Wednesday marked 103 days since Connecticut last had a budget in place.
However, lawmakers said they are inching toward a compromise as they enter a third day of negotiations.
Gov. Dannel Malloy answered some questions on Wednesday morning.
"I'm encouraged as discussions continue," Malloy said. "I'm encouraged that if there is an agreement between leaders that it will come back and we'll have some further discussions."
Malloy said whatever is contained in that agreement must be free of gimmicks, games and pension steals.
"If there are going to be cuts, they should be real cuts," he said.
Malloy said he's working on another budget, his fifth actually, and it may be used as insurance if both sides cannot reach an agreement.
"I have put out four budgets, including the compromised budget that I reached with democrats. I'm prepared to put out another budget very shortly that I have been working on for days," Malloy said.
Lawmakers said they are hoping to have a draft budget by Friday.
"We've definitely hit a lot more numbers, more issues. We have refined the issues then we originally had, still more work to do tore fine numbers but we are definitely making progress," State Senator and Senate President Len Fasano said on Tuesday.
If not, Malloy's executive order will continue and that means more cuts for cities and towns.
Some cities and towns said they won't stand for any more cuts.
Under immense pressure to strike a deal, lawmakers have met for several hours this week. They worked through the Columbus Day holiday.
They emerged from Tuesday's closed-door talks to say that progress was made.
Connecticut has been without a budget since July 1.
If Malloy's executive order is allowed to continue, cities and towns face around $900 million in cuts.
Medicaid advocates said even if a budget is passed, it would likely include cuts that hurt the elderly and disabled.
The Connecticut Education Association said it intends to file a lawsuit on Wednesday in connection with Malloy's executive order, which cuts $557 million in education funding across the state.
Stay with Eyewitness News for continuing coverage of the state budget crisis.
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