Gov. Arnold Schwarzenegger (search) signed a $117.5 billion California spending plan Monday, avoiding a summer-long showdown with Democrats over the state budget.

The governor's signature on the state budget bill had been expected since the Legislature last week approved a negotiated plan that largely reflected his priorities.

Democrats and Republicans will now focus on this fall's special election. The Republican governor is pushing ballot measures to cap state spending, change how legislative districts are drawn and extend the time it takes teachers to get tenure.

The budget for the 2005-06 fiscal year avoids the borrowing that has plagued the state in recent years and does not raise taxes. It sets money aside to pay off some of the state's debt and increases funding to most programs, including $3 billion more for schools and $1.3 billion for road projects.

"This budget is the result of a lot of hard work and a lot of compromise," Schwarzenegger said. "It is an instrument of good for California."

The budget imposes higher fees on four-year university students and saves the state money by transferring about $235 million in teacher retirement payments to local school districts.

It also cuts the state's deficit in the 2006-07 fiscal year from $15 billion to an estimated $4.7 billion.

Schwarzenegger signed the bill in the Capitol's rotunda as tourists and state workers milled about. Also looking on were his wife, Maria Shriver, and former U.S. Secretary of State George Shultz, one of the governor's economic advisers.

The special election ballot also includes separate initiatives that would restrict the use of union dues for political purposes, re-regulate the state's energy market and lower prescription drug costs.

Any compromise proposal could be placed on the ballot by the Legislature later this summer.