SACRAMENTO (AP) Highway construction throughout the state, threatened with shutdown next week because of the late budget, will continue without interruption thanks to a temporary finance agreement between contractors and local government.

The possibility of a shutdown had cast uncertainty on the East Sonora Bypass Project and construction on a new Highway 4 passing lane near Arnold last week.

"We are still full-go on all our projects right now," said Caltrans spokesman Robert Spradling of projects in Tuolumne and Calaveras counties.

On Friday, Jeff Morales, director of Caltrans, said 200 highway projects were facing shutdown today because his agency lacked the money to pay contractors. But work will continue, at least for now, because local transportation officials have agreed to lend the state cash to keep things going and a number of contractors have agreed to work without pay.

Gov. Gray Davis said the finance plan is just temporary and that the Legislature needs to approve a budget.

''We've devised an emergency plan to keep virtually all of the existing projects going for the next several days,'' he said. ''I call on the Legislature to act immediately to pass a budget. Every day we're seeing more and more real-world consequences of the Republicans' intransigence.''

Morales said a lot depends on how long contractors are willing to go without getting paid.

Only a week ago, Davis announced the state was in the process of notifying contractors working on more than $6.7 billion in road improvements that the stalled budget negotiations would mean Caltrans would be unable to pay its bills after yesterday.

The prime contractor on the $70 million bypass project, Goodfellow Bros. Inc., committed last week to continue work even if payments from the state were halted.

However, R.M. Harris Co., the contractor handling bridge and overpass construction for the project, wasn't so certain. Company President Dave Harris said he would hold off making a decision on whether to continue until state funding stopped.

The bypass project, which began in late 2001, is designed to reduce congestion on Highway 108.