The strategy is part of a broad spending reduction plan to overcome a projected $14.5 billion state budget deficit.

Schwarzenegger will seek major cuts in state services when he outlines his budget proposal Jan. 10, including revocation of $1.4 billion in public school funds and a proposal to release tens of thousands of inmates from the state's correctional facilities, the Los Angeles Times reported Saturday.

State officials said the budget problem is so broad tax increases may be considered despite Schwarzenegger's staunch stand against such a move.

The $1.4 billion cut to the state school system would fall below a constitutional provision setting the minimum level of state revenue slated for education. State revenues is sharply down recently.

The release of non-violent prisoners, which is still up in the air, contrasts earlier pledges by the governor to not consider early releases to alleviate an overcrowded prison system.

Prison authorities proposed releasing nearly 30,000 prisoners in response to requests by Schwarzenegger to reduce state spending.