more reservoirs and a controversial canal to improve a water storage and conveyance system mostly built in the 1960s.

He decided to start handling the bills, because negotiations with key legislators were progressing as the deadline neared, spokesman Mike Naple said.  By late afternoon, he had signed 89 bills and vetoed 94.

"They're still talking and working toward a framework," Naple said. "Things are still moving, but we need to act on these bills."

Schwarzenegger and legislative leaders met Sunday for the sixth consecutive day but still had issues to work out, he said. They also met for four hours Saturday without a resolution, despite Schwarzenegger saying Friday they were near a historic agreement.

"I'm fighting to rebuild our crumbling water system," the Republican governor said in his weekly radio address Saturday. "Water is jobs for California, water is food, water is our future, water is our economy."

Legislative leaders on Saturday signalled the difficulty they were having in improving a water system that poorly serves farmers, who grow much of the nation's fruit and vegetables, as well as city dwellers and fish in the state's rivers and fragile Sacramento-San Joaquin Delta.

Assembly Minority Leader Sam Blakeslee, a Republican, objected to creating a new government bureaucracy to oversee the water system.

Senate President Pro Tem Darrell Steinberg, a Democrat, said leaders couldn't agree on how to pay for the plan. They also were arguing over water conservation and trying to balance water rights with monitoring how property owners pump groundwater.

Even if a compromise is reached, they said it was unclear how their rank-and-file members would react to details from the secret negotiations.  Passing a water deal that includes a bond needs a two-thirds vote in the legislature, where Republicans are in the minority.

With files from The Associated Press