Faced with the possibility of a strike, a deal has been struck between the union representing thousands of state workers and the Schwarzenegger admininstration.

The new three year contract announced this afternoon, among other things, gives workers a 3.5% salary increase this year, an raise as high as 4% next year, and a one-time bonus of $1000. It will also, if approved, adjust salaries for state employees who are paid less than private sector workers in similar jobs.

In addition, the contract addresses the thorny issue of pensions, a major sticking point when the last contract expired in July 2005. Union officials say they have now agreed to a lower formula for pension benefits, using the average salary earned in an employee’s final three years of work– rather than highest single year’s salary.

The union involved in the talks, Service Employees International Local 1000, represents 87,000 state employees. A large majority of the membership voted to strike in the absence of a deal, even though administration officials questioned whether such a move was legal. Marathon talks have been underway the last few days, with both sides agreeing to a news blackout on the status of the negotiations.

Meantime, it’s hard to miss the fact that the Capitol’s other big negotiations are pretty non-existent this weekend. Democrats and Republicans say they will resume discussions on Monday on a new state budget, with the new fiscal year now two weeks away.

Maybe the weather will help; the old saying around the Capitol is that the mercury has to hit triple digits before a budget deal develops. It was hot today in downtown Sacramento, but it looks like it was only about 96.